Prepare a critical analysis of the microeconomic and macroeconomic environment a
ID: 1230725 • Letter: P
Question
Prepare a critical analysis of the microeconomic and macroeconomic environment and challenges that the company faces. Include the company background, industry, and industry structure. What is the industry? Financial? Computer? What is the industry structure? Oligopoly? Monopolistic competition? Is it regulated? Covered by EPA? What are the factor markets like? What global pressures does it face? Foreign competition? What is its cost structure (for example, fixed versus variable)? What ethical issues are present? Are there economies of scope or scale? Is it subject to business cycles? What is the long-term outlook for the company—growth, merger, bankruptcy, takeover by another company?Explanation / Answer
A basic category of business activity. The term industry is sometimes used to describe a very precise business activity (e.g. semiconductors) or a more generic business activity (e.g. consumer durables). If a company participates in multiple business activities, it is usually considered to be in the industry in which most of its revenues are derived The major market forms are: Perfect competition, in which the market consists of a very large number of firms producing a homogeneous product. Monopolistic competition, also called competitive market, where there are a large number of independent firms which have a very small proportion of the market share. Oligopoly, in which a market is dominated by a small number of firms which own more than 40% of the market share. Oligopsony, a market dominated by many sellers and a few buyers. Monopoly, where there is only one provider of a product or service. Natural monopoly, a monopoly in which economies of scale cause efficiency to increase continuously with the size of the firm. Monopsony, when there is only one buyer in a market. The imperfectly competitive structure is quite identical to the realistic market conditions where some monopolistic competitors, monopolists, oligopolists, and duopolists exist and dominate the market conditions. These somewhat abstract concerns tend to determine some but not all details of a specific concrete market system where buyers and sellers actually meet and commit to trade. Quick Reference to Basic Market Structures Market Structure Seller Entry Barriers Seller Number Buyer Entry Barriers Buyer Number Perfect Competition No Many No Many Monopolistic competition No Many No Many Oligopoly Yes Few No Many Oligopsony No Many Yes Few Monopoly Yes One No Many Monopsony No Many Yes One The correct sequence of the market structure from most to least competitive is perfect competition, imperfect competition,oligopoly, and pure monopoly. The main criteria by which one can distinguish between different market structures are: the number and size of producers and consumers in the market, the type of goods and services being traded, and the degree to which information can flow freely. An oligopoly is a market form in which a market or industry is dominated by a small number of sellers (oligopolists). The word is derived from the Greek for few sellers. Some industries which are oligopolies are referred to as the "Big 3" or the "Big 4." Because there are few participants in this type of market, each oligopolist is aware of the actions of the others. Oligopolistic markets are characterised by interactivity. The decisions of one firm influence, and are influenced by the decisions of other firms. Strategic planning by oligopolists always involves taking into account the likely responses of the other market participants. This causes oligopolistic markets and industries to be at the highest risk for collusion. Oligopoly is a common market form. As a quantitative description of oligopoly, the four-firm concentration ratio is often utilized. This measure expresses the market share of the four largest firms in an industry as a percentage. Using this measure, an oligopoly is defined as a market in which the four-firm concentration ratio is above 40%. For example, the four-firm concentration ratio of the supermarket industry in the United Kingdom is over 70%; the British brewing industry has a staggering 85% ratio. In the U.S.A, oligopolistic industries include accounting & audit services, tobacco, beer, aircraft, military equipment, motor vehicle, film and music recording industries. Above the kink, demand is relatively elastic because all other firm’s prices remain unchanged. Below the kink, demand is relatively inelastic because all other firms will introduce a similar price cut, eventually leading to a price war. Therefore, the best option for the oligopolist is to produce at point E which is the equilibrium point and, incidentally, the kink point.In an oligopoly, firms operate under imperfect competition and a kinked demand curve which reflects inelasticity below market price and elasticity above market price, the product or service firms offer, are differentiated and barriers to entry are strong. Following from the fierce price competitiveness created by this sticky-upward demand curve, firms utilize non-price competition in order to accrue greater revenue and market share. Oligopsony is a market form in which the number of buyers is small while the number of sellers in theory could be large. This typically happens in markets for inputs where a small number of firms are competing to obtain factors of production. This also involves strategic interactions but of a different nature than when competing in the output market to sell a final output. Oligopoly refers to the market for output while oligopsony refers to the market where these firms are the buyers and not sellers (eg. a factor market). A market with a few sellers (oligopoly) and a few buyers (oligopsony) is referred to as a bilateral oligopoly. In industrialized countries oligopolies are found in many sectors of the economy, such as cars, consumer goods, and steel production. Unprecedented levels of competition, fueled by increasing globalisation, have resulted in the emergence of oligopoly in many market sectors, such as the aerospace industry. Market shares in oligopoly are typically determined on the basis of product development and advertising. There are now only a small number of manufacturers of civil passenger aircraft. A further instance arises in a heavily regulated market such as wireless communications. Typically the state will license only two or three providers of cellular phone services. Oligopolistic competition can give rise to a wide range of different outcomes. In some situations, the firms may collude to raise prices and restrict production in the same way as a monopoly. Where there is a formal agreement for such collusion, this is known as a cartel. Firms often collude in an attempt to stabilise unstable markets, so as to reduce the risks inherent in these markets for investment and product development. There are legal restrictions on such collusion in most countries. There does not have to be a formal agreement for collusion to take place (although for the act to be illegal there must be a real communication between companies) - for example, in some industries, there may be an acknowledged market leader which informally sets prices to which other producers respond, known as price leadership. In other situations, competition between sellers in an oligopoly can be fierce, with relatively low prices and high production. This could lead to an efficient outcome approaching perfect competition. The competition in an oligopoly can be greater than when there are more firms in an industry if for example the firms were only regionally based and didn't compete directly with each other. The welfare analysis of oligopolies suffers, thus, from a sensitivity to the exact specifications used to define the market's structure. In particular, the level of deadweight loss is hard to measure. The study of product differentiation indicates oligopolies might also create excessive levels of differentiation in order to stifle competition. Desoligopolization is the disappearance of an oligopoly.[citation needed] Oligopoly theory makes heavy use of game theory to model the behaviour of oligopolies: Stackelberg's duopoly. In this model the firms move sequentially (see Stackelberg competition). Cournot's duopoly. In this model the firms simultaneously choose quantities (see Cournot competition). Bertrand's oligopoly. In this model the firms simultaneously choose prices (see Bertrand competition). Monopolistic competition. A market structure in which several or many sellers each produce similar, but slightly differentiated products. Each producer can set its price and quantity without affecting the marketplace as a whole. According to standard economic theory (see analysis above), a monopoly will sell a lower quantity of goods at a higher price than firms would in a purely competitive market. In this way the monopoly will secure monopoly profits by appropriating some or all of the consumer surplus: although the higher price deters some consumers from purchasing, most are willing to pay the higher price. Assuming that costs stay the same, this does not lead to an outcome that is inefficient in the sense of Pareto efficiency; no one could be made better off by shifting resources without making someone else worse off. However, overall social welfare declines, because some consumers must choose second-best products. It is often argued that monopolies tend to become less efficient and innovative over time, becoming "complacent giants", because they do not have to be efficient or innovative to compete in the marketplace. Sometimes this very loss of efficiency can raise a potential competitor's value enough to overcome market entry barriers, or provide incentive for research and investment into new alternatives. The theory of contestable markets argues that in some circumstances (private) monopolies are forced to behave as if there were competition because of the risk of losing their monopoly to new entrants. This is likely to happen where a market's barriers to entry are low. It might also be because of the availability in the longer term of substitutes in other markets. For example, a canal monopoly, while worth a great deal in the late eighteenth century United Kingdom, was worth much less in the late nineteenth century because of the introduction of railways as a substitute. Some argue that it can be good to allow a firm to attempt to monopolize a market, since practices such as dumping can benefit consumers in the short term; and once the firm grows too big, it can be dealt with via regulation. When monopolies are not broken through the open market, often a government will step in, either to regulate the monopoly, turn it into a publicly owned monopoly, or forcibly break it up (see Antitrust law). Public utilities, often being natural monopolies and less susceptible to efficient breakup, are often strongly regulated or publicly owned. AT&T and Standard Oil are debatable examples of the breakup of a private monopoly. When AT&T was broken up into the "Baby Bell" components, MCI, Sprint, and other companies were able to compete effectively in the long distance phone market and began to take phone traffic from the less efficient AT&T. The mathematician Harold Hotelling came up with Hotelling's law which showed that there exist cases where monopoly has advantages for the consumer. If there is a beach where customers are distributed evenly along it, an entrepreneur setting up an ice cream stand would naturally place it in the middle of the beach. A competing ice cream seller would do best to place his competing ice cream stand next to it to gain half the market share, but two stalls right next to each other is not an ideal situation for the people on the beach. A monopolist who owns both stalls on the other hand, would distribute his ice cream stalls some distance apart.[4] Historical examples of alleged de facto monopolies This article or section needs copy editing for grammar, style, cohesion, tone and/or spelling. You can assist by editing it now. A how-to guide is available, as is general documentation. This article has been tagged since January 2007. Common salt (sodium chloride) historically gave rise to natural monopolies. Until recently, a combination of strong sunshine and low humidity or an extension of peat marshes was necessary for winning salt from the sea, the most plentiful source. Changing sea levels periodically caused salt "famines" and communities were forced to depend upon those who controlled the scarce inland mines and salt springs, which were often in hostile areas (the Dead Sea, the Sahara desert) requiring well-organized security for transport, storage, and distribution. The "Gabelle", a notoriously high tax levied upon salt, played a role in the start of the French Revolution, when strict legal controls were in place over who was allowed to sell and distribute salt. Advocates of laissez-faire capitalism, such as the Austrian school, maintain that a salt monopoly would never develop without such government intervention. If a monopoly is not protected from competition by law (if it is not a legal monopoly), it may still be subject to competitive forces that pressure it to keep prices low in order to dissuade competition from arising. For an example see Microsoft. Carnegie Steel Company Standard Oil (Jones; Eliot. The Trust Problem in the United States 1922. National Football League Major League Baseball DeBeers control of the world diamond markets. British East India Company Dutch East India Company Boeing United Aircraft and Transport Corporation: Control of aircraft, broken up in 1934 AT&T Telecommunications giant broken up in 1982 to allow the formation of regional telephone companies but somewhat reconsolidated by 2006. The Natural Monopoly Problem Natural monopoly is defined as a situation in which production is characterized by falling long-run marginal cost throughout the relevant output range. In such situations, a policy of laissez-faire must result in monopoly and efficiency losses for society. The conventional Paretian solution to market failure of this kind is public regulation (in USA) or public enterprise (in United Kingdom). Liberals reject both alternatives as being incompatible with important freedoms. International trade has always been an important aspect of national economies . Since the beginning of recorded history , there have been records of trade among nations (Zupnick 21 . In fact , several nations were known mostly for their roles as merchants in international markets (e .g , Venice of the fifteenth century . In today 's community of nations , there has been substantial reliance on imports and exports Since the end of World War Second , there has also been the development of international organizations designed to facilitate economic growth political stability and peaceful resolution of disputes between nations .It is , therefore , unlikely that international trade and business will ever decline in the future . Moreover , for the past decades we witness fast globalization of economy . It seems this process will accelerate year by year and in the long run will lead to creating one global market , a market without national borders and government restrictions , a market where commodities and resources could flow freely both within and across national borders In these turbulent , dynamic , complex days of global management companies faces increased foreign competition . To be successful , a firm must be competitive against market entrants from throughout the world Competitive factors like global alliances , time to market , international quality registrations such as ISO etc . shape the strategic thinking of businesses . Those of them which once experienced competition only from local or regional organizations , perhaps within one state , now face pressures from businesses throughout the world . To realize what challenges they face in international markets and what strategies they should apply to be competitive we should examine the trends in contemporary international business environment , explore factors influencing international trade , consider the obstacles businesses meet on their path to global success and the ways by means of which international organizations reduce them Why Nations Trade International business is of vital importance to most countries . No country , including the largest world exporter the United States (Yelpaala 895 , can survive pretending that the rest of the world does not exist . Since the medieval times when the new sea routes were discovered many nations have got an opportunity to trade with other ones locating wide apart . And from that time just a few persons could be found who would have any doubts concerning the profit of the international business . It is vital to a nation and its businesses because it boosts economic growth . It is an important instrument of the national economies development as owing to it the productivity of labor rises and aggregate output increases . The nations exporting their goods to other countries obtain substantial economical gain due to development of specialized industries possessing comparatively higher effectiveness as regards to the nations manufacturing similar products . Because of the international business the world economy could achieve more efficient resources allocation and higher level of welfare of the people Each nation has to manufacture those goods production costs for which are relatively lower that in other nations , and exchange goods , which it is specializing in , for ones... Every business in today's world has one goal in mind; to maximize their overall profits and drive their business into the future. So to accomplish this goal, you will want to keep in mind as to what types of costs affect your business the most and how to effectively control those costs for reporting purposes. To start us off, let's first define fixed and variable costs. Fixed costs are the costs that are not directly related to the level of output or production. These are costs that, no matter the amount of activity, they will remain the same and do not change. Some examples may include: rent, depreciation, research and development, administration/office salaries, advertising, office utilities, sales salaries, and office supplies. Variable costs are costs that are directly related to the products and change with the levels of output. Some examples of variables costs a business may have are raw materials, sales commissions, salaries to production workers, and utilities used in manufacturing. It is important to note that some costs may be changed to make their activity fixed or variable. For instance, your sales salaries, which are commonly a fixed cost, can be changed to a variable cost by having your sales force work on commission instead of a base pay. Now that we have a basic understanding of what fixed and variable cost are, let's take a look at what type of cost structure might be appropriate for your business's overall needs. There are currently two types of cost structures businesses use most; fixed and variable. Fixed cost structures deal solely with a focus on the fixed costs associated with a company's operations. This type of structure has unlimited profitability potential and unlimited risks. In a totally fixed cost structure, if your sales increase your costs will remain the same, thereby, allowing your company to achieve high profits. But if your company's sales decrease for any reason, your company can incur a huge loss because the costs, again, are going to remain stable. Overall, a fixed cost structure is most beneficial to companies that frequently experience increases in their sales volume. A variable cost structure places its main focus on the variable costs affecting a business. There is little risk associated with a variable cost structure because as sales go up the costs rise with it and when sales go down the costs decrease. In fact the complete risk of this cost structure mainly lies with the suppliers, because if the business doesn't sell any products, the supplier does not get any business. This cost structure is the most predictable for management because it allows a business to predict sales and costs more accurately then a fixed cost structure allows. Overall, this costs structure is most beneficial to companies with a decreasing sales volume. As you can see, both cost structures have their pros and cons. But before you make a final decision as to which cost structure is best for your company, I would like to discuss a little about product costing analysis, which will give you a better understanding of which cost structure may be best for your business and its future needs. The product costing in a manufacturing organization includes all the direct (fixed) and indirect (variable) costs of making the product and these costs are treated as inventory. The GAAP (Generally Accepted Accounting Principles) requires that all product costs (fixed or variable) be accumulated in the inventory until the inventory is sold. The product costs are then expensed, as products are sold, by calculating the cost of goods sold. This practice is known as absorption costing. Under full absorption costing, the only costs that appear on the income statement are the cost of goods sold account. Results reported under this costing method can tempt management to produce more products than the company can sell, because the fixed overhead costs can be spread over or absorbed by more units. This will improve the gross profit margin and make the manufacturing process look more profitable. Beware though; this type of practice causes management to overproduce which leads to a buildup in the inventory account. This can lead to extra costs (i.e. storage costs), risks (i.e. to many products for company to sell in one period), and reduce a company's overall profitability in the long run. So for this reason companies will use what is known as variable costing analysis for internal reporting purposes. Variable costing analysis excludes fixed costs, which will encourage management not to overproduce. The fixed costs are treated as an expense under your contribution margin and by using this costing method you will see an overall improvement in the contribution margin. This is because this method tempts you not to overproduce, thereby, shows an improvement in production and decreases variable costs. This gives a company an advantage on maintaining their long-term profitability picture. The GAAP requires companies to use absorption costing for financial reporting purposes, but has no regulation as to which method companies use in reporting for internal purposes. So because of the pros and cons of both methods, many businesses use variable costing for internal reporting purposes and use absorption costing for external reporting purposes. With all that said, I would recommend that if you are a small company who experiences more variable costs, have a low sales volume, and has a hard time being able to predict the market trends; then I would recommend you use the variable costing structure and variable analysis for internal reporting purposes. Under a variable cost structure, you will be able to accurately predict your company's profitability in a given time period and using variable analysis for internal reporting purposes, you will not be tempted to overproduce. On the other hand, if you are a company that sells several products in one given time period and experiences a high volume of fixed costs, then I would recommend using a fixed cost structure and absorption costing for your reporting purposes. These methods will allow you to achieve higher profits and make your operations look more profitable, because your costs will remain the same no matter you Most of the company’s strategy in remaining to be competitive is trying to differentiate and get over its rivals which has the intentions of realizing the preferred seller and will have the highest returns into the industry. Thus, the choice of the firm had been affected relatively to the minimum efficient scale and the major issues that had been tackled to this issue are the economies and diseconomies of scale and scope Economies of Scale and Scope The economies of scale exist by the increase of the output of the goods through additional units while the costs decrease. On the other hand, the economies of scope exists when the firm increase the variety of the goods that it sells with the objective of saving to the total cost in comparing two firms produced of two goods. The economies of scale and scope are all found in the industry wherein it has the large scale of distribution, production, and retail for the process of cost advantage over the only small scale. There many sources of the economies of scale as the individualities and spreading of the fixed costs, the specialization of the division of labor, inventories, the increased of the productivity of the variable output, principles of engineering, purchasing and adverting. The disadvantages of this approach is relating to the lack of adaptability to the bureaucratic companies and inflexibility. Nevertheless, the advantages of this approach are the sales force for the selling products can do properly as compared to the only one product. There will also be greater revenues from the base in the process of distribution which can yield to cost efficiency. In this regard, there will also be the synergies at the products which are offering the complete range of the products that can give the consumers more efficient products in the single product. This will also have the operation of efficient distribution which can be precise in the range of products to any part of locations. The example of this is the Sony that shipped its 100 millionth of their Play stations 2 in the year 2005 which recovered the total turnover of $67 billion for the same financial year. In this vast production had run the opportunities in some benefits to the others and the economies of scale The other example of economies of scale is the Tiger Airways as well as the Air Asia which both kept their cost low and sells the tickets online that resulted to the reduction of the cost through the lesser number of overhead and the increase of the purchasing process. The other example of the economies of scale is the ST Aero for its customized and flexible program for the support of the specific maintenance and repairs of the aircrafts for the minimization of the resource and capital investment which are all allowed in the stock availability The Diseconomies of Scale The diseconomies of scale are emerging in the growing large business in the increase of the cost per units and this is also the result of the difficulties in managing the larger workforce. This is also the concept in which the economies of scale is no longer the function for the firm and the experience the continuous decrease of the cost in the unit output and the firm can see the marginal costs when the output had been increased. The diseconomies of scale can occur in the plant that cannot produced the same quantity of the output in the other related process and the output also increase whereas the costs of transport in the good for the distant market can also increase the offset of the economies of scale The sources of diseconomies of scale are the firm size and the labor costs wherein the firms are paying the high wages and great benefits, the spread of the specialized resources are all too thin and the people are all limit the amount that they can manage, and conflicting out or doing the business in the firms through competition to one another, as well as the bureaucracy and incentives effects. The example of this approach is the location of the independent controlled donut that can choose to offer the high wages in the charge of higher prices in the affluent area. It can also have the combo promotion for choosing the market cinnamon in the apple cider are available in the bargain market as controlled by the customization. There are also evidences that the diseconomies of scale occurs in the research and development of the pharmaceutical companies wherein outweighing the combination of R and D and the great driver for the efficiency for the strategic importance that cause of difficulties in managing and monitoring for the complex departments. The economies of scale can also occur in outside the firm wherein the larger business can put the pressures to its suppliers for the labour and raw materials so that it raise inputs on the prices. These regulations can be tighter for the bigger firms which can be result of the industry regulations and to the economies of scale The advantages of the diseconomies of scale or the increase in the plant size to the company is the effect to the product cost whereas the increase in the activity can make the possible for the firm in employing specialize labour and sufficient production. In this regard, it can improve the quality of the jobs that are performed by the general and unskilled worker. Thus, the better and more output can produce with the aide of the same input of the specialized labour. The new machines, on the other hand, can increase the productivity as well as decrease the production cost and the increase of the output. Externally, it will have the cheaper transportation in available facilities which can be better connection to the roads and to the railways . It is also disadvantageous for the larger plants which can facilitate the use and the cost of the better and newer machines. These machines will also increase the productivity yet decrease the cost of production while requiring the larger quantity of inputs. Additionally, the increase in the labour facilitation can result in the loss of coordination, the formation of the trade unions, and the delayed in the decision making which can result for the duplication of work, waste time, and costly creating the diseconomies of scale Parkin and Bade's text "Economics" gives the following definition of the business cycle: The business cycle is the periodic but irregular up-and-down movements in economic activity, measured by fluctuations in real GDP and other macroeconomic variables. If you're looking for information on how various economic indicators and their relationship to the business cycle, please see A Beginner's Guide to Economic Indicators. Parkin and Bade go on to explain: A business cycle is not a regular, predictable, or repeating phenomenon like the swing of the pendulum of a clock. Its timing is random and, to a large degress, unpredictable. A business cycle is identified as a sequence of four phases: Contraction: A slowdown in the pace of economic activity The lower turning point of a business cycle, where a contraction turns into an expansion Expansion: A speedup in the pace of economic activity Peak: The upper turning of a business cycle What About Recessions? A recession occurs if a contraction is severe enough... A deep trough is called a slump or a depression. The difference between a recession and a depression, which is not well-understood by non-economists, is explained in the article "Recession? Depression? What's the difference?". The following articles are also useful for understanding the business cycle, and why recessions happen: A well-planned investment strategy is essential before having any investment decisions. A business strategy is generally based upon long run period. Formation of business strategy largely dependent upon the factors such as long-term goals and risk on the investment. As the return on investment is not always clear, so the investors prepare the strategy so as to face the ongoing challenges in investment. A balanced investment strategy is generally required in the process of investment, which possesses long time period and some risk tolerance. In the case, when a strategy is aggressive the chance of attaining a higher goal is higher. An efficient strategy can be obtained from portfolio theory, which shows good estimates on risk and return. Investment Strategy is usually considered to be more of a branch of finance than economics. It is defined as set of rules, a definite behavior or procedure guiding an investor to choose his investment portfolio. For example, investing in mutual funds has recently emerged as a very favorable investment strategy. An investment strategy is centered on a risk-return tradeoff for a potential investor. High return investment instruments such as real estate and mutual funds usually have more risks associated with it than low return-low risk investment opportunities. Return on investment can be calculated on past or current investment or on the estimated return on future investment. Symbolically, it can be expressed as: Vf/Vi -1 where Vf denotes final investment value and Vi is the initial investment value.(“f” and “i” should be noted as subscripts) Return on investment (ROI) is profitable when Vf/Vi-1>0 and the investment is deemed to be unprofitable when the value of final investment is less than that of the initial investment. ROI is calculated to be 1 or 100% when the value of the final investment is twice the value of the initial investment. Types of investment strategies can be defined as follows: A passive investment strategy attempted to minimize transaction costs. An active investment strategy guide used to maximize returns based on moves such as proper market timing. This usually mean, “buying in the lows and selling in the highs” or buying investment instruments when they are cheap and selling them off when their price appreciates. This strategy, however, is not very beneficial for small time investors. Small time investors can adopt the buy and hold investment strategy to invest in equities, which although volatile in nature, give favorable long run returns. Investing in equity markets for small time investors is associated with the investors holding on for very long periods. In the case of real estate, the holding period extends the lifespan of the mortgage. Notably, in case of this strategy, indexing or buying a small proportion of all the shares in market index or a mutual fund is a purely passive variant of the above strategy. The strategy of value investing, a classic investment strategy propagated by Benjamin Graham simply concentrates on the strategy that an investor buys shares of a company as if he was buying off the whole company without paying any attention to the stock market scenario or any exterior conditions such as the political climate. At the end of the day, if he can buy the stock at less than that its actual future worth to the buyer, the person is said to have discovered a “value investment.” Investment strategies can also denote the investment strategies a national or federal government should follow to bring about economic growth in a country. This can only be achieved by domestic investment as well as significant FDI (Foreign Direct Investment) flows to particular sectors of countries, especially the less developed ones of Asia and Africa. In case of India, infrastructural problems, excessive government intervention, rigid labor laws and corruption are stifling the flow of FDI in the critical sectors. Less developed countries such as those in the Asia- Pacific region and Africa can bring about much needed development in these economies. An investment strategy in mutual funds is probably the best bet for a profitable investment. Mutual funds is defined as a pool of money supplied by different investors and in turn used by the mutual fund company to invest in various assets such as stocks and bonds. However, a detailed research has to be conducted for choosing the mutual fund companies and only those should be considered which have a professional investment manger. This will ensure that the funds get channeled towards the right investments. This also applies for investing in stock markets where a decision to invest should follow a through research about the past and current trends of the stock prices and their Net Asset Values (NAV). Analyses from market researchers about the predicted future trends should also be considered otherwise gains from capital appreciation; capital gain distribution (in case of mutual funds) and dividends might not be realized. Lastly, investment strategies leading to green investments or investments in renewable sources of energy will be the next big thing in the investment spectrum.