Importance Of Time Value of Money Of Money For Managerial Prospect

Introduction:

Time value of money is the concept of compare investment alternatives and to solve problems involving loans, mortgages, leases, savings and annuities.

The concept is that have the value of money today is more than the promise and expectations that we will receive money in the future. The money that we hold today is worth more because we can invest it and earn interest.
 Time value of money

Time Value of Money (TVM) is an important concept in financial management. It can be used to compare investment alternatives and to solve problems involving loans, mortgages, leases, savings, and annuities.

TVM is based on the concept that a dollar that you have today is worth more than the promise or expectation that you will receive a dollar in the future. Money that you hold today is worth more because you can invest it and earn interest. After all, you should receive some compensation for foregoing spending. For instance, you can invest your dollar for one year at a 6% annual interest rate and accumulate $1.06 at the end of the year.  You can say that the future value of the dollar is $1.06 given a 6% interest rate and a one-year period. It follows that the present value of the $1.06 you expect to receive in one year is only $1.

A key concept of TVM is that a single sum of money or a series of equal, evenly-spaced payments or receipts promised in the future can be converted to an equivalent value today.  Conversely, you can determine the value to which a single sum or a series of future payments will grow to at some future date.

Interest

Interest is a charge for borrowing money, usually stated as a percentage of the amount borrowed over a specific period of time.  

Simple interest and compound interest

 Simple interest is computed only on the original amount borrowed. It is the return on that principal for one time period.  In contrast, compound interest is calculated each period on the original amount borrowed plus all unpaid interest accumulated to date.  Compound interest is always assumed in TVM problems.

Present Value

Present Value is an amount today that is equivalent to a future payment, or series of payments, that has been discounted by an appropriate interest rate.  The future amount can be a single sum that will be received at the end of the last period, as a series of equally-spaced payments (an annuity), or both.  Since money has time value, the present value of a promised future amount is worth less the longer you have to wait to receive it.

Future Value

Future Value is the amount of money that an investment with a fixed, compounded interest rate will grow to by some future date. The investment can be a single sum deposited at the beginning of the first period, a series of equally-spaced payments (an annuity), or both.  Since money has time value, we naturally expect the future value to be greater than the present value. The difference between the two depends on the number of compounding periods involved and the going interest rate

Managerial prospect of time value of money

Managers study how investors and borrowers interact to value investments and determine interest rates on loans and fixed income securities.through use of time value managers can find out the interest rate and present and future value of money. Interest is paid by borrowers to lenders for the use of lenders’ money. The level of interest charged is typically stated as a percentage of the

Principal (the amount of the loan). When a loan matures, the principal must be repaid along with any unpaid accumulated interest. In a free market economy, interest rates are determined jointly by the supply of and demand for money. Thus, lenders will usually attempt to impose as high an interest rate as possible on the money they lend  borrowers will attempt to obtain the use of money at the lowest interest rates available to them.

Time value of money problem refers to situations involving the exchange of money at one point in time for the rights to the future cash flow associated with that investment. The passage of time between the outflows and inflows in a typical investment situation results in different current value associated with cash flows that occur at different points in time.

Why the value is greater in the future?                      

There are primary reasons why a money to be received in the future is worth less than a dollar to be received immediately. The first and most obvious reason is the presence of positive rates of inflation which reduce the purchasing power of dollars through time. Secondly a dollar today is worth more today than in the future because of the opportunity cost of lost earning, that is it could have been invested and earned a return between today and a point in time in the future. Thirdly all future values are in some sense only promises, and contain some uncertainty about their occurrence. As a result of the risk of default or nonperformance of an investment, a dollar in hand today is worth more than in excepted dollar in the future. Finally, human preferences typically involve anxiety, or the preference to consume goods and services now rather than the future.

Applications of the time value of money:

There are some applications of the time value of money.

1.     This concept is used to purchase equipment or new product decision.

2.     Future payments , future worth of an investment, regular payments necessary to provide a future sum to amortize a loan, determination of return on an investment, determination of the value of the bond.

 

Role Of Marketing In Achieving Business Goals

Marketing is the lifeblood and the backbone of any organization. Without this, a firm is good as nothing. For marketing conceives the product, prices it, distributes it among all the logistically feasible areas and promotes it the best way it should (basic four Ps).
More so, it also formulates the most effective strategies in order for the firm to cope up and meet the ever-changing and fast-paced trends and demands of the business environment. It conducts research, creates short, mid and long-term plans and develops feasibility studies on whether a certain venture would become a click in the market.
Simply put, marketing is the most essential and vital element of any organization since it is the one that produces profit and customers - and retains them for the firm.

I hope you have already started planning, but if not, take some time now. Those of you with retail stores need to develop both your overall business objectives (grow sales10%, expand product lines, improve profitability, etc.) and your marketing calendar for store promotions (sale on easels, a holiday promotion, free offer, etc.). There is plenty of overlap between them, and the best place to start creating your marketing plan is with your business objectives.

Define Your Business Objectives

One of the great responsibilities of managing a business is creating priorities for the year ahead. So much happens each day, week, month, that we might spend all of our time addressing the needs of the moment and mis out on driving our business in the direction we have chosen. So start with the big picture and think about your goals for the coming year. Some of your goals may be based upon areas of your business that need improvement, and others based upon new opportunities you see in the marketplace.

As you fine tune your intentions, begin to get realistic and specific. We all have limits on time and resources. Money spent on incomplete projects can be money lost. It is better to effectively execute fewer projects and see the results, than to spread everything too thin and not make an impact.

Analyze Your Current Situation

Right at this moment your business sits at a point along its own unique timeline. You have a specific number of years in business, a certain level of business maturity, and your own history of accomplishments and challenges. With that information as a reference, you can review the following questions to gain clarity on where you are at this moment. The more information you can bring together, the better your ability to evaluate your business and generate new ideas.

• how is my brand doing in today's economy?

• what changes in the marketplace are affecting my product/service?

• does my current audience have the same needs?

• are there new audiences for my product/service?

• how does my retail space look today?

• am I really connecting with my customers?

Review Your Marketing Channels

In today’s marketplace you need to use every available marketing channel to reach your current clients and target audience. Evaluate the strengths and weaknesses of each channel and have a presence in all the channels that your customers use. You will need a mix of online and offline channels for an effective marketing campaign. While the more traditional offline channels may seem unfashionable, they remain highly effective. Also, offline and online channels are converging in interesting ways. People listen to digital radio on their PCs, watch television on their laptops, research products online and then purchase them at a retail store.

Television can no longer reach the large segments of the population it once could (25 years ago one ad spot on the three TV networks could reach 80% of the US population), but it still provides an excellent return on investment compared with other channels. Radio has the ability to target very specific audiences locally and nationally. It can greatly increase the effectiveness of other advertising. Print still plays a role for most businesses. There are publications that appeal to, and reach, most every niche you can think of. Traditional and free newspapers provide an avenue to reach the mass market.

Print that is coordinated with an online campaign can be highly effective.

Integrate Online and Offline Channels

As you create your marketing plan and identify the best channels for your audience, be sure to integrate all your efforts. You can use your website to house information and then drive people there from other channels. Your print ad can be designed to present your offer in a compelling way and send people to your website to make the purchase; your TV spot can send people to your website for more information; your radio ad can send people to your retail store. In all channels, speak appropriately to your customers in a tone they recognize as your brand, keep your graphics consistent, and coordinate your offers. You want to be sure you are recognized in every channel for maximum impact. Greater success can be achieved if you create a comprehensive multichannel strategy rather than just a multiple channel plan. If you are multiple channel, you are simply using a variety of channels to communicate. For an effective multi channel strategy you will utilize every possible channel and incorporate cross channel customer benefits (buy online, pick up at retail location, etc.) which integrates your brand with every customer experience.

Maximize Your Marketing Budget

Each marketing decision should be made within the framework of “does this marketing activity bring us closer to our business goal?" As you develop your marketing plan you have the opportunity to pre-plan your messaging, advertising, and events. You should plan to cross-promote whenever you can, have info on your next event at the current event, and crosssell

based on customer likes and preferences. Plan around the seasons, the holidays, and the events your customers find interesting. You can begin to allocate your resources to the projects of greatest priority.

Build from one marketing event to the next and see if you can create a theme or concept for the entire year. The more focused your messaging the more impact it will have on the consumer. Don’t feel the need to have each message be unique; it takes a great deal of repetition to create awareness. So while you may grow tired of some things, do not change them just for that reason; be sure it is time for your audience to see something new. Variety based on a single message can be very powerful.

Set Measurable Goals

Now get your plan and schedule in writing. You need to be ahead of the curve when it comes to scheduling. We all know that by the time we recognize the need to do something, or notice an opportunity; it is often too late to execute an event or an advertising campaign. Have some specific goals for every marketing activity; some may be to grow your customer base, others to sell product, and others to bring more people into your retail space.

When developing print and electronic messaging be sure to keep it simple (people are busy) and clearly ask for a specific response (direct your audience). Make offers that are interesting and compelling. The most successful marketing efforts, in print and online, utilize all the direct marketing tools available today – offers, guarantees, time-specific sales, etc. Test various offers to see what generates the most response.

Track and Analyze Results

At regular intervals, you should review the results of your marketing efforts. You can track coupons, visits to your store, dollars spent, names in your database, or any specifics of your promotions. Your website should be running some type of analytics program (Google Analytics is free) so you can track visits to your website, pages visited, where the visitors came from, how long they stayed, etc. If you sell your products online you can, of course, track online sales. Then decide what was successful based upon your specific marketing criteria. If you are looking to increase your customer base this year, you may be willing to bring in customers at a loss on their first purchase. If your goal is to increase profits, then you may need to eliminate some of your less profitable products or categories. Success can only be evaluated based upon the objectives you originally set out in your marketing plan.

Repeat

Your long term success will come from a sustained effort of planning, executing, and evaluating. Your marketing plans do not need to be complex, but they will require your serious thought and evaluation. Take the time to gain clarity and purpose for the year ahead.

total quality management

Process design

The process through which function requirement of people is satisfied through shaping and configuration of resources, to check the whole of the process design is to make sure that the performance the product is appropriate to achieve the goals. The design of product and services is partially dependent on the productive system. Product can only work within the limitation of product design. Therefore, the obvious time to start thinking about basic modes of production for product is while they are still in the design stage. This conscious effort to design for productibility and low manufacturing costs is referred to as product design. One of the important functions of product designer is to meets functional requirement. (slack, et al., 2007)

Service process design

In services there is some interaction and customization is required. recognizing the customer unique desire for the process, manager design the process to accommodate these special requirements, through designing the services process effectively and efficiently they meet the needs of their customers.

Volume variety effect on process design

Operations can range from producing a very high volume of products or services (for example, a food canning factory) to a very low volume. Low volume operations have a very high variety of product and services, while high volume production has low variety product and services. Many manufacturing plants will have a large area, organized on a ‘mass production’ in which they make their high-volume ‘best-selling’ products. In another

Part of the plant they may also have an area where they make a wide variety of products in

Much smaller volumes. The design of each of these processes is likely to be different.(slack, et al., 2007)

Process reengineering

It is the process of redesigning of business processes and improvement in performance of the product. Customer desires, product technology and product changes, and processes are redesigned is sometime called reengineered. (heizer and render, nd)

Design and redesign

The design is the process through which some thing is arrange or work on it before constructing. New information and feeds in from users, and that needs new ways to improve design that reduce and reduce production cost and quality. During design of the product provide freedom to the designer. (Buffa and Sarin, nd)

Interchangeable part

Design for component part need to specified carefully so that any part from a lot will fit. the result for the specified part design for interchangeable part is interchangeable assembly. Assembly costs are then lower than they would be if workers had to select combination of mating parts that fit. (Buffa and Sarin, nd)

Standardization

Standardization products are cheaper than custom product. The cost items affected are raw materials inventory, in process inventory, lower set costs, longer production run, improved quality controls with fewer items opportunities for mechanization and automation, more advantageous purchasing, better labor utilization, lower training costs and so on. (Buffa and Sarin, nd)

Modular designs

Modular design is one way to offer product variety while holding number of component and subassemblies to some reasonable level. Modular design offering variety in the marketplace.

Technology

With the industrial revolution, there has been a continuous substitution of machines power for human power, through use of technology the volume of production level is increase, invention of computer and other chips makes life more easy, in advance and high developed countries they developed a substitute machines for the control functions of the human operation. New and advanced process technology has been developed, such as

·         Robotic

·         NC machine (numerically controlled machine where machine tools are controlled by computer )

·         FMS (flexible manufacturing system that combine NC machine in flexible systems of production)

·         CAD/CAM (computer aided design and manufacturing system that combine product design and manufacturing instructions)

·         CIM (computer integrated manufacturing in which all aspects of manufacturing are integrated through a design and manufacturing data base)

·         GT (group technology that organize planning and facilities for small lot manufacturing by grouping various parts and products with similar design and production process into efficient system  that can use NC machine, robot or other advance technologies) (Buffa and Sarin, nd)

Process technology in services and nonmanufacturing operations

There are some important factors which effect the process technology in services and nonmanufacturing operations, these operations can classified in the same manual mechanized and automated format used for manufacturing process technology. (Buffa and Sarin.nd)

Distribution and transport

To transport the manufacturing good there is a need of standardized containering and shipping system through which the manufacturing can easily distributed to all national and international level, that eliminate most small unit handling and provide highly efficient systems for handling large quantities of goods. (Buffa and Sarin, nd)

Warehousing

In modern era there is use modern technology in warehouses, computer control has been applied to warehousing and advance design will store and retrieve materials on command, items are picked from storage location based on an order list in the computer. (Buffa and Sarin, nd)

Point of sale systems

Mechanization and automation have impacted the operation function in food markets through point of sale systems. The Universal Product Code (the bare code now printed on most product packaging) provide unique machine readable code for nearly every product. (Buffa and Sarin, nd)

Quality

A common definition of quality is “the characteristics of a product or services that satisfy the stated and implied needs” “a product or services free of deficiencies” (summer, nd) another approach which defines quality as “consistent conformance to customer satisfaction or dissatisfaction”

Quality system

In order to fulfill the customer need, requirement and expectation organization create quality system. Quality management system for a focused organization that involves all employees which collaborate with all the employees of the organization for the continual improvement. All employee work for achievement of common goal. It uses strategy, data, effective communications and involvement of all level of employees to integrate the quality discipline into the culture and activities of the organization. It does not matter what organization does to improve the employees training, integrate quality into process design, upgrade technology.  The customer ultimately determines the level of quality. The customer determines whether the efforts were worthwhile or not. (summer, nd)

Total Quality Management

TQM is based on the premise that the quality of products and processes that involve everyone who create or consume the product or services which are offered by an organization, requiring the involvement of management, workforce, suppliers, and customers, to meet or exceed customer expectations.

Nine common TQM practices

1. cross-functional product design
2. process management
3. supplier quality management
4. customer involvement
5. information and feedback
6. committed leadership
7. strategic planning
8. cross-functional training
9. employee involvement (M,Cua and Schroeder, 2001)

The basic idea of TQM is extremely expensive to inspect quality into a company outputs and much more efficient and affective to produce them right in the first place. as a result responsibility for quality is taken away from the department of quality control and the place where it belongs with the workers who produce the parts or provide the service in the first place.(Meredith and Shafer, 2008)

Quality planning. The is the process of preparing to meet quality goals.

Quality control. The process of meeting quality goals during operations.

Quality improvement. This encompasses the activities directed toward achieving higher levels of performance.

Six Sigma

The six sigma concepts were developed by bill smith, a senior engineer at Motorola, a comprehensive and flexible system for achieving, sustaining and maximizing business success. Close understanding of customer needs, discipline use of facts, data, and statistical analysis, and diligent attention to managing, improving, and reinventing business processes.

At Motorola, six sigma is defined as “a business improvement process that focuses on organization on customer requirements, process alignment, analytical rigor, and timely execution”. Six sigma initiatives are associated with a increased profitability, improve quality, improve employees moral, lower costs, higher productivity, market share growth, improved levels of customer retention and satisfaction, and shorter leads times. (summer, nd)

The DMAIC improvement process

The phase DMAIC is defines measure, analyze, improve, and control. the DMAIC  is used to improve the process by using scientific method. A progress is asses at the end of each phase which is discus in detail.

Define

·         Define goals for process improvement

·         Define the customers

·         Define the project in which you work

·         Define the problems or opportunity

Measure

·         Identify appropriate performance measures

·         Collect data

·         Evaluate current process performance

Analyze

·         Develop and test theories related to root causes of problems

·         Identify cause and effect relationships

Improve

·         Develop and evaluate solution to reduce gap between desired process performance and current performance

Control

·         Monitor process to sustain improved performance

·         Ensure that problems do not resurface. (summer, nd)

Benchmarking

Benchmark involves comparing organizations processes with best practices to be found. Identify the best practices to implement .projecting trend in order to be able to respond proactively to future challenges and opportunities. (Meredith and Shafer, 2008)

Benchmark is the way through which companies compare their performance against the set of standards with best class companies, through use of information provided by comparison, a company come to know how to improve its own performance. They make a conclusion about the performance and necessary improvements. (summer, nd)

Defining and measuring quality

Richard and schonberger has compiled a list of 12 dimension that customers perceive as associated with product and services.

Conformance to specifications

·         Confirmation to specification is the extend to which the actual product matches the design    specifications.     

Performance

·         The customer equates the quality of products and services with their performance.

Quick response

·         amount of time required react to customers demand.

Quick change expertise

·         By changing the model with out any delay.

Features

·         Features are the attributes that a product or services offers.

Reliability

·         The probability that a product will continue to perform for some period of time.

Durability

·         Durability shows the product toughness

Serviceability

·         Serviceability refers to the ease with which maintenance or repair can be performed.

Advertising Mediums

 

“Advertising is paid non personal communication from an identified sponsor using mass media to persuade or influence an audience” advertising is complex because to reach different type of audience diverse type of advertising is required. Brand advertising is for national consumer, which focuses on the development of a long term brand identity and image. Retailer advertising focus on the store where variety of products can be purchased or where services are offered retail advertising. Political advertising is used by Politician to persuade people to vote for them. Directory advertising refers to find out how to buy a product or services. Direct response advertising includes messages directed at retailer wholesaler and professional. Institutional advertising is also called corporate advertising. Public service advertising communicates a message on behalf of some cause, such as stopping drunk driving or preventing child a abuse.(William., John & Sandra., 1995)

Advertising is one of the most expensive activity of marketing, advertising create tangible and intangible value. To check advertising effectiveness they take angles, employees distinct approaches, and generate separate knowledge bodies to interpret advertising. Marketers largely on two type of advertising affects, intermediate effects which refers to changes in consumer belief and attitudes, which relate to brand choice and purchase of consumer. Advertising has persistence affect on sales, sales and market share can be captured by behavioral effect. Through advertising it can create knowledge about the product and reinforce to purchase the product to consumer, advertising create a mind setup to store information in memory, its strengths of association decays very slowly.  ( Fang., et al., 2009)

The objective of marketing is to boosting the trade activities. Marketing activities bring changes and modification in the economic environment of the world, every country is trying to get the competitive edge through use of marketing science. Through use of marketing or advertising one can easily communicate and connected  with the clients, to catch customer attraction is the most important aim of  the organization through which organizations  increase the profitability.advertising and promotion campaigns have strong on market rivalry, when a new product is introduced in market advertising boost the  product to move through its life cycle. Advertising tools are effective to increase revenue. To promote sale marketers use many motivational method for making many belonging to sales to consumers, the advertisement characteristics included size, color, and logo. Effectiveness of promotional media plays a important role to increase the demand, such as magazines, radio, direct mail, newspapers, television, and outside formats billboards and banners. The increase in sales is due to targeted segmentation of advertising, Strong brand loyalty can be achieved by advertising. both print media and electronic media had played a vital role in changing our ways of life and purchasing decision.(faisal.et al, 2013)

Most manufacturing industries largely focus on the impact of advertising on industries profitability; through this study I will be able to examine the effect the advertising expenditure for the medium which is used as advertising medium (TV, radio, magazine and newspaper) as we that each medium vary from each other regarding their information it provides, To study the affect of each media advertising on market performance of companies. For the promotion of any industries where advertising seems to play an important role. Printed advertising is more informative compared to persuasive television advertising. Their for people use to search goods more in newspapers and magazines and less on television and radio. Because in printed media provide detailed information such as prices and quality characteristics. Advertising increase the number of substitutes known to the buyers, through use of advertisement companies increase the brand loyalty as well as the demand of the product, advertising increase the profit margin and persuasive advertising increase price for the consumer. According to porters advertising on magazine is more effective than on television, while Ackoff and Emshoff (1975) found that newspaper and radio advertising is less powerfuk too than television advertising.( Ourania and Kostas 2001­)

Know the global trade has change both in magnitude and orientation. The rapid transformation created enormous market opportunities for entrepreneur around the globe. by changing economies which improves the standard of living and quality of life,. Turkish entrepreneur get the knowledge and increase their market share to export their goods, variety of good and services are not available their in the earlier but entrepreneur in the region start suitcase trade with turkey. Entrepreneur provides very valuable information to be used in the development and implementation of their marketing strategies. With the changing world their they face increasing competition in the domestic markets.( Erdener. Ali & Serkan.,2009)

Manufacturer focused on locally promotion tools, which are easily ranging from the circular of retailer and local news papers to reduced rate television advertising, in the innovation of information technology it make the retailers ability to provide benefit and it also enhanced the local information. the total advertising expenses in 2000 were $15 billion, as compare to $900 million in 1970, nearly a four-fold increase in real terms. ( Matthew., 2006)

In recent research it came in knowledge that the milk sale decline, highlighting the risk inherent in not advertising, in another case study it is found that the brand awareness did not decline immediately or gradually after advertising has stopped, but it dropped sharply after several months. it is also noticed that brand awareness decline immediately in the absence of advertising. We did not understanding of the effect of cessation of advertising on the erosion of awareness, awareness of well known brands are decline due to last longer of advertising, it is noticed that awareness refers to the ad awareness, consumer forget ad instantly, over and again advertising create intangible brand image in the mind of the consumer. Awareness decrease in the absence of advertising at the proportional to the current awareness level.(Ashwin  & Prasad., 2011)

Through this study we will able to assess the impact of advertising campaigns on sales and profits. Advertising is considered more successful for small brands or new brands; the leader is more receptive to the long term effect of advertising compared to its competitors, it is not possible to measure the impact of advertising campaign in term if media, cost, copy etc. advertising effectiveness vary from campaign to campaign, (Philippe & Anne., 2013)