AN Introduction to Barriers, Motivators Challenges of Export/Import - Free Essay Example

Introduction to Barriers, Motivators Challenges of export/import Contents:- Motivation and barriers Sunk Cost of firm Overall Exports sales by extending into new market Improved performance through learning from international competitors Learning by-exporting by spreading export activities across several market then focusing on a single product-market relationship Market specific knowledge and networks Does an existing trade relationship with a given country tent to increase the probability that new product will be exported to that country Whether helping one firm to reach a new export market will tend to create spill-over benefits to other firms by providing an example which they can follow Receipt of export development assistance Whether government programmers are successful in promoting new trade relationships Motivators Increased growth Greater profit potential Increase stability Large market share Excess capacity Barriers Too much red tape Trade barriers Conditions overseas Lack of incentives Cross border security Currency fluctuation Political climate Lack of competitive products Payment default Language barrier Slow payments Lack of assistance Transportation Protectionism Challenges High entry barrier to venture in certain countries Export/import licenses and documentation Government regulations Tension between the two countries Extra costs Product modification Financial risk Market information References Motivation Barriers Sunk Cost of firm:-Sunk cost is that which has already invest and we cannot receive it again or refund it. Sometime sunk cost are different prospective cost and if we are taken an action So that cost are future costs and that may invest or changed. Example: There are ABC wood ltd. Company in new Zealand and that company wants to sell their product in India. It does market research and it invest some amount of money on market research after this market research they find that their product is not suitable for selling in India and they decide that they will not sell their product in India and money which is incurred for market research that is sunk cost. Overall Exports sales by extending into new market:- When a business exporter wants to enter into new market then they expected more sales which can be beneficial to ex point their business. Example: Ram is an exporter now he export the wood in India only but in future he is planning to export wood in Australia and he wants expand his business. So he will export wood in two countries, one is old market for him and another is new market for him. So he can earn more profit by selling his product into two countries. Improved performance through learning from international competitors: When an exporter enter into new international market there would be existing competitor who would be ruling in the market with their same tactics which can be adopted by exporter and brought that tactics to compete in the local market. Example: There are two exporters. One is in New Zealand and one is in Australia. New Zealand exporters has their own tactics to doing business in New Zealand but he wants to enter into Australian market and for this New Zealand exporter should be adopt new techniques of business from exporter who is in Australia and New Zealand exporter can improve his performance for business by adopting new techniques . Learning à ¢Ã¢â€š ¬Ã¢â‚¬Å"by-exporting by spreading export activities across several markets then focusing on a single product-market relationship: It is beneficial to business in various markets rather than focusing on single market. Because if one market fails so there are other market for survival Example: ABD ltd. Company in New Zealand. That company exports their product in many countries like: Japan, Australia, India etc. If India refuses for importing goods from ABC ltd. Company which located in New Zealand then ABC ltd. Company have other choices for export their product. They can export their product in Australia and Japan. ABC ltd. Company cannot fail because they have many choices for export. Market specific knowledge and networks: Exporter should have specific knowledge of market and contacts in the market which can be helpful for doing business before entering into the new market. Example: There are so many departmental stores in the market. They buy goods from the local wholesaler or export the good from the exporter who is in other state or countries. Exporter should have contact with that owner of departmental stores and knowledge of the market that means he knows that the demand of the product in the market. Does an existing trade relationship with a given country tent to increase the probability that new product will be exported to that country? Countries trade relationship plays a vital role in doing business to other nations. It would be a free trade agreement with another nation it will tend to do business in that nation because no duties will be charged and it will be easily imported in another nation which is beneficial for the both parties to do business. Example: We are assuming that there are two countries Australia and New Zealand which export/import the goods from each other because of free trade agreement. When they will export or import the goods from each other, no duties will be charged on it. They can easily export or import the goods from each other and it is beneficial for both the countries to do business. Whether helping one firm to reach a new export market will tend to create spill-over benefits to other firms by providing an example which they can follow: When one firm try to enter new market it will beneficial from the experience of the existing or past competitor which can help in improving us from their experience to put a step in new market. Receipt of export development assistance: Some bodies of New Zealand existing in India that helping business. These bodies give information about business. Example :- When a local business man plan to expand the business in other country he would need assistance to develop knowledge about the market customers, competitors and local helper of that nation over which he can be benefited by the list of bodies present in that country for this help. Whether government programmers are successful in promoting new trade relationships: Government can help for the establishing new business and it also improve trade relationships through various programmers. Example :- We are assuming that In India congress government are ruling at this time. Leaders of that party organize various programs in which they say that all business should start from India only and all outside importers should maximum exports from India. Main agenda of this government programs are to do business in India only. MOTIVATORS Increased growth:- Increase growth means increase the demand of product among importers or customers. Example:- Cadbury company make various types of chocolates and advertise it in different ways for promoting the product. Firstly they attracted youngsters and childrens and then they attracted old peoples by various advertisement and they replaced all sweets by chocolate on occasions like Diwali etc. From all these they enhanced the demand of chocolate and attract more customers towards the Cadbury chocolate and it also increase growth. Greater profit potential:- It is the maximum profit that company/exporter/importer could make potentially. Example:- Lets assume ABC limited company sold $1000 of widgets last year and made of profit of $500 widget. Technology is changing rapidly and company ABC limited has the brightest mind in the industry to take an advantage of this technology. It also expects to be the first. Company on the industry to implement the technology which roughly halves certain product expenses. This analyst estimate that company ABC limited has another say $480 of earning potential. Increase stability:- Increase stability means more profit and more sales and it also creates the right environment for the balance of payments and it creates certainity and confidence and this enhance investment in busines Example: Large market share:- Markets total sales which is earned by a exporter or particular company in a specified time period. Example:- If importer as a whole import hundred quantity of product and forty of which are from one exporter and that exporter holds forty percent market share and other exporter holds sixty percent. Excess capacity:- It is increase in supply because of increasing price and population. Example:- We are assuming that there are large number of population in New Zealand , so that demand of particular product will be more and it enhance the sales and profit also. BARRIERS Too much red tape:- Export or import business requires so many formalities and documents. Example:- In export or import business we requires various types of documents for the export and import of goods, like bill of lading , insurances , airway bill certificate of inspection etc. and when we export or import the goods from the other country there are so many restrictions on particular product like bullets, cigarettes, alcohol, etc. It affects the business and it is red tape for the business. Trade barriers:- Trade barriers are restrictions which Is forced on movement of goods between two countries, it is applied not on imports but also on exports, it can be divided into two parts: Tariff barriers and non tariff barriers. Example:- when a businessman exports or imports the goods they pay some taxes on particular product. Like specific duty, Ad valoren duty, revenue tariff, custom quota, multi-lateral quota etc. These taxes create a barrier for the export or import of goods. Conditions overseas: It means condition in the exporting or importing country at the time of export or import of goods. Example: If we export or import the goods from the other country and political condition are bad or war is going on at the time of export and import or weather is not good so it creates problem in the exporting and importing of goods from the overseas and it is barrier for the business. Lack of incentives: It means no government support and benefits are provided by the government in the business. Example: When a businessman do export and import business and government do not provide the incentives for the business like rewards for the increasing business. Cross border security: Cross border security means security on the border of different country. Example: there are two businessmen in two different countries one is in New Zealand and other is in Australia. Businessman who is in New Zealand export the goods to Australia and he pay the taxes and he show the documents related to the goods which he export to the Australia to the cross border security which is in Australia. Currency fluctuation: It means increase and decrease the currency. Example: We are assuming that exporter who is in USA, he exports the goods to the importer who is in Japan, they final the deal and everything like price of the product at the time of dealing price of the dollar is sixty and Japanese importer ready to buy goods on that price after sometime price of the currency decrease and exporter may bears losses in the exporting of goods and it is barrier for the business Political climate: Political climate is the current mood and opinions of populace about political issues that also affects the business. Example: The governments have to seek re-election every few years and every government makes the different rules and regulations for the business in the every few years or after the elections. It is hard for the businessman to adopt the different rules and regulations because of changing government. And it is barrier for the export and import business. Lack of competitive products: In economics, one way that two or more goods can be classified is by examining the relationship of the demand schedules when the price of one good changes. This relationship between demand schedules leads to classification of goods as either substitutes or complements. Substitute goods are goods which, as a result of changed conditions, may replace each other in use (or consumption).A substitute good, in contrast to a complementary good is a good with a positive cross elasticity of demand this means a goods demand is increased when the price of another good is increased. Conversely, the demand for a good is decreased when the price of another good is decreased. Language barrier:- Different languages are barriers in business. Example; We are assuming that exporter from India and importer from China and importer imports some products from India ,both countries have their own languages, the both may not understand languages of each other, so language problem may create barriers in business. Payment default: It means payment not done by importer or buyer in business. Example: When a importer imports some goods from exporter and he says to make a payment of goods which he imported from exporter Slow payments: Slow payments means when a importer pay amount of money later than the due date. Payment reaching a certain no.of days late will appear. Example: When a buyer buy the goods from seller and he pay amount of money after the due date, so it creates problem or barrier in business for expand the business. Lack of assistance: It means no help or support provided by anyone in the business. Example: When a exporter or businessmen plan to start the business or expand the business in another country he would need assistance to develop knowledge about the market, customer and competitors. Helping bodies are not present in that country for his help, so it creates barrier in the business. Transportation: high transport costs push down profits and wages .the efficiency of transport service greatly determines the ability of firms to complete in foreign markets. For a small economy for which world prices of traded goods are largely given higher costs of transportation feed into import and export prices. To remain competitive exporting firms that face higher shipping costs must pay lower wages to workers accept lower returns on capital or be more productive. Protectionism: It is the economic policy of restraining trade between states or country through methods such as tariff on imported goods, restrictive quotas and a variety of other government regulations. Example: EU common agriculture policy, banana wars, Argentina food tariff, escalated tariff, anti-dumping tariff, and illegal subsidies. All these examples of protectionism are barrier in business. References:- https://www.gov.uk/government/news/government-welcomes-business-led- plan-to-cut-eu-red-tape https://www.gov.nl.ca/redtape/taskforcereport.pdf https://www.rep-am.com/articles/2014/06/11/commentary/809083.txt https://www.consumerpsychologist.com/international_marketing.html https://www.teara.govt.nz/en/1966/trade-external/page-2 https://en.wikipedia.org/wiki/Default_(finance) https://www.teara.govt.nz/en/overseas-trade-policy www.expertbase.org https://www.investopedia.com/terms/e/excesscapacity.asp

Financial Factors Leading to the French Revolution Essay

Introduction The French Revolution was nothing less than any revolution before or anyone after it: radical change in the institution that was known as the ordinary lifestyle. What began as a dispute between the people and the monarchy quickly turned into a violent and demandingly rapid movement to change the government that was more representative of the people of France. With many examples around them, the French people had many examples and inspiration that motivated them to revolt. The British had lived with some governmental relief knowing that the Monarchy had not all the power with Parliament making some of the major decisions. Across the Atlantic, the Americans had already begun and ended their revolution, becoming a nation†¦show more content†¦In order to fully understand the economic turmoil France was in, the factors causing it must be explored. Furthermore, if one factor is found to be more significant than the others, additional research can commence following that specific f actor with other cases in history (i.e. American Independence, Russian Revolution, etc.) This paper aims to explore the two most significant financial factors leading to the French Revolution: taxation during wartime versus peace, and the broken system within the French Revolution. In these sections, origin, narration and meaning to the revolution will be explored and analyzed in order to find the overall significance of the factor. While this paper does intend on attempting to find the most significant financial factor of the French Revolution it does not guarantee it; rather the author hopes that the audience reading this will inquire further research into the topic, with the possibilities of adding other factors into the mix of the origins of the French Revolution. The ‘rivalry’ between Great Britain and France runs deep within each of their own histories, and ties in directly with the French deficit in the Eighteenth Century. With the discovery in the New World and given the head start by Spain, the British and French were most urgent in claimingShow MoreRelatedThe French Revolution And The American Revolution1592 Words   |  7 PagesThe French Revolution is often recognized as one of the most significant events in French history. The revolution was caused by a series of events leading to uproar from the French people demanding change. The main factors causing the french revolution are: debt from previous wars leading to the financial crisis, resentment of the nobility, influence of enlightenment ideas, a series of bad harvests and a weak monarch. These issues, along with the increased desire for equality among the french peopleRead MoreThe French Revolution And The American Revolution1254 Words   |  6 PagesThe French Revolution was an influential period of social and political upheaval in France that lasted from 1789 until 1799, and was partially carried forward by Napoleon during the later expansion of the French Empire. The Revolutio n overthrew the monarchy, established a republic, experienced violent periods of political turmoil, and finally culminated in a dictatorship by Napoleon that rapidly brought many of its principles to Western Europe and beyond. Inspired by liberal and radical ideas, theRead More French Revolution Essay1141 Words   |  5 Pages Why was there a French Revolution? Between, 1789  ¡V 1799, many events occurred in France that caused an outbreak within the people thus leading to a revolution. This culminated in the France becoming a democratic government. 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They had spent huge sums of money on the French and Indian War, and the king and nobility consumed much money to keep up with their lavish lifestyles. In addition, there was a severe economic depression at the time. In areas of agriculture, manufacturing, and trade, there were great downturns. Also, revolutionary ideas were instilled within the people duringRead MoreEssay about Exploring the Factors Leading to the French Revolution959 Words   |  4 PagesExploring the Factors Leading to the French Revolution The French Revolution began due to many different reasons. The French Revolution of 1789 had many long-range causes. Political, social, and economic conditions in France contributed to the discontent felt by many French people-especially those of the third estate. The bad harvest of 1788, the weakness of Louis XVI, the financial crisis of 1789, the ideas of the enlightenment, the failure to bring in reform and alsoRead MoreFrench Revolution Causes1139 Words   |  5 Pages The French Revolution was not an event that happened overnight but rather a series of events that occurred over several years leading up to the overthrow of the monarchy and the implementation of a new government. The Primary cause for the fall of the Ancien regime was its financial instability and inability to improve upon the lives of the French people. The 4 key flaws or events leading to the fall of the regime was; the structure of royal government, the taxation system, the structure of french

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The Problem Of True Happiness - 1696 Words

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The Quiet American Essay - 743 Words

The Quiet American The film The Quiet American takes place during the 1950’s in Vietnam. The movie illustrates the atmosphere of Vietnam previous to the Vietnam War and during the French occupation of the country. The main plot of the movie revolves around three characters: Fowler played by Michael Caine, Pyle played by Brendan Fraiser, and Phoung played by Do Thi Hai Yen. For the duration of the movie the three main characters are involved in a semi love triangle. This triangle and the emotions that the male characters feel towards Phoung begin to characterize the way they feel about the country of Vietnam itself. Vietnam becomes feminized, taboo, and sexualized just as Phoung does in Pyle and Fowler’s eyes. The manner in†¦show more content†¦Pyle doesn’t love Vietnam so much as he hates communism, in the same way he doesn’t love Phoung so much as he does not want Fowler to have her. Fowler on the other hand walks a thin line between noninvolvement and participatio n within the situations at hand. Fowler believes that Vietnam should be left to make its own decisions, but at the same time he is afraid of the consequences of such choices. This policy of noninvolvement and noncommittal is the same way that he approaches all the situations within his life. Fowler does not want to become concerned with the circumstances occurring in Vietnam and he also does not wholeheartedly become involved in the situation between Pyle and Phoung until he is forced to do so. He essentially permits Phoung to decide whom she wants to be with until he is compelled to leave his state of neutrality when it does not seem as if he will become the winner of her heart. Yet again Fowler’s feelings towards Phoung embody his feelings towards Vietnam. 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Investment Management Assigment

Question: Describe about investment management? Answer: Introduction The superiority of the Efficient Market Hypothesis was challenged due to the emergence of the Behavioral Finance. From that point forward, the conventional standard methodology has been in a consistent clash against this new and progressively acknowledged standard of the investing behavior. The shortcomings of the hypothesis have turned into the investing weapon of the new exploratory methodology (Kartaova, Remeikiene, Gaspareniene and Venclauskien, 2014). Efficient market process and the investing rationality have contradicted the psychology of investors, market bubbles and biasness of the investors. Efficiency of information and the integration approach of the arbitrage have been found to be conflicting with the inefficient access to the market information as well anomalies in the market in case of long term (Gupta, Preetibedi and mlakra, 2014). This paper will provide an insight regarding the concept of efficient market hypothesis and behavioral finance. Therefore, it is discussed how the behavioral finance has challenged the efficient market hypothesis (Brown, 2010). Efficient Market Hypothesis Efficient market hypothesis is one of the most important investment theories and it is also considered as the spine of the present financial theories. Since early 1960s to the middle of 1990s the efficient market hypothesis was considered to be the principal investing theory and the most popular approach accepted by the financial analysts. According to Malkiel (2003), the efficient markets do not permit the investors to obtain returns which are higher than the average. It can be implied that that the efficient market hypothesis emphasizes on the efficient of the market in terms of the highly efficient level of news, information along with perfect communication (Borges, 2009). The efficient market hypothesis has described efficient market where huge number of investors who are rational and focuses on profit maximization through actively participating in the competition. In the efficient market, the investors focus on anticipating the future of the financial market for estimating the values of securities. Additionally, one of the most important features of the efficient market is all the relevant and information can be easily accessed by all the investors participating in the market. Hence, the individual stock as well as the aggregate stock market is characterized as efficient as the investors can access the entire available information foe integrating it into the present prices of the stocks. The efficient market hypothesis assumes that when any information or news arise, it gets easily spread within the market and instantly gets incorporated in the stock prices. Efficient market hypothesis has significantly focused on the integration, efficiency, market information and reflection. Eugene Fama has acknowledged the model and stated that in an actie market which is consisted of various rational as well as investors, stocks will be price appropriately and all the available market information will be reflected on the price of the stocks. The economists and scholars have distinguished efficiency in the market in three major forms. In case of the strong form, the public as well as the private information significantly contributes in pricing of stocks. Consequently, it does not allow the investors for achieving the competitive advantages. In the semi strong form, the stock prices significantly reflect the public financial information such as financial position of the company, announcement of the companies (Westerlund and Narayan, 2013). On the other, in case of the weak efficiency form, all the historical prices of the securities are integrated into the present price. Hence, these factors cannot be used for anticipating the future situation. In efficient markets, the investors have no scope to outperform and hence, investors cannot achieve higher returns from their investment. As all the information is available, no investor can be differentiated as market specialist or investment expert. Additionally, it has been found that any kind of new news or information in the market do not have the potential for bringing out unusual profit as those information will be easily available to the investors and will be reflected on the prices of stocks. It must be noted that the information which is instantly integrated in the market prices of which is public as well as can be accessed easily (Kartaova, Remeikiene, Gaspareniene and Venclauskien, 2014). The active managers will be unable to achieve higher level of performance though exploitation of the available private information. The market forecasts the future condition in an unbiased way and the information is reflected in a more objective manner in comparison to the insiders. Addi tionally, the return maximization from the uninterrupted trading is stopped as all the relevant information is integrated in the price of the stocks (McCauley, Bassler and Gunaratne, 2008). It is evident that the fundamental analysis of the stocks of a company is conductive for assessing the stock instead of the anticipation of the future price movements. On the other hand, technical analysis cannot be utilized for experiencing the further changes over the time. In case of efficient markets, the graphical representation and other technical studies do not offer significant benefits to the investors as the historical prices are integrated in the present prices. The efficient market hypothesis has found that loge term markets are more efficient (Westerlund and Narayan, 2013). Concept of Behavioral Finance The significance of efficient market hypothesis started losing due to the emergence of behavioral finance in the 1990s. This concept focused on consideration of the human behavior on the investment decision. Basically, this concept provides an insight to the influence of human psychology in financial and investment decision making. Behavioral finance has been attempting to describe how human behavior affects the decision making related to investment as well as its impact on the market (Wojcik, Kreston and McGill, 2012). It is evident that there are some financial effects which will be dependent on the psychological variables and biases of an individual. According to Alexakis and Xanthakis (2008), financial investors are not optimal decision makers and the psychological procedures significantly affects financial decision making. Heuristics is a major basis of the behavioral finance which is perceived as the pattern of human behavior. This concept majorly focuses on the obtaining knowledge or achieving a desirable outcome through employment of a smart guesswork instead of application of particular formula. Heuristics is involved with simple techniques which are based on experience and used for solving problem. It is known as shortcuts or rule of thumbs and responsible for explaining the decision making procedure of the investors (Mehra, 2008). This technique is more applicable when the investing decisions are made with poor information. Alternatively, the investment decision making procedure in case of market volatility and complicated investing atmosphere, where the decision making becomes extensively difficult, can be analyzed with the help of this concept. The cognitive heuristics significantly help in explaining the implications of the rules. Additionally, it provides evidence of the irrational decision making of the investors. Representativeness is one of the common heuristics that states that the investor tends to attempt for fitting into a new as well as unknown event into an existing event. Therefore, they focus on identification of the mutual components in the entirely distinct events. Additionally, it has been argued that that investors judge the probabilities by the degree of one element in comparison to other element. Anchoring is considered to be one of the important cognitive heuristic. It has been found that anchoring is significantly associated with the decision making procedure of an investor which is based on the initial anchor. It means the investors focus on estimating through starting from the initial value which will be adjusted to the yield. These adjustments are often found to be erroneous which leads to irrational decision making. Another common cognitive heuristics is herding which states that the investors seek to join a group and therefore eventually develops a collective behavior in case of decision making. In this situation, people prefer to follow others instead of using their cognitive ability and information. Overconfidence is another factor that states that investors may have a tendency of overestimating their cognitive and decision making skills (Shefrin, 2001). Theories and research studies have exhibited that fallacies significant dominate the investors and it prevents them from making right investment decision. Investors have a tendency to become risk averse for losses instead of profits (Zeelenberg and Pieters, 2004). It has been found that previous gains help in reducing risk and previous loss enhances it. Mental accounting is referred to a set of rational operations utilized by the human being for organizing evaluating and keeping track of the investment activities (Smith, 2008). It engaged the tendency of an individual for generating various mental accounts on the basis of special traits and registers the events which have been encountered. Regret aversion is associated with the desire of an investor for avoiding pain which is generated from the poor investment decision such as postponing the sale of stocks which leads to loss (Muradoglu and Harvey, 2012). Apart from the above stated considerations the investing decision is significantly affected by the cognitive bias, socio economic atmosphere and culture along with the personality. It has been found that these biases lead to different logical fallacies. Behavioral finance has exhibited significant concern for the investment time. Additionally, it has suggested that the stock market bubbles are not short term. Hence the loss bubble will not be easily reimbursed immediately (Goldberg and Nitzsch, 2001). Implication of behavioral finance for investment mangers Investment management may be defined as the financial process of managing the securities and tangible assets of an individual or an organization to meet specific goals (Muneer and Rehman, 2012). Investment decision making is a complex process involving various alternative scenarios. Some of the personal factors like age, education and income effect the investors decisions. To make effective investment decision the investor has to use various technical models like CAPM. Hence, the le of behavioral finance is extensive in case of understanding the investment decisions of an individual. (Alajbeg, Bubas and Sonje, 2012) has suggested that the selection of portfolios and stocks can be increased with the use of behavioral tools. However, at the time of relying on the portfolio managers for the investment decisions, the investors will have to accept the behavioral mistakes of the portfolio managers. In majority of cases, the portfolio mangers are seen to adopt a regret aversion strategy (Ba ker and Nofsinger, 2010). Barnes (2010) opined that the major psychological biases like over confidence, anchoring, cognitive dissonance, mental accounting and regret aversion and gambler fallacy. Due to the effect of these biases, the investors tend to take poor investment decisions. The relation between the biases and the investment decisions can be explained with the help of the following theories namely Heuristic decisions process Under this process of decision-making, the investor uses the common emotional norms and mixes them with the rational thoughts in order to arrive at suitable investment decisions. The following factors are responsible for the Heuristic decisions making process. Representativeness: In cases of making investment decisions high degree of stereotyping occurs. The investors make the decisions depending upon some past investment result. Hence, if the investor has a bad experience with a similar kind of bond investment then in the future the investor will reject any investment of the similar nature or of the similar bonds (Beck and Levine, 2002). Overconfidence: Confidence is the emotional factor within the individual investor that provokes the investor to take right decisions (Shefrin, 2000). Suppose if an investor suffers a high degree of loss in an investment then he gains encouragement in form of confidence to make effective investment decision in future. Anchoring: In this case, the investors decision is guided by irrational price levels as an important process of decision-making and therefore the investors misses investment opportunities and at times makes a wrong entry into the investment market (Marx and Mpofu, 2010). Gamblers fallacy: At times depending on positive past experience the investors tend to take high investment risks. Since the experiences have fetched the investor, good returns hence the tendency to opt for more returns pushes the investor to take risky investment decisions. This situation may either prove to be positive or negative for the investor suggesting that the investor knowingly takes chances of high losses. Prospect theory The prospect theory states that the individuals while making investment decisions chose between probabilistic alternatives that involve risk and the probabilities of outcomes are known. For instance, the investor will conceive the loss of $ 1 more painful compared to the gain of twice $ 1 (He and Shen, 2010). The theory is also termed as the loss aversion theory. The mental condition of the investor forces the investor to take poor investment decisions so that risk can be avoided. The key concepts of this theory are as follows: Framing: This concept states that the method of presentation of facts influences the decisions of the investor. Hence, a negative representation will result in a loss on the part of the investment decision. Loss aversion: Since the human psychology is to avoid risks, hence when the price of a share decreases the investor refuses to sell the same and continues to retain the shares with an expectation of future price growth (Hunton, 2009). Regret aversion: This psychology induces the investor to omit any good investment opportunity so that the individual can avoid any regrets of a loss resulting from the investment. Mental accounting: Mental accounting tendency prompts the individual to categories the sources of income according to their respective expenses. Hence, the investment decision depends on the prioritizing of the income categories. Challenges faced by efficient market hypothesis due to Behavioral Finance According to Mockus and Raudys, (2010) the process of efficient market hypothesis helps the investors to be acquainted with efficient share market information. Since all investors have access to the available share information, hence it is not possible to exploit the investors. However, the rapid movement within the stock market makes it difficult for the individuals to access all information at all time of investments. Since the stock market, information is available though elaborative channels of communication hence it is difficult for the individual to combine and assimilate the same. Moreover, the emotional status of the investor also hampers the assessment of the information. Keryt (2012) opined that majority of the cases the information of stock market is available to a limited group of investors. Thus behavioral finance denotes that the stock markets are informational in efficient. With the help of fundamental analysis and technical analysis, the investors try to analyze the security market. If the information supplied by these analysis techniques are positive then the investor frames a positive image about the company thereby fostering a sense of confidence in respect of the investing decision. However, the technical analysis produces a forecast of the direction of the share prices hence the investors relying on the forecasts may suffer losses in future. Thus, they may form a stereotype decision on the investments and develop a sense of risk aversion in this matter. The use of technical analysis makes the investors develop a sense that the economy will repeat itself. De Bondt (2009) further stated that the EMH highlights that the individuals engaged in a stock market investment decision are individuals with common characteristics namely lack of unique personality, sharing common investing traits, lack of social life and engaging in common discussions. Thus, the hypothesis creates a wrong impression on the investors and they tend to stay away from the stock markets. Rozeff (2011) commented that when the market remains efficient the investors act rationally and take efficient investing decisions. However, the occurrences of investment bubbles like the internet bubble and the real estate market bubble has shown the instances that the market is not always efficient. The addition of .com after internet based organizations. The major reason for the growth of the share prices of the internet companies was the investors speculation that the addition of .com after the internet based companies would make the companies more profitable. Hence, Simmons (2012) suggested that behavioral finance has huge affect on the market efficiencies. The financial anomalies arise majorly due to the effect of behavioral finance on the EMH. Although the investing techniques have been changed over the time however, the EMH strategies remain unmodified for the contemporary and old stock markets (Ross et al. 2004). The information supplied by the hypothesis still takes the investors to be irrational. However, with the changing time the investors have become rational and have tended to change their investment techniques. The use of modern tools like credit default swaps in the global stock markets suggests that the efficient market hypothesis has become invalid in the eyes of the investors. The use of rational behavioral finance has helped the investors to invalidate the irrational hypothesis. Moreover, Beck and Levine (2002) argued that the efficient market hypothesis suggests that the investing is a long-term decision and the stock markets should acquire efficiency in long run. However, the fact is contradicted by modern concepts of stock market that suggests that the stock investment is now a short-term decision. The profit seeking and the risk aversion psychology of the investors suggest that the investors are relying on the short-term gains so that high risk of loss can be avoided. Since the primary concept of behavioral finance is to frame the investment structure based on the behavior patterns of the investors, hence it is more effective in attractive gainful investments compared to the use of market hypothesis. Conclusion The essay shows that the major three components of a stock market are the behavioral finance, efficient market hypothesis and the investing decision. On ascertaining, the relation between the three it can be noted that behavioral finance has a huge impact on both investment decision and market hypothesis. Depending on the emotional biases, the individual designs the investment decisions. The nature of the individual will contribute to the investment decision. Moreover, the change in the behavioral patterns of the investors influences the validity of the efficient market hypothesis. With the changes in the behavioral pattern, the investors have shown that not all market hypotheses are efficient and correct. Hence, it is advisable on the part of the individual to make rational investing decisions based on the present and current information available on the stock prices of the investments. IT is also noted that due to the behavioral weaknesses the majority of the investing decisions fa il. However, the market efficiencies are also considered as imaginary instances and irrational in respect of any investment decision. References Alajbeg, D., Bubas, Z. and Sonje, V. (2012). The efficient market hypothesis: problems with interpretations of empirical tests.fintp, 36(1), pp.53-72. Alexakis, C. and Xanthakis, M. (2008).Behavioral Finance. Greece: Stamoulis Publications. Baker, H. and Nofsinger, J. (2010).Behavioral finance. Hoboken, N.J.: Wiley. Barnes, P. (2010).Stock Market Efficiency, Insider Dealing and Market Abuse. Farnham: Ashgate Pub. Beck, T. and Levine, R. (2002).Industry growth and capital allocation. Cambridge, MA.: National Bureau of Economic Research. Borges, M. (2009). Efficient market hypothesis in European stock markets.The European Journal of Finance, 16(7), pp.711-726. Borges, M. (2009). Efficient market hypothesis in European stock markets.The European Journal of Finance, 16(7), pp.711-726. Brown, S. (2010). The efficient markets hypothesis: The demise of the demon of chance?.Accounting Finance, 51(1), pp.79-95. Bruce, B. (2010).Handbook of behavioral finance. Cheltenham: Edward Elgar. Burksaitiene, D. and Bernatonyt, D. (2012). TENDENCIES OF FOREIGN DIRECT INVESTMENT.ecoman, 17(4). De Bondt, W. (2009).Financial accounting and investment management. Cheltenham, Glos, UK: Edward Elgar. Goldberg, J. and Nitzsch, R. (2001).Behavioral finance. New York: John Wiley. Gupta, E., Preetibedi, P. and mlakra, P. (2014). Efficient Market Hypothesis V/S Behavioural Finance.IOSR Journal of Business and Management, 16(4), pp.56-60. He, W. and Shen, J. (2010). Investor Extrapolation and Expected Returns.Journal of Behavioral Finance, 11(3), pp.150-160. Hunton, J. (2009).Advances in accounting behavioral research. Bingley: Emerald Group Publishing Limited. Kartaova, J., Remeikiene, R., Gaspareniene, L. and Venclauskien, D. (2014). Transformations of Efficient Market Hypothesis under the Influence of Behavioral Finance.Mediterranean Journal of Social Sciences. Keryt, A. (2012). INVESTMENT RISK ANALYSIS: THEORETICAL ASPECTS.ecoman, 17(3). Malkiel, B. (2003). The Efficient Market Hypothesis and Its Critics.Journal of Economic Perspectives, 17(1), pp.59-82. Marx, J. and Mpofu, R. (2010).Investment management. Pretoria: Van Schaik. McCauley, J., Bassler, K. and Gunaratne, G. (2008). Martingales, nonstationary increments, and the efficient market hypothesis.Physica A: Statistical Mechanics and its Applications, 387(15), pp.3916-3920. Mehra, R. (2008).Handbook of the equity risk premium. Amsterdam: Elsevier. Mockus, J. and Raudys, A. (2010). On the Efficient-Market Hypothesis and stock exchange game model.Expert Systems with Applications, 37(8), pp.5673-5681. Muneer, S. and Rehman, U. S. (2012). Materialization of Behavioural Finance and Behavioural PortfolioTheory: A Brief Review.Journal of Economics and Behavioural Studies, 4(8), 431-435 Muradoglu, G. and Harvey, N. (2012). Behavioural finance: the role of psychological factors in financial decisions.Review of Behavioural Finance, 4(2), pp.68-80. Ross, S. A., Westerfield, R. W. and Jefferey, J. (2004). Corporate Finance. 7th ed. New York, NY: McGraw-Hill/Irwin Rozeff, M. (2011). Market Pricing Beyond the Efficient Market Hypothesis.SSRN Journal. Shefrin, H. (2000).Beyond greed and fear. Boston: Harvard Business School Press. Shefrin, H. (2001).Behavioral finance. Northampton, MA: Edward Elgar Pub. Simmons, P. (2012). Using a Differential Evolutionary Algorithm to Test the Efficient Market Hypothesis.Comput Econ, 40(4), pp.377-385. Smith, D. (2008). Moving from an Efficient to a Behavioral Market Hypothesis.Journal of Behavioral Finance, 9(2), pp.51-52. Westerlund, J. and Narayan, P. (2013). Testing the Efficient Market Hypothesis in Conditionally Heteroskedastic Futures Markets.Journal of Futures Markets, 33(11), pp.1024-1045. Wojcik, D., Kreston, N. and McGill, S. (2012). Freshwater, saltwater and deepwater: efficient market hypothesis versus behavioural finance.Journal of Economic Geography, 13(2), pp.257-277. Zeelenberg, M. and Pieters, R. (2004). Consequences of regret aversion in real life: The case of the Dutch postcode lottery.Organizational Behavior and Human Decision Processes, 93(2), pp.155-168.

Binding Contract and its Type Samples †MyAssignmenthelp.com

Question: Discuss about the Binding Contract and its Type. Answer: A contract is a binding agreement which is legal and enforceable by law (Board, 2011). The covenant is made between two or more entities. The main purpose of contracts is to enforce the rights and duties of the parties to fit with the agreement made (Carter, 2012). A contract can be formal or informal depending on how the parties want it to be. In case one party fail to follow the agreement the court can penalize that particular party. The duty of the court is to make sure that the agreement that the parties made is enforced. Some entities prefer written contracts while others prefer verbal. Only under specific conditions which state that the contract has to be written and signed. There are various types of contracts, among these are; contract under seal, implied, executed and executory, express, bilateral and unilateral, void and voidable contracts (Ba Yang, 2016). This paper aim at handling particular questions regarding contract. List and explain briefly all the components required to demonstrate that a binding contract exists. A binding contract is a legal agreement which is done verbally or in writing and the document is signed by the parties involved, two or more parties or entities sign the document. For a binding contract to exist, there are several components which are the requirements to show that the binding contract exists. These include; offer, consideration, terms and conditions, acceptance, capacity, legal purpose and mutuality (Anson, et al. 2010). Offer is one of the components of a binding contract which has to be specific. This is the point where one party of the involved parties presents a good or service to the other party. One party promises to do something or to refrain from doing something to the other. The first component is that there has to be goods or services that one party has to offer, For instance, SPC is a company in Australia which deals with canned fruits. When they offer to supply Woolworths with their products, SPC has to get to a point where they present to Woolworth what they have so that they decide if to go on with the contract or not. Consideration is another key component for a legal binding contract. There has to be something that is being exchanged to compensate for what was offered by the other party. For instance, when purchasing a car, the person offering the car specify the amount of money to be paid by the person interested to purchase the car. All the documents which are included in the car purchase are agreed upon. The money paid will be the consideration (Anson, et al. 2010). Acceptance this is the next major component. When one party offers what they have, then it's upon the other to decide whether to accept the offer or not. For example, before there is any agreement made on the type of fruits and quality Woolworth decides that they dont want to continue with the contract, then the binding contract is not there until the two agrees on the terms of the bargain. Acceptance is a key component of a contract as the party being offered has to agree to terms and without that, no proceeding with the contracting process can go on. Capacity is legal requirements for parties to be allowed to take part in getting into contract. It is not everyone is in a position to enter into a contract legally. Some people are not allowed to, due to their conditions which can bring complications in the terms of the contract. For instance, minors, prisoners, bankrupts, people with mental impairment are among those not allowed to take part in contracts (DiMatteo, 2010). If someone falls in the categories the contact cannot be complete as they are not legally allowed to enter into a binding contract. Terms and conditions, this is a component of the binding contract. It is very important that the two parties set aside the terms and the conditions of the contract. This will govern their agreement. In case of a dispute, the court will just have to revisit the terms of the contract thus making it easy to find a solution in that particular case. A binding contract must be the legal purpose, if the contract is aiming at illegal deals or for fulfilling objectives to violate the laws, then they cease to be a binding contract. Whatever the contract is about has to be legally acceptable. Finally, mutuality is a component of a binding contract. It means that the parties involved have mutually agreed to go on with the contract after understanding all the terms and conditions set for that particular contract. When all these components are involved, they demonstrate a binding contract (Fried, 2015). Does a contract have to be in writing to be binding? In your answer explain whether this is the case, and further whether it is a good idea to put an agreement in writing. Generally, a contract does not have to be written, only in very specific conditions when writing is compulsory for it to be binding (Fried, 2015). Whether written or oral, they are both legal and can bind the two parties. There are those contracts which must be written in order to be valid. For example, sales made in real estate, contracts taking more than one year to complete. Also, contracts that take more years than the life time of the parties involved have to be write the contract. Even if writing is not legally required, it is advisable to do written contracts moreso for businesses. It is difficult to prove an oral contract in contrast with a written contract. For a written one, you just have to provide the document that was signed by the other party in case there is a problem with one party or they fail to comply. For instance, a contract which involves a large amount of money it is important to write the contract since there are possibilities that a dispute might occur. In case the dispute has to move to court, then it is important to have the written contract as it will serve as evidence that such a contract exist (Fried, 2015). What is a formal contract? Explain the formalities of such a contract and give two examples. A formal contract contains an agreement which is written, it is used to bind the parties legally. It is one where the parties taking part in the binding contract sign it under seal. This is different for an informal contract, where there is no seal that is involved. In the formal contract, there is a format which is prescribed to be followed during the contracting process. They are supposed to contain the following; offer, consideration, acceptance, conditions, and terms of the contract (Nystn-Haarala, Lee, Lehto, 2010). Formalities of a formal contract include the elements of the contract all being fulfilled. Where writing the contract is a must, then it has to be so otherwise the contract will not be enforceable by law. Understanding the agreement and both parties signing the written document is a requirement for a formal contract but it is not a must. The case of Gordon and Macgregor at the Australian High Court is an appropriate example. The two parties had a negotiation which was followed by the two entering into a written agreement. The agreement was requiring Gordon to offer dark red cedar logs. All the requirements were specified in the document including the length, girth and the quantity. It happened that Gordon did not supply the logs with the specified specifications as indicated in the contract document. Macgregor filed a case claiming damages. Gordon also claimed that the contract did not conform to the rules of recording the contract in writing (Carter, 2012). In this scenario, the contract did not fulfil the requirement of a formal contract as Macgregor and Gordon left out some information when writing the terms of the contract. For a formal contract every detail of the contract has to be written in the document to avoid cases where one will fail to fulfil the requirements (Chen-Wishart, 2010). Another example of a formal contract includes Macquarie University in Australia who want to offer a job to a tutorial fellow. There has to be a written contract between the two clearly identifying and recording all the required for a legal contract (Suprapto, et al., 2016). The fellow offers to provide services that the university requires. Offer in one of the components of a binding contract. There will be considerations which the university will give in compensation to the services provided. Then the fellow thinks through it and accepts to go on with the contract after all the terms are clearly understood by the two parties. The two meets legal capacity which might otherwise lead to failure of the contract being legal. The two signs the contract making it a formal contracts. A group of friends meets for a regular drink at a hotel every Friday night. Each contributes $2 towards a group lottery ticket, which is drawn over the weekend by Lotto Company. One of the group is given the role of actually buying the syndicate ticket. When in fact a winning ticket is drawn for the group the purchaser of the ticket claims the arrangement is purely social and there is no arrangement whereby he needs to share the prize. Analyse this issue in terms of contract law. When it is a social arrangement, there is an assumption that they are no need for a court of law to be involved in these cases. The ticket purchaser cannot be taken to the court of law since all he has to say is what will be taken as the truth. The reason is that the other party does not have any evidence that they had an agreement. The contract was not written, therefore they cannot prove the case only by words that they say which may or may not be taken as truth by the person in charge In case the situation was planned to be serious then the court of law would be in a position to solve the dispute involving the social agreement (Li, Poppo, Zhou, 2010). This would help for this particular case study. This is different from cases where individuals are involved. If they had the idea that amount of money is large they would have changed the contract from social agreement to contractual agreement which is more serious and legal requirements will be involved. Occasions where money is in volved, it is important that a written contract is used to bind the two parties. This will make it easy to deal with individuals who happen to refrain from the terms and conditions made on the contract (Schooner, 2011). Why is it important under the law to distinguish between a party who is an agent for a principal, from that of an independent contractor? In your answer explain the legal implications of each relationship. A party who is an agent for a principal is a situation where a party legally appoints another party to represent them in a contracting process. The agent takes a position of the principal and acts on his position. In this kind of a relationship, the agent is supposed to have no conflict of interest in the process of handling the action. On the other hand, an independent contractor is a natural person or a corporation which contracts another entity to offer goods and services in accordance with their own processes and their own ways. The contract could be either written or verbal and the independent contractor solely does the work to meet the requirement of the contract (Furmston, Cheshire, Fifoot, 2012). It is important under the law to distinguish the above relationship as they have different responsibilities and they report to different people. Independent contractor report to their employer and the agent reports to the principal (Jost, 2011). For an independent contractor work without being controlled but for the case of an agent of the principal, he/she is controlled by the principal. For the latter, their actions and omissions, the principal are liable. This is not the case for an independent contractor where the employer is not liable for his/her actions or omissions. It is important to distinguish between the two parties because, when the employer characterizes the employees the wrong way, the employer is likely to suffer from an increased number of legal liabilities (Suprapto, et al., 2012). For instance, misclassification of employees and failure to withhold the taxes, the employer will be faced with challenges from the IRS. Also, there are civil liabilities that can result. For instance, employers are supposed to pay overtime and minimum wages to employees or agent, which is not the case to an independent contractor (Messina Messina, 2012). In conclusion, entering into a contract is an act that needs caution (Matthijs, Chiaburu, Jansen, 2010). There is need to understand the requirement of a contract so that it can be clear and then they will do it right. The paper also shows the importance of employer understanding the classes of their employees. Otherwise, there is the employer will end up facing penalties enacted by the law. References: Anson, W. R., Beatson, J., Burrows, A. S., Cartwright, J. (2010).Anson's law of contract. Oxford University Press. Ba, S., Yang, X. (2016). Changes in Pre-internet Real Estate Brokerage Industry in the US Over the Century. InInternet Plus Pathways to the Transformation of Chinas Property Sector(pp. 11-29). Springer Singapore Board, S. (2011). Relational contracts and the value of loyalty.The American Economic Review,101(7), 3349-3367. Carter, J. W. (2012).Cases and materials on contract law in Australia. LexisNexis Butterworths. Chen-Wishart, M. (2012).Contract law. Oxford University Press. DiMatteo, L. A. (2010). Strategic contracting: contract law as a source of competitive advantage.American Business Law Journal,47(4), 727-794. Fried, C. (2015).Contract as Promise: A theory of contractual obligation. Oxford University Press, USA. Furmston, M. P., Cheshire, G. C., Fifoot, C. H. S. (2012).Cheshire, Fifoot and Furmston's law of contract. Oxford university press. Joskow, P. L. (2012). Vertical integration.The Antitrust Bulletin,57(3), 545-586. Jost, M. P. S. (2011). Independent Contractors, Employees, and Entrepreneaurialism under the National Labor Relations Act: A Worker-by-Worker Approach.Wash. Lee L. Rev.,68, 311 Li, J. J., Poppo, L., Zhou, K. Z. (2010). Relational mechanisms, formal contracts, and local knowledge acquisition by international subsidiaries.Strategic Management Journal,31(4), 349-370. Matthijs Bal, P., Chiaburu, D. S., Jansen, P. G. (2010). Psychological contract breach and work performance: Is social exchange a buffer or an intensifier?.Journal of Managerial Psychology,25(3), 252-273. McKendrick, E. (2014).Contract law: text, cases, and materials. Oxford University Press (UK). Messina, R. A., Messina, E. A. (2012).U.S. Patent Application No. 13/412,973. Nystn-Haarala, S., Lee, N., Lehto, J. (2010). Flexibility in contract terms and contracting processes.International Journal of Managing Projects in Business,3(3), 462-478. Schooner, S. L. (2011). Desiderata: Objectives for a system of government contract law Suprapto, M., Bakker, H. L., Mooi, H. G., Hertogh, M. J. (2016). How do contract types and incentives matter to project performance?.International Journal of Project Management,34(6), 1071-1087.