Sunday 27 January 2013

Economics 9



In the recent past, the business world has witnessed quite a number of mergers by both small and large firms. This essay seeks to look into the potential cost advantages of these moves. In addition, it looks to explain efficiency of firms in relation to the capital base. Finally, it will seek to explain whether or not these mergers can be based on economies of scope.
            According to Hirschey (2008), mergers and acquisitions often generate cost advantages courtesy of economies of scale. In addition, merging positions firms well to harness additional revenues through increased market share. Moreover, merging enhances the ability of a firm to increase its tax gains. It is therefore apparent that the potential cost advantages accrued by merging firms are not only improved cost efficiency but also value generation and market share increases.
            To say that a national bank with a capital base of 300 billion dollars is likely to be relatively more efficient than either a 30 billion regional bank or a 3 billion state based bank is untrue. The aforementioned is relatively because the costs associated with large firms are often high when compared with those with small capital base.
            Yes, it is true to say that the recent mergers are often predicated on economies of scope. This is relatively because most of these firms merging are keen to stay ahead of competitors by curbing the threat of multinational corporations and be able to position themselves to compete internationally. Mergers often paramount in an industry where companies are striving to remain afloat. Here, an industry will be able to avert impending crisis. Giving that scope, firms will be able to share knowledge and information through increased merging in an industry (Hirschey, 2008).
             

References
Hirschey, M. (2008). Managerial Economics. New York: Cengage Learning.

Economics 10



This essay seeks to dissect cost structure issues and advance arguments on whether lower transaction cost positions small firms well to equally compete in an ecommerce environment with large firms in supplying information goods and services. In addition it looks to explain how network externality affects firm operating strategies.
            In the contemporary business world, large firms often dominate markets in the supply of goods and services. The aforementioned is not limited to only commodity market as it is also evident in information market where information goods and services are often supplied by large firms. Often at this state, small firms are locked out of the market as large firms have huge capital base and are able to survive from low profits. However, given low pricing of information goods and services, small firms are unable to meet their costs of production. Yes, Low transaction costs in ecommerce will position small firms well to compete with larger firms (Gangopadhyay, 2002). The aforementioned is relatively because the transaction costs will be similar across the market and small firms will be able to meet their production costs.
            According to Hirschey (2008), network externality is change in either a benefit or surplus that is accrued by an individual from a good or service given that the number of other individuals consuming the same commodity changes. Network externality often has adverse effects on a firm operating strategies and cost. For example, given that popularity of a given good produced by a firm increases, the good will relatively increase in values as more consumers will be willing to use it. Here, a firm will be forced to relook into its strategies and align it well with the market changes. For example, the prices of the good will be adjusted upwards, production of the good will be increased (Gangopadhyay, 2002).

References
Gangopadhyay, A. (2002). Managing Business With Electronic Commerce: Issues and Trends. Pennsylvania: Idea Group Inc (IGI).
Hirschey, M. (2008). Managerial Economics. New York: Cengage Learning.

Analyze and evaluate the ways in which higher education is changing due to advances in Information and Communication Technology (ICT)



In the contemporary society, education systems are under intense pressure to utilize information and communication technology in their day to day operations. The assumption that information and communication technology (ICT) is paramount in changing to education system i.e. in not only learning but also teaching in classrooms form the basis of the aforementioned pressure. The modern society is in dire need of a workforce that is better placed to utilize technology to spur productivity, economic growth, development and creativity. The aforementioned entails the identification of sound information sources, effective and easy access of information and the communication or transfer of such information and data to other individuals (Stensaker et al. 2007: 431). This essay seeks to analyze and evaluate various ways on how advances in information technology and communication are changing higher education.
            Information technology and communication envisages applications and software that are often aid in boosting higher education distance learning through distance learning. According to Kirkup and Kirkwood 2005: 185), ‘information and communication technology is a relatively powerful tool that is well aligned to change and reform higher education’. Given that it is utilized well, different ICT tools aid to not only ease access to higher education but also strengthen the importance of higher education to work places. In addition, information technology and communication enhances the quality of education by advancing a relatively active process that connects well with real life. In the past few decades, there has been increased interest on how ICT can be utilized to enhance not only efficiency but also effectiveness of higher education. However, ICT is still at infant stages in emerging and developing economies. The aforementioned is because of limited infrastructure and relatively high cost of usage (McNay 2006: 231).
            According to Gurr (2004: 115), effective learning in higher education is largely attributable to information technology and communication (ICT). ICT has not only enhanced efficiency but also expanded access, improved quality of higher education leaning and has contributed to improved systems of management. In the modern education system, ICT has been regarded highly relatively because of its role in higher education, research and in breaking the vicious cycles of poverty through new job openings and newly created investment opportunities. Information communication and technology is a subject that cannot be swept under the carpet in the 21st century. The higher education field has not been spared by the ever increasing influence of information technology and communication in the contemporary society. Information technology and communication has impacted both the quality and quantity of learning in higher institutions and distance learning institutions that have embrace it. ICT introduction and its subsequent usage together with its integration have led to the sprouting of modern educational methodologies. Therefore, it is apparent that ICT has had a radical change in the traditional methods of information transfer and delivery and has offered an enviable learning experience to tutors and students of higher institutions (Aleksic-Maslac & Magzan 2012: 273).
            The evolution and subsequent penetration of ICT into higher institutions of learning have had significant impact on the way leaning is conducted in that it has changed traditional modes of learning. For example, it is not only possible to utilize distance learning and realize collaboration between diverse higher institutions of learning but also providing new avenues where there is unchallenged ability to transfer knowledge and share information. The pace of higher education change attributable to information technology and communication has had relatively significant impact on operations of humans i.e. in terms of learning globally. The ever evolving ICT has relatively challenged traditional and often radical   processes of higher education by advancing feasible methods of information transfer and management. Easy global communication and transfer of information enhances instant exchange of data courtesy of evolving ICT is a boost to higher institutions of learning (van Weert & Tatnall 2005: 109).
For developing and emerging economies, information communication and technology provides a rational avenue of enhancing the quality of higher education and also boost access to much needed education. ICT does not only facilitate knowledge absorption and transfer, but also offers emerging and developing economies with wide opportunities that are meant to boost institutions of higher learning, boost the formulation of policies and their subsequent execution (Dittler 2005: 64). From the aforementioned, it is apparent that information and communication technology plays a cardinal role in reducing the isolation of certain groups from sound education and opens up knowledge avenues in unimaginable ways i.e. those that were not possible in the recent past.
            In conclusion, it is apparent from the discussion above that information technology and communication (ICT) has greatly impacted higher education. First, ICT provides an avenue which eases the transfer of information and data to different quarters. In addition, ICT has addressed the issue of isolation and low absorption and acquisition of knowledge in developing and emerging economies. Moreover, its rapid evolution and subsequent embracing by institutions of higher learning will relatively reduce the ever widening gap between those educated in developing economies and those in developed economies. Finally, ICT has relatively improved the formulation and implementation of sound educational policies by enhancing easy access to information.

List of references
Aleksic-Maslac, K & Magzan, M 2012, 'ICT as a tool for building social capital in higher education', Campus -- Wide Information Systems, vol 29, no. 4, pp. 272-280.
Dittler, U 2005, E-Learning in Europe - Learning Europe:How have new media contributed to the development of higher education?, Waxmann Verlag, Berlin.
Gurr, D 2004, 'ICT, Leadership in Education and E-leadership', Studies in the Cultural Politics of Education, vol 25, no. 1, pp. 113-124.
Kirkup, G & Kirkwood, A 2005, 'Information and communications technologies (ICT) in higher education teaching—a tale of gradualism rather than revolution', Learning, Media & Technology, vol 30, no. 2, pp. 185-199.
McNay, I 2006, Beyond Mass Higher Education:Building on experience, McGraw-Hill International, New York.
Stensaker, B, Maassen, P, Borgan, M, Oftebro, M & Karseth, B 2007, 'Use, updating and integration of ICT in higher education: Linking purpose, people and pedagogy', Higher Education, vol 54, no. 3, pp. 417-433.
van Weert, T & Tatnall, A 2005, Information and Communication Technologies and Real-Life Learning: New education for the knowledge society, Springer, New York.


In response to the global financial crisis central banks across the world have cut interest rates. Why? What are the main arguments against rate cuts?



Global financial crisis is a phenomenon that brought most economies to their knees. The crisis affected the macroeconomic stabilities of countries. Investments were largely affected as both local and foreign investors were afraid of injecting their hard earned capital in an uncertain environment. Developments and economic growth of a number of economies stagnated as its citizens faced nurtured the wrath of this economic disaster. Companies laid off their employees as it sought to cut down its production costs. Moreover, banks increased their lending rates to cushion them from economic uncertainty. However, despite being faced by fear and uncertainty, central banks advocated for a reduction in interest rates. This was done to instill not only investor confidence but also that of the general public. In addition, the move was intended to trigger investments and avert further macroeconomic instabilities (Hilsenrath, 2008). This essay seeks to dissect the how central banks responded to global financial crisis by advocating for interest rates cuts.
            A central bank often plays a cardinal role in regulating credit movement in an economy. In the contemporary society, a central bank is an entity that acts with public interest at heart. In most cases, this credit regulator is often affiliated with the national government in any economy. There are a number of functions that are associated with the central bank. They include, issuing shillings and notes, acting as a lender of last resort, managing foreign receipts on behalf of the governments, acting as fiscal agent and regulating the supply of credit in an economy (Bertaut, 2002).
            However, during the global financial crunch, central banks around the globe increased their portfolio. Of most importance is that during this period, the central bank became the lender of the last resort to banking sector in a view to cushion them against systemic risk and to facilitate lending between different banks. Lending within banks can also be called interbank lending. Interbank lending enables banks to loan each other funds in the short run to enable them meet their requirements (Coyle, 2000). In banking, the rate at which these banks loan each other funds is often called interbank rate. During the catastrophic global economic crisis, fear ran through the spine of the banking sector. Here, commercial banks were scared of extending loans to each other. The aforementioned did not only result into an increase of rates but also lead to credit freezing. This freezing of credit by commercial banks forced them to request liquidity from the central bank which often acts as a lender of the last resort. According to Froeb and McCann (2009), the lack of confidence both the money market and the entire economy during the global financial crisis positioned central banks as the only lenders of not the last but the only resort. The aforementioned phenomenon drove central banks into adopting monetary actions aimed at curbing the crisis.
            At the height of the global financial crisis, central banks took rational interventionist approach to ensure that macroeconomic stability of economies is restored. For example, during the mild mortgage crisis in 1997, the Fed utilized traditional tools to relatively increase credit supply in the subprime mortgage market (Moss, 2007). During this time, Fed brought down interest rates i.e. by slashing down funds rate between zero percent to 0.25%.  In the same breath, Fed also utilized Open Market Operations (OMO) to boost liquidity in the banking sector. According to Coyle (2000), Open market operations can be said to be the buying and selling of financial instruments in an open market at relative market rates. This monetary tool that is utilized by central bank to implement policies that seeks to stabilize money in circulation. In the same breath of promoting borrowing, central banks reduced their discount rates further. Discount rate is often a rate that is relatively higher than central bank rates. The aforementioned is utilized to enhance and trigger borrowing at banks discount window. The discount window often injects commercial banks liquidity. This enables banks that are eligible to source funds from the central bank. Therefore, despite Open market Operations targeting the economy as a whole, discount window is limited to banking system that were often in need of liquidity during the global financial crunch. However, during the global economic crisis, the effects of discount lending on economies were not felt. This was relatively because banks failed to fully utilize relatively because such a borrowing sends a coded message to the market that a banking institution is facing financial problem. Therefore, at the beginning of the global financial crisis, banking institutions that were in dire need of money were very reluctant to request funds from the central bank discount window because they feared the impacts of such moves on their image. With this irrationality of commercial banks, central banks convinced some banks to acts as guinea pigs to proof to the reluctant banks that there was nothing wrong with embracing the discount window to boost their liquidity. The central bank adopted the above move with an aim of increasing the liquidity of commercial banks in order to boost their lending capabilities. In addition, they observed that the move could go a long way in cutting down interest rates further. This they asserted could have huge impact to not only the economy but also to the stock market which was already battered by macroeconomic stability (Hilsenrath, 2008).
            In conclusion, it is apparent from the above discussion that banks played a cardinal role in addressing the global financial crisis. The monetary policies adopted by the central banks were of utmost importance in restoration of confidence in the economy. Reduced interest rates ensured that credit was available to not only the investors but also common populace with much ease. Reduced rates triggered borrowing of money that was otherwise utilized to boost the macroeconomic stability of the economy. Citizens who were locked out of employment courtesy of the crisis were now able to be absorbed back by their primary employers or new employers. Investors are often keen to investing in an environment where their capital will realize most return per unit of investment. The aforementioned is achieved when there is stability of an economy. Central bank often formulates policies that are keen in controlling the flow of funds in an economy. With the cutting down of rates by the central banks, commercial banks were able to lend loans to the public at cheaper prices. This plays a major role in both the development and growth of an economy as there is a lot of money in circulation. Finally, the move by central banks to cut down interest rates boosted the stability of the stock market that was already battered by the global economic crisis.

References
Bertaut, C. (2002). The European Central bank and the Eurosystem. New England Economic Review, 25.
Coyle, B. (2000). Foreign Exchange Markets: currency risk management. kansas: Global Professional Publishi.
Froeb, L., & McCann, B. (2009). Managerial Economics: A problem solving approach. New York: Cengage Learning.
Hilsenrath, J. (2008, December). Global Crisis Resists Central-Bank Moves. Wall Street Journal - Eastern Edition, 252(144).
Moss, D. (2007). A Concise Guide to Macroeconomics: What managers, executives, and students need to know. New York: Harvard Business Press.