The Financial Crises - Assignment Example

The Financial Crises ASSIGNMENT Introduction. It is evident that the well being of a particular nation is largely dependent on the performance of the overall economy of the nation in the long run. It has been comprehended that economic growth and sustainability also depends on certain key factors, which includes trade relations as well as flow of business of a particular nation with other and the trends of the global economic domain among others. It must also be mentioned that the economic stability and equilibrium for any particular economy is directly dependent upon the balance of the global economy. This aspect can be justified from the fact that with the emergence of financial crisis within the global economy, the economies of various nations is deemed to get impacted in a negative manner altogether. Historical records suggest that there have been a multiple number of occasions where the global economy has dealt with financial crisis owing to certain specific reasons. Among the various crises that the world has experienced, the Asian financial crisis and the America financial crises would be crucial to discuss (Allen & Gale 20-50). Contextually, this particular discussion will emphasise upon depicting the implications of Asian financial crisis and the America financial crises and the manner in which, the economy of UAE got affected from the same. The discussion also emphasises upon evaluating the approach of recovery by UAE from the implications of the financial crisis. Asian Financial Crisis. Asian financial crisis has drastic impact on the Asian nations along with the world economy. The crisis which was started in Thailand in the year 1997 has affected much of the East Asian nations in a comprehensive manner. The scenario has raised major concern for the global economy with the rising chances for economic meltdown. The crisis was mainly emerged owing to the fall or collapse of the financial institutions of Thailand owing to the lack of foreign currency. This has resulted into increased foreign debt of the nation, which has resulted into its bankruptcy. Subsequently, in relation to the fall of the Thai economy, the Singaporean dollar also depicted a gradual decline. Furthermore, in order to deal with the financial crisis of the nation, the authorities in Thailand agreed on implementing the strict measures imposed by the International Monetary Fund (IMF) so that it could be able to return back the loan taken from the Asian nations. Countries such as Indonesia, South Korea and other nations has also experienced a dramatic fall within their economy as an after-affect of the crisis that had taken place in Thailand. Furthermore, it has also been comprehended that as part of the crisis within the subcontinent, the financial sector of these became incapable to provide capital to the overall economy that could be able to mend the situation further. It has also been noted that the crisis also had severe impact on the economy of the United States as the country had extensive dealing with the nations of the Asian continent that were under the influence of financial crisis. The operations of the IMF were also hampered considerably due to the crisis that took place in Asia in 1997-98 (Nanto, “The 1997-98 Asian Financial Crisis”). American Financial Crisis. Similar to the economic downfall in Asia, financial doom has also been experienced by the United States in the year 2007-08. It has been learnt that the financial crisis that has primarily started from the United States took the world by shock as the American economy has major contributions towards maintaining the balance of the global economy. Owing to this particular aspect, this crisis was also known as the Global Financial Crisis. The crisis which was started in the mid 2007, threatened the overall collapse of the financial institutions of America and the world. As a result of the crisis in the US, the global stock market has also depicted a considerable decline. It has also been observed that the housing markets of the US also got negatively affected. Owing to the wideness of the impact of this economic depression, the financial crisis of the US in the year 2007-08 is deemed to one of the severest economic downfall in the history of mankind, since the great depression in 1939. Notably, the causes of this particular crisis within the economy of the US and global world primarily revolves around factors such as subprime lending mortgage of the financial institutions of the country i.e. the US. It is often argued that the approach of the American financial institutions to lend money in bulk without proper security of getting the same has impacted the operations and further gave rise to the financial downfall in a considerable manner. Though experts hold the belief that the world and the US Economy have overcome the financial crisis, its impact still seems to be prevalent (Wall Street Oasis, “Financial Crisis 2007/2008 Overview”). Comparison between the Asian financial crisis and the America financial crises. Though both the Asian financial crisis and the American financial crisis took place in two different time period, there are still certain similarities and differences between the two financial crises, which will be discussed in an elaborated manner. The difference amid the two financial crises is mainly in the domain of causes and effects of the two financial crises mentioned above. Notably, both the financial crisis has certain causes, effects and consequences, which have taken the global economy by storm. The primary difference amid the two crises was mainly with regard to their causes. In this regard, it can be affirmed that the Asian financial crisis was a result of issues with the inflows of cash from the foreign exchange in Thailand. While on the other hand, the financial crisis that took place within the US and the global economy was largely due to asset bubbles that emerged within the housing and the financial markets of the nation i.e. the US. Furthermore, it has also been learnt that the financial crisis of Asia was known as crisis relevant to balance of payments owing to the significant external debt that Thailand and other Asian countries had with the foreign nations. In similar regard, the crisis in the US was largely owing to the extensive financial lending of the financial institutions of the US to the housing markets. Furthermore, it is also believed that the financial crisis that was experienced by the nations of the Asian subcontinent was due to the extensive growth of the economies of the countries. This can be better explained by the aspect that Asian countries developed themselves as a powerhouse of export during the 90s. However, in the later stage of this particular time period, with the increase in the volume of the investment in the trade sector, the quality of the investment declined considerably. Many of the investments were made on the basis of unrealistic assumptions, which further failed to yield positive results. This has contributed largely towards the establishment of the financial crisis. On the other hand, the risks taken by the financial institutions of America were deemed to be quite unprecedented. Most of the financial institution of the nations has put significant investments on the housing markets without proper security. In the later scenario, the financial institutions were unable to recover many of the investments, which not only impacted them negatively but also paved the way for a financial doom within the nation (Goldstein 7-28; Peters 1-18). There are also certain similarities amid the two crisis situations, which mostly resembles with the effects and consequences of the financial crisis that took place in Asia and America. As a result of the financial crisis in the US, the values of national asset of the nation have declined considerably. Similar results have also been seen during the financial crisis of 1997-98 in Asia. Furthermore, it has also been comprehended that the negative implications of the crisis in both the situations upon the global economy was also similar. Additionally, the aspect that value of money in both the nation has declined considerably post financial crisis can also be regarded as one of the prime similarities amid the two situations (Goldstein 7-28; Peters 1-18). Hence, from the above analysis, the similarities and differences amid the two crisis situation on the basis of their consequences and causes can be apparently comprehended. Effect of Crisis on UAE and its Recovery. The Global Financial crisis in the US and Asia had significant impact on numerous countries all around the world including Asia. The impact of the crisis can mainly be seen in the overall financial sector along with the construction and real estate industry of the nation. Though the impact of the crisis on the gulf nations including UAE is quite mild, it consequences upon various sectors of the nations could not be ignored at the same time. The country has experienced slow down in various sectors owing to the financial crisis that took place long time back. The business domain of the nation has faced the most significant impact of the crisis especially in the form of reduction in the export of goods and services, which further resulted in the slowdown of business processes. The slowdown of the business sector is largely owing to the downfall of the global economy that has resulted from global financial doom. Banks and other financial institutions within the nations also had to deal with the bitter side of the crisis as many of such concerns were unable to get positive return from their investment made in different nations of the world. Again, the impact of the crisis on the construction and real estate sectors of UAE must also be apparently mentioned owing to the fact that this particular sector is among the major contributor towards strengthening the overall economy of the nation. In this regard, it has been learnt that owing to the decline in prices of the properties due to financial crisis, the overall economy of the nations has witnessed significant loss. However, the country was able to recover from this particular scenario with adoption of updated policies of the IMF, which were made specifically to deal with the financial crisis. Furthermore, the effectiveness of the monetary policies of these particular nations has also helped it to gain back its financial strength in no time. Again, it is also believed that since the country has minimal debt on other nations during the financial crisis, the impact of the crisis on its financial domain was quite small. This has also enabled the nation to deal with the financial crisis and its implications to a greater extent altogether (Goldstein 7-28; Peters 1-18). Conclusion. From the overall analysis of the study, several key results and findings can be compiled, which can further provide an elaborative understanding about the subject matter. Notably, the financial crisis in the US and the Asian countries during the year 2007-08 and 1997-98 respectively had stern impacts on the global economy along with affecting the economic stability of some of the small or underdeveloped nations. The crisis that initiated in Asia in the year 1997-98 was a result of the financial downfall of Thailand, which subsequently leads to the decline in economy of some of the other nations of the Asian continent. Notably, as a result of the crisis in Asia the global economy has got substantially impacted. On the other hand, the crisis in the US during the year 2007-08 also contributed towards impacting the economy of the nation negatively along with affecting the global economy in a comprehensive manner. The reason for the US or global financial crisis is deemed to be due to the inappropriate lending and investment policies of the financial institutions of the nation, which has also considerably declined the global economy. Both the crisis has significant impact on the economy and the business sector of UAE, which has been further demonstrated within the discussion of the paper. Hence, to conclude the discussion, it can be depicted that the financial crisis indeed had major implications upon the global economy and the associated nations in a comprehensive manner altogether. ASSIGNMENT 2 Introduction. With regard to the challenging business environment in the present day context, companies need to operate efficiently in business domain in order to ensure that they are able to sustain for longer durations within the diverse business environment. In order to stay ahead of the rivals with regard to competition, companies must also seek to make decisions that could be able to ensure a better business performance for the same in the long run. Strategies can be of various sorts and it differs from company to company on the basis of the industry they operate in. Contextually, proper implementation and management of managerial economies within the business is one of the prime strategies that companies must take into consideration within their operations. Managerial economics can simply be explained as the approach of companies to implement economic concepts within the operations of the business. It is important in developing a better understanding with regard to the decision making of the mangers along with reliability and sustainability of the decision made (Mohin 29-43). Some of the key managerial decision areas where managerial economics are used include investment of the business, making the right selection of the products and services along with determining the price and services of the products and services among others. Managerial Economics. Managerial economics which is also known as business economics is implemented integrally in the operations of the present day business where business units have the need to take effective decisions. This particular concept integrates the management operations of business with economic concepts so that the decisions made by the top level management hold utmost reliability and accuracy. In this regard, it has been noted that managerial economics concepts such as operational research and game theory are used to make effective business strategies in alignment with the demands and trends of the external business environment. It must be mentioned that the primary purpose of the use of managerial economics is to analyse and evaluate the decision making of the business in any particular domain. Almost each and every decision made within a particular business unit can be evaluated with the help managerial economics concepts. The concept of managerial economics is apparently applicable in risk analysis of the business, production analysis with regard to its capacity and analysing the pricing related decisions of any company among others. The aspect of managerial economics is also deemed to be crucial in deciding proper allocation of resources so that optimum use of the same can be ensured (Hirschey 1-18). The concept of managerial economics in any form of business has utmost prominence, which is discussed in the subsequent section. Importance of Managerial Economics in Business. Intelligent decision making is one of the core needs of the management of modern day business units. In order to sustain and get competitive advantage over the rivals, business unit needs to ensure effective decision making that can act positively towards enhancing the overall operations of the company. In this regard, the role of managerial economics is deemed to be quite crucial. With the use of managerial economics as a business concept, management of companies can be able to ensue better or optimum use of the information gathered towards delivering effective decisions that can be aligned with the objectives of the business along with the changing demand of the external business environment. Managerial economics and its implementation in business involve a particular process of using the information obtained about any particular aspect towards making effective decisions. It has been learnt that decision making is an integral part of business and management and is largely responsible for proper execution of the same. In this regard, it can be stated that management decision making is an intellectual process, which is inseparable from the responsibilities of managers and decision makers. Decision making, which is also seen as a correct choice making, needs to ensure accuracy and reliability so that the outcome obtained from the same helps the business positively. In the strict present day business environment, the survival of any business is largely dependent on the choices it makes both in the short term and the long run. In this regard, the values of economic concepts could not be ignored towards effective business decision making. In order to ensure a better balance amid demands, supply and pricing of products, the concept of managerial economics is deemed to be crucial. It is also important to analyse and comprehend the external factors that can impact a particular business in a negative manner altogether. The concept of managerial economics is also deemed to be crucial in determining the problem and issues that prevails in a particular business along with identifying the solutions or measures that can eradicate the same from the very basic level. It has been observed that the concept of managerial economics also involves developing effective economic theories that can be helpful in making decisions regarding sales and profits of the business in an accurate manner (Hirschey 12-26). Thus, it can be apparently stated that managerial economics is indeed quite vital in the present day business context, where operational decision making has to be accurate and effective in alignment with short and long term goals of business. Managerial Economics in Emirates Airlines. As described earlier, managerial economics is an integral part of business units irrespective of the sector they are operating in. Likewise, the aspect can be considered important within the aviation sector of the world. Similar to other industry sector, the aviation sector of the world is also highly competitive owing to the existence of large number of competent players that are known for delivering quality products and services to customers globally. Contextually, Emirates airlines are one of the players within the aviation sector of the world that is widely renowned and competitive amid the rivals. The company is one of the biggest airplane services providers of the world with regard to its market share and extensiveness of operations. The company which is headquartered in the UAE is directly supervised and funded by the government of the country. The company connects its operations and services with more than 78 destinations of the world. In terms of its scale of operations, the company is the fourth largest service provider in the world. The company is well known for its fast services and scheduled operations, which ensures utmost convenience for the passengers all over the world. It has been observed that the company is operating in challenging and competitive global aviation industry where margin of error for the company is quite less. Contextually, the company has the need to make effective decisions that can ensure its long term sustainability and competitive advantages over the rival airplane service providers. The management of the company ensures that effective decisions and choices can be made in each of the domains of the business, so that its business moves in alignment with the target or mission of the business and the trends of the overall aviation sector. In this regard, the role of managerial economics is deemed to be vital to a larger extent. Managerial economics has been implemented by the company in order to evaluate and validate its decision making and choices, which again plays an important part in the success of the company over the years of its operations in the aviation sector (Slideshare, “Emirates”). The concept of managerial decision making can be witnessed extensively within the operations of emirates airlines. The company makes decisions regarding price of products and services, decisions for strategic alliance and other operations related decisions based upon the concept of managerial economics. This means that the decisions of the business are taken entirely on the basis of the external business environment and trends. To have a better comprehension in this context, some of the managerial decision making of the company would be vital to discuss with regard to the operations of company within the airline sector. It has been noted that customers in the present day airline sector seeks to get quality products and services at a reasonable price. This means that the customers are quality and price centric. Contextually, with regard to this particular aspect the management of the business i.e. Emirates has decided to provide quality airline products and services to the passengers at the least possible price structure in comparison to the price offered by the rivals. In addition, the company also offers utmost safety and convenience for the buyers of services so that competitive advantage can be gained. This has also been one of the vital aspects of the application of managerial economics in Emirates airlines (Slideshare, “Emirates”). Furthermore, with the increasing demand of airline services throughout the world opportunities for expansion of airline companies in various parts of the world is quite vast. This aspect is also applicable for Emirates airlines, which are one of the most notable players within the sector. Since, it is not possible for the business to expand and establish its operational activities in every nation the management of Emirates airlines prefers to move into strategic alliance with notable players of other nations to expand its business in unexplored markets. The example of Emirates airlines and Qantas airlines can be taken into consideration in this regard. Observably, the alliance is ought to help Emirates to reach larger customer base in Australia and London where the operations of the company is limited owing to certain legal obligations. This aspect also shows the applications of managerial economics by the management of Emirates airlines to explore wider market and serve more and more passengers (The Conversation Media Group, “The Qantas-Emirates alliance: a flight path to future growth?”). Advertising and promotion is also an important part of the modern business units that enables them to raise awareness about products and services amid the potential or targeted customers. This aspect is also relevant with regard to the operations of Emirates Airlines. Notably, the company is aware of its extensive presence in the Gulf regions or countries including Saudi Arabia, UAE and others. The company holds a large percentage of market shares in these markets. Correspondingly, the marketing strategies of the business are concentrated largely towards raising awareness of the products and services of the company among the customers of the gulf countries. In this regard, the management of Emirates intends to advertise about the products and services with the channels and newspaper of gulf countries so that it could be able to explore a wider market. Furthermore, in order to ensure that the business is able to promote itself in a wider manner; the management of the business emerges with the ideas of aligning with various advertising companies in the global platform. Sponsorship is also an important part of the advertising strategy of the company, which helps the same in better accessibility of the customers. An example, in this regard would be sponsorship of the company to English football club Arsenal F.C. This strategy of the business has enabled the company to enhance its awareness amid potential customers in different nations of the world. Hence, it is quite apparent that managerial economics is indeed an important part of the process for the decision making of the company i.e. Emirates Airlines. Conclusion. From the overall analysis of the paper, certain specific facts can be compiled with regard to managerial economics in the present day business domain. It has been noted that in the contemporary scenario companies need to emerge with better and effective decision making in order to ensure their long term existence within a particular sector. Contextually, the role of effective decision making is quite vital in this regard. Companies need to ensure that the decisions and choices made by the business are quite accurate and are taken in alignment with the trend of the external environment. Correspondingly, the role of managerial accounting came into existence. Managerial economics is a particular concept that involves analysing and evaluating the decision making of the business with regard to its accuracy and viability in the present trend. The case of emirates has been taken into consideration in this context to provide a better understanding. Notably, the company is involved with the use of managerial economic concept in the domain of pricing strategies, operation management and advertising among others. Hence, the importance of managerial economics is indeed quite vital in the contemporary scenario. Works Cited Allen, Frankline and Douglas Gale. Understanding Financial Crises. US: Oxford University Press, 2009. Print. Goldstein, Morris. The Asian Financial Crisis: Causes, Cures, and Systemic Implications. US: Peterson Institute, 1998. Print. Hirschey, Mark. Fundamentals of Managerial Economics. US: Cengage Learning, 2008. Print. Mohin, Timothy J. Changing Business from the Inside Out: A Treehuggers Guide to Working in Corporations. UK: Berrett-Koehler Publishers, 2012. Print. Nanto, Dick K. The 1997-98 Asian Financial Crisis, 1998. Web. 26 Nov. 2014. Peters, Mary. What the 2008/2009 World Economic Crisis Means for Global Agricultural Trade. UK: DIANE Publishing, 2010. Print. “Emirates.” Slideshare, 2013. Web. 26 Nov. 2014. “The Qantas-Emirates alliance: a flight path to future growth?” The Conversation Media Group, 2012. Web. 26 Nov. 2014. “Financial Crisis 2007/2008 Overview.” Wall Street Oasis, 2014. Web. 26 Nov. 2014. Read More