The Definition And Mechanisms Of Sukuk Finance Essay - Free Essay Example

Sample details Pages: 12 Words: 3495 Downloads: 6 Date added: 2017/06/26 Category Finance Essay Type Research paper Did you like this example? According to Islamic Invest Guide, a Sukuk is an asset based security that provides a relatively fixed constant flow of income without violating the Islamic laws on interest. Instead of interest payments, sukuk investors receive a pass-through of income generated by the underlying assets. Sukuk are a Syariah-compliant tool for raising capital and may be structured around a variety of Islamic contracts Such as: Al Musyarakha, Al wadiah, Al Bai Bithaimal Ajil and Al Mudharabah to name a few. Don’t waste time! Our writers will create an original "The Definition And Mechanisms Of Sukuk Finance Essay" essay for you Create order According to UBS.com a Sukuk is an Islamic financial certificate, similar to a bond in Western finance. Sukuk are securities that comply with the Islamic law and its investment principles, which prohibits the charging or paying of interest. Financial assets that comply with the Islamic law can be classified in accordance with their tradability and non-tradability in the secondary markets. Mechanism and trading and how Sukuk is traded There are different types of Sukuk Bonds that are being traded in the market. Having different forms as the sukuk bonds have, this means that they are traded in different ways. Sukuk has many different types and depending on how the Islamic models of trading is used in its structure. The following are the more common as identified by the Accounting and Auditing Organization for Islamic Financial Institutions (AAOIFI): Mudharabah Sukuk These are investment sukuk that represent ownership of units of equal value in the Mudharabah equity and are registered in the names of holders on the basis of undivided ownership of shares in the Mudharabah equity and its returns according to the percentage of ownership of share. Mudharabah sukuk are used for enhancing public participation in big investment projects. Features They symbolize the co-ownership, where one provides the financial investment and the other the entrepreneurial know-how with the profits being split between them All information required by Shariah for the Qirad contract such as the source of start up funds, the ratio for profit dispersion and other conditions related to the issue, which must be Shariah compliant are to be listed in the company prospectus. The Sukuk holder is given the right to transfer the ownership by selling the deeds in the securities market at his discretion.   The sale of MS must follow the rules listed below: If the capital is still in the form of money before the operations of the project, the trading of MS would be like exchange of money for money. In that case the rules of bay Al-Sarf would be applied. If Muqarda capital is in the form of debt then it must satisfy the principles of debt trading in Islam If capital is in the form of combination of cash, receivables, goods, real assets and benefits, trade must be based on market price evolved by mutual consent. The Manager who receives the fund collected from the subscribers to Mudharabah Sukuk can also invest his own fund. He will get profit for his capital contribution in addition to his share in the profit as Mudarib. Neither prospectus nor Mudharabah Sukuk should contain a guarantee, from the issuer or the manager for the fund, for the capital or a fixed profit, or a profit based on any percentage of the capital It is permissible to create reserves for contingencies, such as loss of capital, by deducting from the profit The prospectus can also contain a promise made by a third party, totally un-related to the parties to the contract, in terms of legal entity or financial status, to donate a specific sum, without any counter benefit, to meet losses in the give project, provided such commitment is independent of the Mudharabah contract. On the expiry of the specified time period of the subscripti on, the Sukuk holder is given the right to transfer the ownership by sale or trade in the securities market at his discretion. Musyarakah Sukuk Musyarakah Sukuk is used for mobilizing the funds for establishing a new project or developing an existing one or financing a business activity on the basis of partnership contracts. The certificate holders become the owners of the project or the assets of the activity as per their respective shares. These Musyarakah certificates can be treated as negotiable instruments and can be bought and sold in the secondary market. Steps involved in the structure Corporate (as Musharik) contributes land or other physical assets to the Musyarakah The Musyarakah appoints the Corporate as an agent to develop the land (or other physical assets) with the cash injected into the Musyarakah and sell/lease the developed assets on behalf of the Musyarakah In return, the agent (i.e. the Corporate) will get a fixed agency fee plus a variable incentive fee payable. The profits are distributed to the Sukuk holders. The Corporate irrevocably undertakes to buy at a pre-agreed price the Musyarakah shares of the Special Purpose Vehicle (SPV)  [1]  on say semi-annual basis and at the end of the fixed period the SPV would no longer have any shares in the Musyarakah. An example of Musyarakah Sukuk in practice is the US$550 million Sukuk transaction for Emirates airline, the seven-year deal was a structured on a Musyarakah contract. The Musyarakah or joint venture was set up to develop a new engineering centre and a new headquarters building o n land situated near Dubais airport which will ultimately be leased to Emirates. Profit, in the form of lease rentals, generated from the Musyarakah venture will be used to pay the periodic distribution on the trust certificates. Al-Ijarah Sukuk These are sukuk that represent ownership of equal shares in a rented real estate or the usufruct of the real estate. These sukuk give their owners the right to own the real estate, receive the rent and dispose of their sukuk in a manner that does not affect the right of the lessee, i.e. they are tradable. The holders of such sukuk bear all cost of maintenance of and damage to the real estate. Features It is necessary for an ijarah contract that the assets being leased and the amount of rent both are clearly known to the parties at the time of the contract and if both of these are known, ijarah can be contracted on an asset or a building that is yet to be constructed, as long as it is fully described in the contract provided that the lessor should normally be able to acquire, construct or buy the asset being leased by the time set for its delivery to the lessee. The lessor can sell the leased asset provided it does not hinder the lessee to take benefit from the asset. The new owner would be entitled to receive the rentals. Rental in ijarah must be stipulated in clear terms for the first term of lease, and for future renewable terms, it could be constant, increasing or decreasing by benchmarking or relating it to any well-known variable. As per shariah rules, expenses related to the basic characteristics of the assets are the responsibility of the owner, while maintenance ex penses related to its operation are to be the responsibility of the lessee. As regards procedure for issuance of ijarah sukuk, an SPV is created to purchase the asset or assets that issues sukuk to the investor, enabling it to make payment for purchasing the asset. The asset is then leased to third party for its use. The lessee makes periodic rental payments t the SPV that in turn distributes the same to the sukuk holders. Ijara sukuk are completely negotiable and can be traded in the secondary markets. Steps involved in the structure The obligator sells certain assets to the SPV at an agreed pre-determined purchase price. The SPV raises financing by issuing sukuk certificates in an amount equal to the purchase price. This is passed on to the obligator (as seller). A lease agreement is signed between SPV and the obligator for a fixed period of time, where the obligator leases back the assets as lessee. SPV receives periodic rentals from the obligator These are distributed among the investors i.e. the sukuk holders At maturity, or on a dissolution event, the SPV sells the assets back to the seller at a predetermined value. That value should be equal to any amounts still owed under the terms of the Ijara sukuk. An example of this is US$350 million sukuk Trust Certificates by Sarawak Corporate Sukuk Inc. (SCSI) Sarawak Economic Development Corporation (SEDC) raised financing amounting to US$350 million by way of issuance of series of trust certificates issued on the principle of Ijara sukuk. Th e certificates were issued with a maturity of 5 years and under the proposed structure, the proceeds will be used by the issuer to purchase certain assets from 1st Silicon (Malaysia) Sdn Bhd. Thereafter, the issuer will lease assets procured from 1st Silicon to SEDC for an agreed rental price for an agreed lease period of 5 years. Murabaha Sukuk In this case the issuer of the certificate is the seller of the Murabaha commodity, the subscribers are the buyers of that commodity, and the realised funds are the purchasing cost of the commodity. The certificate holders own the Murabaha commodity and are entitled to its final sale price upon the re-sale of the Commodity. The possibility of having legally acceptable Murabaha-based sukuk is only feasible in the primary market. The negotiability of these Sukuk or their trading at the secondary market is not permitted by shariah, as the certificates represent a debt owing from the subsequent buyer of the Commodity to the certificate-holders and such trading amounts to trading in debt on a deferred basis, which will result in riba. Despite being debt instruments, the Murabaha Sukuk could be negotiable if they are the smaller part of a package or a portfolio, the larger part of which is constituted of negotiable instruments such as Mudaraba, Musharaka, or Ijara Sukuk. Murabaha suku k are popular in Malaysian market due to a more liberal interpretation of fiqh by Malaysian jurists permitting sale of debt (bai-al-dayn) at a negotiated price. Steps involved in the structure A master agreement is signed between the SPV and the borrower SPV issues sukuk to the investors and receive sukuk proceeds. SPV buys commodity on spot basis from the commodity supplier. SPV sells the commodity to the borrower at the spot price plus a profit margin, payable on installments over an agreed period of time. The borrower sells the commodity to the Commodity buyer on spot basis. The investors receive the final sale price and profits. Salam Sukuk Salam sukuk are certificates of equal value issued for the purpose of mobilising Salam capital so that the goods to be delivered on the basis of Salam come to the ownership of the certificate holders. The issuer of the certificates is a seller of the goods of Salam, the subscribers are the buyers of the goods, while the funds realized from subscription are the purchase price (Salam capital) of the goods. The holders of Salam certificates are the owners of the Salam goods and are entitled to the sale price of the certificates or the sale price of the Salam goods sold through a parallel Salam, if any. Salam-based securities may be created and sold by an SPV under which the funds mobilized from investors are paid as an advance to the company SPV in return for a promise to deliver a commodity at a future date. SPV can also appoint an agent to market the promised quantity at the time of delivery perhaps at a higher price. The difference between the purchase price and the sale price i s the profit to the SPV and hence to the holders of the Sukuk. All standard shariah requirements that apply to Salam also apply to Salam sukuk, such as, full payment by the buyer at the time of effecting the sale, standardized nature of underlying asset, clear enumeration of quantity, quality, date and place of delivery of the asset and the like. One of the Shariah conditions relating to Salam, as well as for creation of Salam sukuk, is the requirement that the purchased goods are not re-sold before actual possession at maturity. Such transactions amount to selling of debt. This constraint renders the Salam instrument illiquid and hence somewhat less attractive to investors. Thus, an investor will buy a Salam certificate if he expects prices of the underlying commodity to be higher on the maturity date. Steps involved in the transaction SPV signs an undertaking with an obligatory to source both commodities and buyers. The obligator contracts to buy, on behalf of the end-Sukuk holders, the commodity and then to sell it for the profit of the Sukuk holders. The Salam proceeds are passed onto the obligator who sells commodity on forward basis SPV receives the commodities from the obligator Obligator, on behalf of Sukuk holders, sells the commodities for a profit Sukuk holders receive the commodity sale proceeds. The following is an example of the Salam Sukuk Aluminum has been designated as the underlying asset of the Bahrain Government al Salam contract, whereby it promises to sell aluminum to the buyer at a specified future date in return of a full price payment in advance. The Bahrain Islamic Bank (BIB) has been nominated to represent the other banks wishing to participate in the Al Salam contract. BIB has been delegated to sign the contracts and all other necessary documents on behalf of the othe r banks in the syndicate. At the same time, the buyer appoints the Government of Bahrain as an agent to market the appropriate quantity at the time of delivery through its channels of distribution. The Government of Bahrain provides an additional undertaking to the representative (BIB) to market the aluminum at a price, which will provide a return to al Salam security holders equivalent to those available through other conventional short-term money market instruments. Istisna Sukuk Istisna sukuk are certificates that carry equal value and are issued with the aim of mobilising the funds required for producing products that are owned by the certificate holders. The issuer of these certificates is the manufacturer (supplier/seller), the subscribers are the buyers of the intended product, while the funds realised from subscription are the cost of the product. The certificate holders own the product and are entitled to the sale price of the certificates or the sale price of the product sold on the basis of a parallel Istisna, if any. Istisna Sukuk is quite useful for financing large infrastructure projects. The suitability of Istisna for financial intermediation is based on the permissibility for the contractor in Istisna to enter into a parallel Istisna contract with a subcontractor. Thus, a financial institution may undertake the construction of a facility for a deferred price, and sub contract the actual construction to a specialised firm. Shariah prohibits the sale of these debt certificates to a third party at any price other than their face value. Clearly such certificates cannot be traded in the secondary market. Steps involved in the structure SPV issues Sukuk certificates to raise funds for the project Sukuk issue proceeds are used to pay the contractor/builder to build and deliver the future project. Title to assets is transferred to the SPV Property/project is leased or sold to the end buyer. The end buyer pays monthly installments to the SPV. The returns are distributed among the Sukuk holders. The following are examples of Istana Sukuk in practice Tabreeds five-year global corporate Sukuk (on behalf of the National Central Cooling Company, UAE) provided a fixed coupon of 5.50%. It is a combination of Ijara Istisna and Ijara Mawsufah fi al dhimmah (or forward leasing contracts). The issue was launched to raise funds to retire some existing debt, which totals around US$136 million, as well as to finance expansion. The Durrat Sukuk will finance the reclamation and infrastructure for the initial stage of a broader US$ 1 billion world class residential and leisure destination known as Durrat Al Bahr ain, currently the Kingdom of Bahrains largest residential development project. The return on the Sukuk is 125 basis points over 3 months London Interbank Offered Rate (LIBOR) payable quarterly, with the Sukuk having an overall tenor of 5 years and an option for early redemption. The proceeds of the issue (cash) will be used by the Issuer to finance the reclamation of the land and the development of Base Infrastructure through multiple project finance (Istisna) agreements. As the works carried out under each Istisna are completed by the Contractor and delivered to the Issuer, the Issuer will give notice to the Project Company under the Master Ijara Agreement and will lease such Base Infrastructure on the basis of a lease to own transaction. Hybrid Sukuk Considering the fact that Sukuk issuance and trading are important means of investment and taking into account the various demands of investors, a more diversified Sukuk hybrid or mixed asset Sukuk emerged in the market. In a hybrid Sukuk, the underlying pool of assets can comprise of Istisna, Murabaha receivables as well as Ijara. Having a portfolio of assets comprising of different classes allows for a greater mobilization of funds. However, as Murabaha and Istisna contracts cannot be traded on secondary markets as securitised instruments at least 51 percent of the pool in a hybrid Sukuk must comprise of Sukuk tradable in the market such as an Ijara Sukuk. Due to the fact the Murabaha and Istisna receivables are part of the pool, the return on these certificates can only be a pre-determined fixed rate of return. Steps involved in the structure Islamic finance originator transfers tangible assets as well as Murabaha deals to the SPV SPV issues certificates of participation to the Sukuk holders and receive funds. The funds are used by the Islamic finance originator. Islamic finance originator purchases these assets from the SPV over an agreed period of time. Investors receive fixed payment of return on the assets. An example of this type of sukuk is when Islamic Development Bank issued the first hybrid Sukuk of assets comprising 65.8% Sukuk al-Ijara, 30.73% of Murabaha receivables and 3.4% Sukuk al-Istisna. This issuance required the IDBs guarantee in order to secure a rating and international marketability. The $ 400 million Islamic Sukuk was issued by Solidarity Trust Services Limited (STSL), a special purpose company incorporated in Jersey Channel Islands. The Islamic Corporation for the Development of Private Sector (ICD) played an intermediary role by purchasing the asset from IDB and selling it to The Sol idarity Trust Services Limited (STSL) at the consolidated net asset value. Bond valuation Bond Definition According to www.investorwords.com, a Bond can be defined as a debt instrument issued for a period of more than one year with the purpose of raising capital by borrowing. Valuation definition According to www.investorwords.com valuation can be defined as the process of determining the value of an asset or company Bond Valuation According to an online dictionary Bond Valuation can be defined as the process of determining the fair price of a bond. As with any security, the fair value of a bond is the present value of the stream of cash flows it is expected to generate. Hence, the price or value of a bond is determined by discounting the bonds expected cash flows to the present using the appropriate discount rate. Pricing of Sukuk Bonds with Embedded Options Embedded option bonds can be valued similar to the valuation of options on equities implementing binomial trees. In conventional bond issuance the value of the underlying assets will depend on the level of interest rates. In Islamic contracts interest rates are substituted with the rate of return on the underlying assets. We can analyse the valuation of embedded options using altering scenarios in a tree diagram. Assume that future one-year rates of return develop as follows: The represented tree can be utilized to value zero coupon certificates of various maturities. For example, the value of a 1-year zero coupon bond at time 0 is B(0,1) = 1/1.065 = 93.89 % of par value The value of a 2-year certificate at time 0 can be determined using the same discount mechanism. The value of a 1-year zero coupons at time 0 can be calculated as: If r= 7.00 ÃÆ' ´Ãƒ ¢Ã¢â‚¬Å¡Ã‚ ¬Ãƒâ€ Ã¢â‚¬â„¢Ãƒ ¢Ã¢â€š ¬Ã‚   1/1.07 = 93.45% of par value If r= 6.00 ÃÆ' ´Ãƒ ¢Ã¢â‚¬Å¡Ã‚ ¬Ãƒâ€ Ã¢â ‚¬â„¢Ãƒ ¢Ã¢â€š ¬Ã‚   1/1.06 = 94.34% of par value The valuation of callable bonds will invoke an adjusted method as the callable bond is essentially a portfolio of a non-callable bond and an American call option written with the non-callable bond as the underlying and a strike price that is given by the call price. Accordingly, at each node of the tree the value of the bond can be given as follows: P = 1 + C at maturity P = max [ CP, (1+C)/(1+r) ] one year prior to maturity )] 1(}) (5.0, max [{r+Cà ·Pd+Pu+CPÃÆ'Æ’-P}] = more than one year to maturity CP = price of the option C = coupon r = rate of return Pu = value of the certificate in one year if return goes up Pd = value of the certificate in one year if return goes down

Essay on Class, Socialization, and Politics - 1865 Words

Elections are at the core of the American political system. They are the way we choose our government, the source of government authority, and a means by which the people can influence public policy. For most Americans, voting is the only form of political participation. Essential questions to ask concerning these issues are: Who votes and why? What influences people to become voters? And what influences how they vote? It is important to approach these issues from a sociological standpoint addressing such matters as socialization and social stratification. Socialization is a gradual process that takes place as we grow up. It is the process that aids in developing attitudes and opinions that allow us get along within a society. These†¦show more content†¦(Introduction to Sociology Pg. 222) Within this class system are three broad overlapping categories: a working class, a middle class, and an upper class. People are placed within these categories based on their occupation, income, and wealth. The working class receives the lowest income and fills blue-collar jobs in factories and farms, as well as white-collar positions like clerical and secretarial jobs in offices. The middle class consists of professionals like teachers, engineers, small business people, and skilled workers. The upper class, often called the elite or ruling class is composed of those who run our major economic and political institutions and receive the highest earnings for doing so. Class as reflected in education, income, and occupation, does influence peopl e’s attitudes on a variety of issues. People in the working class tend to be liberal in wanting greater economic equality and more programs dealing with social welfare. This liberalism on economic issues contrasts strongly with their ideas on civil liberties. 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Information Knowledge Management

Question: Discuss about theInformation Knowledge Management. Answer: Introduction: With the technological improvement in trends and technologies, the knowledge is becoming the important part of the production for an organization. The key objective of the knowledge management is to focus on the processes of acquisition acquired by the organization, integration of information and knowledge, and others. The information and knowledge management is the process which is used for creation, accumulation, organization and utilization of the knowledge which focuses on achieving the objective of the enterprise and enhances the performance of the goods and services provided by the business. The program of information and knowledge management works in the direction of developing strategies, cultural values related with the organization, and the workflow of the firm (Chan, 2011). In the research we have discovered that there are various critical success factors which are associated with information and knowledge management. The implementation of knowledge management will positiv ely benefits and improved the performance of the organization. The factors which affect the growth of the enterprise are categorised into three modules (Ngai, 2008) which are information technology whose aim is to capture knowledge for usage of information technology and its management within the firm, secondly is the Organization which can be treated as the collection of people, culture of the firm, and processes, and lastly the knowledge which is treated as accumulation, utilizing, sharing, ownership, and identification of knowledge (Petrova, 2011). Methods used in Information and Management System: Case Based Reasoning System: This system is composed of case library and the software which helps in retrieving the case related to an activity within an organization. The case library provides the range of good ideas which are based on the critical situation which occurs in others industries and companies and how to tackle with them. The case is the collection of situation of competition, condition related to environment, priorities set for management, based on experience, successful strategy to tackle with the situation, and others. Indexing helps to differentiate and retrieving the case which faces the similar critical situation. The software also has the facility to add new case for further studies. Group Decision Support System: Group is the medium which promotes sharing of ideas and exchanging of information with other people. The group can be treated as shared mental models because it promotes sharing of ideas and information retrieved from the minds of different people who are being the part of the group. It is the best medium for individual learning program. This system makes use of different hardware and software tools which results in the interaction of business processes. Best Alternative: The Electrolux supports Group decision support system method to tackle the situation and to make their system update according to the changing environment. By this method company gets the information about the current situation of the market and customer requirement so that company works in the direction of the demand of the customer. They are working on developing the new technology in refrigerator, washing machine, Dishwasher, Microwave, vacuum cleaners, cookers coolers, and others so that company gains maximum profit and a place in the market. Information Generation and Sharing: The robust notification and sharing of information are implemented in environment of organization. This helps in ensuring the participation and ownership of the organization. The Electrolux implemented the administrative control for gathering scientific data in regards of development of strategies. The company also focuses on the collection of hydrological data, parameters regarding planning, and assessments of actual performance in accordance with the social, environmental, and economic parameters of the organization (Jagannath, 2013). The information gathered can be used for preparing plans for the organization and plans for emergency response. The Information generation and sharing is comprised of five attributes which are highlighted below: Predicting new opportunities for the Electrolux Organization: This phase aims in redefining the new opportunities in the strategic direction of the organization. The real time adaptation can be done in the existing working program of the organization (Singh, 2015). Innovation: It focuses on the collection of design to bring innovation in the organization in order to fetch resources of the organization in the most utilized way. Demonstration of transparency and confidence: Unambiguous statement or plans can be developed in the ethical manner in accordance with community, customers, and employees. Delivery of the unique and in a personalized experience: Data driven plans should be developed according to availability of need and information for meeting the requirement of the organization. Works on operating in the real time environment: Accountability and availability are the tools which help in collecting information about customers. Example: The Electrolux is to reduce energy consumption done by the appliances. The company is focussing towards improving their quality of service provided to the customer. They are also working in the direction of reducing the cost of the appliance and designing of equipment with better quality features which helps in bringing the feeling of satisfaction in the customers (Ullah, 2012). The knowledge management program should work on short term objective as well as long term objective. Periodically the validation of the knowledge management should be checked. Knowledge Generation and Sharing: The aim of the knowledge generation and sharing focuses on the building incremental approach in relation to existing asset, partnership, and processes. It also identified the tools and instruments used for improving tactics for generating knowledge, learning processes, and its sharing. The fundamental approach is to find out the organization and behavioural changes observed for implementing the knowledge management program. The Electrolux focuses on the people and the working environment of the organization. The company is carrying out the activities of implementing innovative technologies in their products to match with the requirement of the customer. The modes which are used for collecting information about the requirement of the customer are socialization, combination outsourcing, and internalization. Tactic Knowledge Socialization Development of knowledge maps Externalization Groupware Workflow Intelligent use of Knowledge Customer relationship management (CRM) Explicit Knowledge Internalization Tools used for innovative support Combination Customer relationship management (CRM) Intranet Documents electronic management Business intelligence Example: The focus of the Electrolux Company is to design innovations which meet the requirement of consumer and professional. Knowledge management not only involves the innovative technology usage but also works on developing the cultural changes and sharing of knowledge in the direction of achieving companys objective with ease. The implementation of knowledge management may bring changes in the organization rules and sharing of information. The implementation of high level knowledge management results in the effective utilization of the resources and assets of the organization. The activities which are associated with the utilization of the companys resources are development of knowledge strategy, creation, Classification, identification, capturing, transferring, validating and archival, maintenance, measurement, and reporting. Tactic and Explicit Knowledge Explicit Knowledge: The explicit knowledge is codified and formalized with the identification, storing and retrieving of the information. The knowledge management program effectively works on the facilitation of storage, modification, and retrieval of documents and text necessary in accordance with the firm. Explicit knowledge is collected in databases, notes, memos, and documents. Tactic Knowledge: The tactic knowledge focuses on intuitive knowledge, definition of knowledge, and experience.it is the most crucial way of collecting knowledge from the valuable resources in the direction of uplifting the quality of the product and performance. The company is focussing towards improving their quality of service provided to the customer. They are also working in the direction of reducing the cost of the appliance and designing of equipment with better quality features which helps in bringing the feeling of satisfaction in the customers. The difference between explicit knowledge and tactic knowledge is defined in the table below: Particulars Explicit Knowledge Tactic Knowledge Working process for the organization It focuses on the organization of tasks, process, routine, predictable environment, reusing of codified knowledge, and creation of object of knowledge It focuses on the spontaneous, improvised version of the processes, unpredictable environment, generation of emergency response, channels for expertizing individuals, and creation of knowledge Learning capability The different platforms are offered for learning such as on the job, meeting goal of the work, trial and error methods, self-directed expertizing, and setting of objective The tactic knowledge can be collected by supervisor, team leader, facilitating and reinforcing ideas and judgement of the business Teaching Trainer focuses on designing of the syllabus, selection of the organization which fulfils the requirement of the business It focuses on developing one to one relationship, internship, on the job training program, competition based, brainstorming, and apprenticeship Type of thinking The thinking can be classified into logical, proved by methods, and convergent thinking program The thinking can be classified as creative ideas, flexible, divergent thinking, and development of insights. Sharing of the knowledge Extraction of knowledge in the form of code, electronic discussion, emails, report, and forums Sharing of the knowledge by making use of network technology, face to face communication, video conferencing, storytelling, chatting, and sharing of the personalize knowledge. Motivation Requirement of achieving the specified goal Leadership, personal contact and etc. are the ways of motivating the employees. Reward Competition within the working environment, no rewards are provided for sharing of information Intrinsic and non-monetary rewards are given to the employees for sharing of information Relationship Top down approach is followed from supervisor to team members Open, friendly and unstructured relationship environment Technology The technology should be related with the job, cost efficient and development of professional knowledge Tools used for selecting personal information, facilitating conversation, moderate development of framework of information technology. Evaluation Accomplishment of tangible work Works on demonstrating performance, and evaluation of the on-going processes Importance of Knowledge Management: The success of the company and enhancement in the performance of goods and services offered by the organization depends on facilitating capabilities of decision making, learning routing for bringing organizational change, and lastly the stimulation and innovation in the cultural changes of the organization. The fundamental approach is to find out the organization and behavioural changes observed for implementing the knowledge management program. The Electrolux focuses on the people and the working environment of the organization. The effectiveness of knowledge management program can be achieved by focusing on the significance of resource utilization and funding. With the passage of time, the additional information should be added to the roadmap to make it updated according to the requirement of the firm. The assessment of knowledge management in the organization of Electrolux involves the consideration given on people, technology, processes, structure and culture. It will helps in id entifying the gap between the existing state and the preferred state. The effectiveness of the program should be measured in terms of anticipated result. The company of Electrolux works by comparing the result of the previous year report with the report of the current year of the organization. The trends and comparison in the result helps in identifying the gaps and flaws of the organization. It has been seen that the Electrolux is able to provide better quality of service to the customers. The problem of the customer can be solved within 24 hours of the complaint. The knowledge management program of the Electrolux Company is beneficial in following six ways which are classified below: Particulars Description Produce The knowledge and system are combined together for developing the knowledge based environment Response Monitoring and responding towards the decentralized structure of the workforce Anticipation Proactive in formulating issues by making use of knowledge system Attraction The satisfied customer provides positive feedback which increases the review rate of the organization which results in attracting new customer towards the organization and increases the sales of the product Creation The employees can learn new tactics and skills through the training program and knowledge sharing Commitment The long term and short term plans should be developed by making use of knowledge sharing tactics The key success factors of the Electrolux organization are illustrated below: Key success factors Measures Motivation of the employees Number of staff training given Motivation of the employees Cost incurred on education per employee Motivation of the employees Absence from the working environment Motivation of the employees Satisfaction of the employees Investment carried out on technologies implementation Innovative technologies Quality standard Processes proposed by information technologies Quality standard Information system is available Challenges: The primary issue is to acquire knowledge correspondence to the controlling of process, estimation of cost, and is benefits. The Electrolux raises its concern in the direction that their existing technologies fulfil their requirement, the need of implementing new technology, and enhancing automation in their organization. They have undertaken the methodology of developing sustainable product which plays a major role of long term planning of the enterprise (Linda, 2013). it focuses on the changes which are required in the firm to enhance the performance of their product and services provided to the customer because this will help in raising the level of the satisfaction in the customer. The assessment of knowledge management in the organization of Electrolux involves the consideration given on people, technology, processes, structure and culture. It will helps in identifying the gap between the existing state and the preferred state. The shortcoming of the firm and the assessment repo rt helps in the development of roadmap for the implementation of the knowledge management program. It helps in changing the economic condition of the business and drivers of the organization (Alexios, 2013). The effectiveness of the program should be measured in terms of anticipated result. The company of Electrolux works by comparing the result of the previous year report with the report of the current year of the organization. The trends and comparison in the result helps in identifying the gaps and flaws of the organization. The major challenges which the company face are listed below: The company is inefficient in identifying and recognize articulate knowledge. It is difficult to convert tactic knowledge into explicit knowledge of the resources and assets The company phases the barrier of geographical distance The company phases the barrier of geographical Language The areas of expertise are loosely defined Situation of Internal conflicts among the employees of the organization Lack of developing the goals related to measuring the performance of the employees and utilization of resources Poor training programs Cultural and language barrier. The table shows the challenges faced by the company: Particulars Collection of information and codification Connecting with people and personalization Direction for searching information and knowledge Make use of database, internal, and external sources Content of the architectural support Support of information services Best practices use for data mining and action analysis Leaning and gathering information and knowledge from the working group of the organization. Looking forward for expertise directories Tools used for finding and facilitating collection of information. Example: Groupware Response of the team Browsing Cultural support of the organization Awareness in regards of profiles and databases Selection of the processes for altering the working and the management technique of the organization Cultural support of the organization Libraries and groupware Attendance regarding travel and meeting Conclusion: The program of information and knowledge management works in the direction of developing strategies, cultural values related with the organization, and the workflow of the firm. In the research we have discovered that there are various critical success factors which are associated with information and knowledge management. The implementation of knowledge management will positively benefits and improved the performance of the organization. The Electrolux supports Group decision support system method to tackle the situation and to make their system update according to the changing environment. By this method company gets the information about the current situation of the market and customer requirement so that company works in the direction of the demand of the customer. The assessment of knowledge management in the organization of Electrolux involves the consideration given on people, technology, processes, structure and culture. It will helps in identifying the gap between the existi ng state and the preferred state. References: Chan, R. (2011). The importance of Knowledge management in organization. 1st ed. [ebook] Available at: https://issbs.si/press/ISBN/978-961-92486-3-8/papers/ML11-1.pdf [Accessed 5 Dec. 2016]. Ngai, E. (2008). The role of tactic and explicit knowledge in the workplace. 1st ed. [ebook] Available at: https://ww.basicknowledge101.com/pdf/KM_roles.pdf [Accessed 5 Dec. 2016]. Jagannath, S. (2013). Tactic Knowledge versus Explicit Knowledge: Approaches to knowledge management practice, [online] 2(3). Available at: https://www.fraserhealth.ca/media/Tacit-vs-Explicit%20Knowledge%20Transfer.pdf [Accessed 5 Dec. 2016]. Petrova, K. (2011). Knowledge generation and sharing by multilateral development banks. 1st ed. [ebook] Newzealand. Available at: https://wpqr4.adb.org/lotusquickr/ecg/Main.nsf/0/EDE45E021D3B496F48257C0B005525DB/$file/04a%20-%20Draft%20ECG%20Knowledge%20Synthesis%20Paper.pdf [Accessed 5 Dec. 2016]. Singh, S. (2015). The impact of knowledge management on organization performance. 1st ed. [ebook] Available at: https://www.ebrjournal.net/ojs/index.php/ebr/article/viewFile/85/pdf [Accessed 5 Dec. 2016]. Ullah, K (2013). The role of organization culture in the knowledge management process. IOSR Journal of Computer Engineering (, [online] 2(3). Available at: https://www.emeraldinsight.com/toc/jkm/19/3 [Accessed 5 Dec. 2016]. Linda, M (2012). Knowledge management and knowledge based marketing. Available at: https://www.businesschemistry.org/downloads/articles/Issue05-2007_62.pdf [Accessed 4 Dec. 2016]. Alexios, V (2013). Knowledge Management: A content Analysis. Available at: https://www.google.co.in/url?sa=trct=jq=research%20paper%20pdf%20on%20knowledge%20managementsource=webcd=2 [Accessed 4 Dec. 2016].

Methods Of Domination Essays - Structure, Discrimination, Behavior

Methods Of Domination Methods of Domination Power and domination are the driving forces in society. Throughout history, there have always been those in power and those that are dominated. Many tactics have been used to keep this cycle of domination in tact. Two of these tactics are described in Erika Apfelbaum's Relations of Domination and Movements for Liberation: An Analysis of Power between Groups. Through the descriptions of these methods of domination, the correlation between the methods of domination and the effect it makes on the subordinated is shown. One method described in Apfelbaum's analysis is that of grouping. In grouping individuals together, the dominator separates himself from those he wants to dominate by some physical attribute, real or imaginary to distinguish itself. power can be maximally exercised when there exists two disparate groups that have been differentiated to the point of a clear distinction between ?us' and ?them'.? (Apfelbaum 197) In finding a difference the dominating group can mark the subordinates as lower because they possess the said ?defect.? An example of this is shown in Ronald Takaki's Iron Cages. The enslaved blacks were grouped together by their dark complexions. One American, Dr. Benjamin Rush, further distinguished blacks as not only savage in their lifestyles but came to the conclusion that blacks suffered from a form of leprosy. Dr. Rush offered ?observations' intended to ?prove' that the ?color' and ?figure' of Negroes were derived from a ?modification' of leprosy.? (Takaki 30) The traits found in blacks such as the ?big lip,? ?flat nose,? and ?woolly? hair were all a part of his ?diagnosis? for their difference from that of their white ?superiors.? After hundreds of years of domination, blacks found a way to counteract the negative impact of white subjugation. As stated by Bell Hooks in Black Looks Race and Representation., blacks need to learn to cherish their blackness, and their other distinguishing figures. ?Cone calls upon whites, blacks and all other non-black groups to stand against white supremacy by choosing to value, indeed to love, blackness.? (Hooks11) By embracing their difference and relishing in it, blacks can try to over turn the vicious cycle of domination. One example of embracing ?blackness? is that during the 1960s and 1970s or even during the Reconstruction period, ?black pride? took the place of black or self -hatred. By reclaiming their views about their own beauty, blacks began the bitter struggle to gain victory over oppression. Another tactic of domination is degrouping. Apfelbaum describes degrouping as stripping the ?grouped? subordinates of their identity and anything else that provided some sort of link to one another. ?the to-be-subordinated group is plunders of its self-identity and becomes less and less able to fulfill, for the individual member, the important role of providing ?the ground on which he stands, which gives or denies him social status, gives or denies him security and help'?Paradoxically, then, the marked collectively, at the same time that it is becoming an excluded group, is having its group essence destroyed-that is, it is in the process of being degrouped.? (Apfelbaum198) By destroying the common bonds shared by the subordinate groups, the dominators keep the dominated separate from one another, thus hindering any uprisings that would lead to a disruption of the cycle of domination. Another way to ?degroup? a group is by isolating each member from another. Apfelbaum states an increasing isolation of members of the group from one another, as if partitions had come between them, blocking more and more of those communications relevant to, and functional for, the group's autonomous life.? (Apfelbaum200) By alienating the members, the dominating group disposes of the interdependency within the group, leaving the subordinates to depend on their superiors. One example of a group that has been ?degrouped? as a form of domination is that of women. Apfelbaum states that women would constitute a collectivity that is completely degrouped.? (Apfelbaum200) Women have been alienated from each other for hundreds of years. Audre Lorde shows in her piece, The Master's Tools Will Never Dismantle the Master's House, how women are degrouped. there was no examination of mutuality between women, no systems of shared support, no interdependence (Lorde 98) As long as women have no connections with each other, they cannot change

General Motors External Environment Essay Example

General Motors External Environment Essay Example General Motors External Environment Paper General Motors External Environment Paper When the business cycle is at the stage of recession known as recovery, it becomes even difficult for the potential customers to keep up with the routine purchasing habits. This means that the customers purchase only the things which are economical and are of absolute importance. The new protocols imposed by the Fiscal Policy Institute (PI) resulted in a hike on the organization by the government which resulted in the increase of selling prices, thus making the vehicle out of reach of purchase. Inflation as well as deflation marks a straight blow to the cost of products and the services. For instance, if more tax is levied on customers, it implies diminished income which finally results in lower expenditure. All these circumstances directly affect the potential customers to turn away from GM and chose more affordable and economic automotive products. Furthermore, for international markets, the inconsistency in the exchange rate gave others an added advantage. :

Trans-national tourism corporation The WritePass Journal

Trans-national tourism corporation Introduction Trans-national tourism corporation Introduction  ReferencesRelated Introduction There are various of interpretations to what Trans-national Tourism Corporation means. However, this essay will suggest that Trans-national Tourism Cooperation (TNC) as Hampton (2011) suggested that it has been defined as large firms with subsidiaries in 2 or more countries. Hall suggested that TNCs are where the organisational behaviour ideas are an approach for marketing and promotion in the global market.   Mowforth and Munt states that 80% of mass tourism is dominated by TNCs and around 80% of tourists who travel by air to a less-developed country (LDC) will stay at hotels owned by TNCs. (Britton, 1991) TNCs benefits from vertical integration as it helps to reduce transaction cost because there is no ‘middle-man’ to deal with and the size of TNCs also mean that they will benefit from economies of scale.   TNCs are also known as   multinational companies. Tourism for the Trans-national co-operation is the centre point, and specifically more focused on Less Devel oping Countries. The first advantage of a TNC according to Mowforth and Munt Japanese Tourist arriving there from Tokyo. The tourist is transferred with a luxurious car Honda from the airport and stays at the Japanese owned Hotel as well as eats all the authentic Japanese food. However, travels back to Tokyo in the Hondo and explains that Japan is a good Third World destination. Furthermore, there could have been a BMW and an international hotel- but the point is argued that it is the main ownership that has made the benefit for the Tourism Industry. This now means that only the small proportion of the money is spent in the country itself so this connects to leakage as Mowforth and Munt adds that this does not just mean the purchase goods by the tourist in a destination also looks at goods and services by hotels and all other organisations. Leakage is not the main d of disadvantage for all financial aspects as Tourists itself but it is highly in use of Third World Countries. Mowforth and Munt say that the level of leakages is highly important the reason for this is this affects the economic power which is held by the TNCs for all local communities and government. What should be taken into account that due to not having a relevant collective data it is very difficult to calculate the leakage in a Tourist destination. Second advantage for a TNC in a poor country is having a TNC is powerful for the industrialisation especially for all the Asian countries where there needs to be rural development. Therefore, the government makes the farming prices quite low- and saves money; takes cheap food so the workers do not demand high wages. With the positive side to having a TNC this creates a good form of power for the poor people in LDCs as the TNCs clearly   know the wants and the basic needs of the poor people and making sure they are getting what they deserve. (Madeley, J. 2003) A general advantage for the TNCs is having more a Foreign Direct Investment (FDI) as this heavily benefits the Tourism factor. Nusa Dua in Bali is encouraging the TNCs to develop their restorts. FDIs are usually very good for funding for local or government projects that the country wants to run. This benefits Bali, by having a better economy, better jobs for the locals making Bali a better destination. This has helped Bali to succeed to be a better destination and improve its roads. This would mean more Tourists would now come into Bali and this will benefit them as a flourished economy. An disadvantage of a TNC reported by Pattullo in Mowforth and Munt (2005:51:-2)- this shows that there is a high level of leakage it is an overall of 50-70% but it states that for Jamaica it is 37% as this is known as more of a assorted economy therefore, the leakages here can be a lot lower then anywhere else. So this in general states that the money paid into the country never actually reaches the Third World Destination itself therefore, this is not a successful way for the country to expand economically. Another disadvantage is that all the First World Tourists who fly to a Third World Tourist destination- are mass tourists. The reason being for this is that they fly and possibly stay in a hotel which is TNS owned- these tourists may not form a mass or alternative tourism and may not be seeking for, adventure, wildlife and authenticity. This is not a huge factor but, mass tourism is becoming more of a straight focus however, they are being affected by the new, sustainable and alternative forms of tourists. An disadvantage of having a monopoly firm and the TNC being in control of this is being in contention with the mass tourism being contend of the Third World Tourism which often is different, and causes a lot of problems of dependency, and exchange leakages with under-developed economies by foreign owned enclaves.   (Brohman, J 1996) So the important aspect of this is that the TNC must address the issue of sustainability. Carothers in Mowforth and Munt   (1993:15) quoted that the final touches of the Earth Summit (agenda 21) the main focus was to remove the TNCs from the text of the Agenda 21. Agenda 21- is when there is aware of the environment being eco-friendly as well being sustainable. In the Third World Country it had to be clear that they knew what the term â€Å"multinational operate†. All the governments also needed to know what a Trans-national cooperation did for them was to gain more stability and have an increase in the legal rights. (Hamed, D 2005) The impact on all the human resources is an encouragement in employment and as the TNC has an increasing wage levels. The local firms- which are Tourism related (TNCs) make more connection with the suppliers and the distributors which makes a good business when they make the effort to have a better connection with the local suppliers and the distributors. However, there is no proof of how the TNC if they are crowding over the local firm. (Hamed, D 2005) Advantage of a TNC is that they are usually very small in most of the developing economies, because much of the involvement takes the non-equality forms. Some of the government assists the main development of the infrastructure itself. The new technology that can be introduced in a developing country and different management skills can make the Less Developing Country a lot better. (Hamed, D 2005) Another disadvantage stated by Mowforth and Munt is that the British tour operators are not aware of visiting Burma the reason being for the unawareness is purely the ethical reasons. As hotels were being built by the TNCs- Asia countries of: Japan, Malaysia, Singapore, South Korea and Thailand, with also French and Swiss Interests were very involved. Tourism in Burma is a good example of with a lot of interest to the government itself. But in many Less Developed countries the government and the TNCs and the case of Burma itself (SPDC) enlisted the assistance of this body. However, the clarity of the human rights and the nature and the culture Tourism and the leaflets of the tourism companies will praise all its virtues. Mowforth and Munt acknowledge that it is very important that the understanding and the issue of power is transparent strong if the destination wants a development. The TNCs commonly under the impression that the community has a strong and that the locals are in work by the power for the rest of the national government. This is a case some but not all. But the policies of the national government itself are in some situations influenced by the external organisations. The policies for the development of tourism are largely suitable for profits and for First World investors rather then the communities and the government itself. Another strong case study to support this essay is that the FDI- has been considered towards a strong factor of the economic development. The TNCs in the imports industry especially for Argentina and Brazil, there has been a strong relation of the TNCs being involved in the manufacturing industry just before the recent FDI boom took place. (Chudnovsky, D and Lopez, A 2004) The TNCs in Argentina and Brazil showed a significant amount of performance with a high level of technology and the productivity which was related to the TNCs. But, for the domestic market they wanted to take advantage of their own domestic markets itself. However, the TNCs did its best and used its own strategies for all different areas for all its economic development for the host country itself.There had been a huge number of arrivals of the FDI itself for all the presences of the TNCs as the economies increased in the 1990s. In this particular case Argentina and Brazil gained a very strong level with all the TNCs which were present. All the investments made by the TNCs aimed to increase all the assets, and with a better market. ( Chudnovsky, D and Lopez, A 2004) As competition becomes more of a wider spread- the TNC then has simple integration strategies. All the TNC searches are done very effectively with a range of assets in all the different locations. More than 50% of the TNCs sales In Brazil as compared with the number of sales itself as these were hardly even 25% the figure seems significantly low. Since the Brazilian Industry- it is not a major surprise to find that the TNCs in the country are more of an export orientated then of Argentina itself. The TNCs within the groups are Tourist operated with a much of a generally larger coefficients in Argentina and Brazil. ( Chudnovsky, D and Lopez, A 2004) ( Chudnovsky, D and Lopez, A 2004) suggests that the Brazilian Tourist Industry itself has much of a widespread the reason being for this is due to the number of linkages between the elements of being spread around than Argentina. In general this suggests that the TNCs have looked at the domestic market itself rather than the any of the human resources itself. This means that the TNCs have their goods that are more strategic in relationship to the firm’s performance at all national and regional level. In Argentina the TNCs clearly affect the imports and the exports. This is due to the relationship of all the sales and a result of a down side in the negative foreign trade balances. In Brazil similarly the TNCs for all the domestic firms are at a higher rate and grow incredibly faster. In Argentina and Brazil there has been an FDI (Foreign Directive Investment) which has helped the TNCs become more recognised as a main leader in Argentina and Brazil. The key linkages between the Foreign Directive Investment and The Foreign Trade show that the TNCs have had a bigger contribution than all the national firms itself. However, there is a higher chance for the imports with the local enterprises. From, the whole research of Brazil and Argentina the TNCs have had a lot less linkages with the local community itself then the domestic firms. From the research Brazil and Argentina has TNCs but with a reduce amount of linkages with the local community itself than the domestic firms. ( Chudnovsky, D and Lopez, A 2004) In conclusion to this essay despite the fact the concerns over TNCs on the Less Developed Country having TNCs are very beneficial for a host country. Additionally, the government has to make sure that they are fully in power with this and this situation should not be changed around as the government should be powerful enough to help a host country. Every point that was discussed in this essay has some understanding to the aspect of the impacts and the implications of the TNCs in some LDCs. From the understanding of the TNCs it is felt that International Tourists tend to understand better to what TNCs do and how they will profit the Less Developed countries- due to the complications in an Less Developed Country not having enough educated people therefore, the International Tourists will look at the wider focus of the capitalist mode as the product if recognised can not be in separation. (Jenkins, R 1987)   References Brohman, J (1996) New Directions in Tourism for Third World Development (Online), 23 (1), 48-70 Available from: stepuptravel.org/downloads/library/new_directions_for_tourism_in_third_world.pdf (Accessed 23 March 2011) Chudnovsky, D and Lopez, A (2004) Trans-national Corporations Strategies and Foreign Trade Patterns in Mercosur Countries in the 1990s (Online), Cambridge Journal of Economics 28 (5), 1-18, Available from: law.wisc.edu/gls/documents/foreign_investment_recommended2.pdf (Accessed 21 February 2011) Hamed, D (2005) What is Agenda 21? (Online). Avaliable from: lbhf.gov.uk/external/la21/index.htm (Accessed 20 March 2011) Hampton, M. (2011) Lecture Slide 6 on Trans-national Tourism Jenkins, R, Fist Edition (1987) Trans-national Corporations and Uneven Development. London Madeley, J. 2003 Transnational Corporations and Developing Countries Big Business Poor Peoples (Online) The Courier ACP-EU no 196 January-February 2003 Available from: (http://ec.europa.eu/development/body/publications/courier/courier196/en/en_036_ni.pdf) [Accessed 30 March 2011] Mowforth, M., and Munt, I Third Edition (2008) Tourism and Sustainability Development, Globalisation and New Tourism in the Third World War. Routledge, London Scheyvens, R. (2002) Tourism for Development. Prentice Hall, London. Harrison, D., (2001) Tourism and the Less Developed World. CABI, Wallingford.

Price Essay Example | Topics and Well Written Essays - 2250 words

Price - Essay Example Price is also very import in marketing. It is one of the four variables that are considered when coming up with marketing strategy. In the marketing mix, price is the utmost factor which determines how the commodity is accepted in the market and in which market segment that product will have to be sold. It is also used by business when they are developing the marketing plan for the products. In our ordinary life we use the term price in order to refer to the amount or the quantity of payment that is made in order to acquire something. In this regard it is taken as a form of compensation that is given in exchange for something. When not referring to the economical terms, price has the same meaning of the compensating for something that has been acquired. When a criminal is arrested and incarcerated, we usually say that one has paid the price of the crime. This implies that the criminal has been compensated for the crime that has been committed. Therefore it is an exchange that is used to settle a debt. But in the economic world, price is used to refer to the exchange ratio for goods or services. It is the amount that is given in order to acquirer something which means it is an exchange reaction that is equal to what is being acquired. In this case we should not only be referring to the price in terms of the monetary exchange but it can also mean the value that is equal to something. For example when use din barter trade it would be an exchange ratio that equates the product or service that are being exchanged. In this case if we take that we have two goods x and y, the price of commodity x will be the ration y/x and in the same manner the price of y will be the ration x/y. (Buiter, 1999) However this concept has not been used always to refer to the price and there are old confusion that still compound the concept. In this case we can take that the value of a commodity of are services to be equated to the quantity countered using a common unit of values which may even have been based on imagination. This is usually done in order to compare different goods and services. This is the unit value of something. But most of the time, we usually confuse the unit value of something with price based on the fact that market values is usually counted as the quantity of a commodity which is multiplied by the nominal price of the commodity. The theory of price The theory of price was constructed in order to show how the price of goods and services is arrived at in the market. The price theory asserts that the market price of a commodity is usually based on two opposing considerations. As we have said about if we base the market price on the unit value of the product, this may not be true because the unit value may be created on imaginations. Therefore the theory of price presents factors that prevail in the market and which help to determent the common stand in the market. In this case the buyer and the seller are the two people who are involved in the whole process. It is the willingness of the buyer to buy a product or a service and the willingness of the seller to dispose that product or service that will determine the price at which they will arrive in. Therefore setting of the market price is an interactive process that involves the buyer and the seller. Therefore on one side stands the demand factor while which is based on marginal utility of the product while on the other side