The Philippine Pesoâ€Us Dollar Exchange Rate: the Impact of Strengthening Currency

INTRODUCTION The  foreign exchange market is a worldwide decentralized  over-the-counter  financial market for the trading of currencies. Financial centers around the world function as anchors of trading between a wide range of different types of buyers and sellers around the clock, with the exception of weekends. The foreign exchange market determines the relative values of different currencies. (wiki. org) The exchange rate is the price of a unit of foreign currency in terms of the domestic currency.In the Philippines, for instance, the exchange rate is conventionally expressed as the value of one US dollar in peso equivalent. The value of any particular currency is determined by market forces based on trade, investment, tourism, and  geo-political risk. Every time a tourist visits a country, for example, he or she must pay for goods and services  using the currency of the host country. Therefore, a tourist  must exchange the currency of his or her home country  for t he local currency. Currency exchange of this kind is one of the demand factors for a particular currency.Another important factor of demand  occurs when  a foreign company  seeks  to do business with a company in a specific country. Usually, the foreign company will have to pay the local company in their local currency. At other times, it may be desirable for an investor from one country to invest in another, and that investment would have to be made in the local currency as well. All of these requirements produce a need for foreign exchange and are the reasons why foreign exchange markets are so large. (investopia. om) In this paper the researchers attempt to show the impact of strengthening peso against the US dollar and what are the consequences behind it. It also attempt to show where should the government place itself when the opposing interest of the public are at stake. Background The Philippine peso has been one of the strongest currencies in Southeast Asian Region f or the past two year. It appreciated for an about 5. 6 percent from year 2009 to 2010 where the exchange rate is 47. 6372 to 45. 1097 a dollar—that is based on the average data from BSP.This appreciation may attributed to the increasing inflows of remittances from the overseas Filipino workers (OFWs), the improvement in portfolio and direct investment, the deterioration of United States’ dollar economy for the past two years and the attractiveness of the Southeast Asian Region to the foreign investors. Peso appreciation would provide to a positive and negative effect on different sectors. The appreciation of Philippine peso would mean a reduction of debt servicing; this would also mean a reduction of prices of imported commodities in terms of peso when the product came here.However, this appreciation will reduce the purchasing power of Dollar that OFWs send to their family here in the Philippines and it would also mean that exported product will be less competitive abr oad or if ever the exporter’s income will diminish. In this situation, the government is stock between letting the peso appreciate for the purpose of lower importation cost and lower debt services—or maintaining it at a lower value for the sake of OFWs and export sector. According to Senator Ralph Recto, chairman of the Senate Committee on ways and means, the Philippine peso could further appreciate up to P34 a dollar this year (2011).Inflow of remittances will continue to be strong and the outlook for foreign investments remains positive. The exchange rate is important for several reasons: (1) it serves as the basic link between the local and the overseas market for various goods, services and financial assets. Using the exchange rate, we are able to compare prices of goods, services, and assets quoted in different currencies. (2) exchange rate movements can affect actual inflation as well as expectations about future price movements.Changes in the exchange rate tend to directly affect domestic prices of imported goods and services. A stronger peso lowers the peso prices of imported goods as well as import-intensive services such as transport, thereby lowering the rate of inflation. (3) exchange rate movements can affect the country’s external sector through its impact on foreign trade. An appreciation of the peso, for instance, could lower the price competitiveness of our exports versus the products of those competitor countries whose currencies have not changed in value. 4) the exchange rate affects the cost of servicing (principal and interest payments) on the country’s foreign debt. A peso appreciation reduces the amount of pesos needed to buy foreign exchange to pay interest and maturing obligations. Foreign exchange policy in the Philippines has evolved from a pegged system to a floating rate regime over the last 50 years. The period of pegged exchange rate regime witnessed an extensive use of a myriad of administrative rules that were set to restrict access of Philippine residents and corporations to foreign currency.From 1949 to early 1970, foreign exchange policy was used to promote exports industries, to limit imports, and to try to change the orientation of the Philippine economy from agricultural to agro-industrial. Even after the floating rate system was adopted in 1970, it was not until late 1984 that the central bank stopped announcing a guiding rate and imposing a trading band. Moreover, it was a decade hence yet before the watershed set of reforms was issued. In 1993, the BSP liberalized capital flows and implemented a comprehensive set of foreign exchange market reforms.Today, even as there remain some prudential regulations with respect to foreign currency transactions, market forces determine the exchange rate. Furthermore, mechanisms to allow the economy to absorb shocks that a freely floating currency entails have been the subject of recent economic discussions. (BSP, 2008) Table 1: Phil ippine Foreign Exchange Policy, 1949-2007 Period | Milestones| 3 January 1949| The CBP began operations. It adopted a fixed exchange rate system, pegging the peso to the US dollar at P2. 00/US$1. December 1949| The CBP imposed a comprehensive system of foreign exchange controls, which included a foreign exchange allocation scheme that gave preference to export industries and the manufacturing and mining sectors, and placed restrictions on buying of foreign exchange for services-related imports. The restraints were an effective instrument in carrying out the â€Å"Filipino First† policy of the government. | 1959| The Philippines achieved its first ever post-war trade surplus. | 1962| The Government launched an integrated socio-economic program that almost entirely eliminated restrictions on trade and payments. 25 April 1960| The CBP launched a four-year program to dismantle the complicated system of foreign exchange controls imposed in the 1950s. The most important feature of the decontrol program was the adoption of a multiple exchange rate system which paved the way for a de facto devaluation of the peso. | January 1962| All restrictions on sales of foreign exchange were eliminated. | December 1949| The CBP imposed a comprehensive system of foreign exchange controls, which included a foreign exchange allocation scheme that gave preference to export industries and the anufacturing and mining sectors, and placed restrictions on buying of foreign exchange for services-related imports. The restraints were an effective instrument in carrying out the â€Å"Filipino First† policy of the government. | 1959| The Philippines achieved its first ever post-war trade surplus. | 25 April 1960| The CBP launched a four-year program to dismantle the complicated system of foreign exchange controls imposed in the 1950s. The most important feature of the decontrol program was the adoption of a multiple exchange rate system which paved the way for a de facto devaluat ion of the peso. 1962 | The Government launched an integrated socio-economic program that almost entirely eliminated restrictions on trade and payments. | January 1962| All restrictions on sales of foreign exchange were eliminated. | 22 January 1962| CB Circular No. 133 dated 22 January 1962 sought to establish a free market for foreign exchange and transferred the function of allocating exchange for most categories of payments from the administrative machinery of the CBP to the free market. | 5 November 1965| A new parity for the peso-dollar exchange rate was set at P3. 0/US$1| 21 February 1970| The CBP abandoned the fixed parity regime and adopted a floating rate system. The competitive rate was applied on all foreign exchange transactions except for 80 percent of export receipts from the country’s major commodities (namely, logs, centrifugal sugar, copra and copper concentrates) which were to be purchased at the rate ofP3. 90/US$1. | 1972| The CBP started lifting the major ity of foreign exchange restrictions, paving the way for partial liberalization in foreign trade and investment.The liberalization efforts focused on the suspension of nationality requirements in establishing industries, relaxation of repatriation policies, simplification of the tariff structure, import liberalization, and granting of various incentives to the export sector particularly on non-traditional commodities, such as textiles, garments and electronics. | April 1972| The foreign exchange trading band was widened to 41 2 percent on both sides of the guiding rate. 1982| â€Å"Operation Greenback† was launched to curb widespread illegal trading in the black market as the CBP implemented liberal authorization of establishments to operate as foreign exchange dealers. | October 1983| After consultation with the IMF and several foreign banks, Philippine economic managers requested a 90-day moratorium on principal payments of external debt owed to foreign commercial banks. Wi th scarcity of foreign exchange, a system of direct controls was put into effect. 4 November 1983| Local commercial banks were required to sell to the CBP all foreign exchange receipts for placement in a pool out of which payments were made on the basis of officially set priorities. | June 1984| The foreign exchange market was reopened. By October 1984, a measure of stability had been restored in the forex market and the CB reopened the foreign exchange trading system. The previous trading day’s completed transactions formed the basis for the Bankers Association of the Philippines (BAP) reference rate. With this system, the CBP stopped announcing an inter-bank guiding rate and imposing a trading band. August 1985| CBP lifted the ceiling in the amount of allowable foreign exchange holdings. | 1986| Import controls on a broad range of items were abolished. Likewise, the tariff structure was made more uniform; and discriminatory aspects of the domestic tax structure against impo rts were eliminated. | April 1992| Currency trading shifted from a short daily trading session to full off-floor interbank foreign exchange trading with the operation of the Philippine Dealing System (PDS). | 13 April 1993| CB Circular No. 1389 was issued, setting forth foreign exchange liberalization measures. July 1993| The CBP was reorganized into the Bangko Sentral ng Pilipinas (BSP) by virtue of the New Central Bank Act (R. A. No. 7653). | September 1995| The Philippines acquired Article VIII status with the IMF with the lifting of all restrictions on current account transactions. | July 1997| Asian currency and financial crisis emerged. The BSP implemented measures to rationalize the rules and regulations governing non-trade related FX transactions to restore stability in the FX market and mitigate the impact of the Asian crisis on the economy. December 1997| Circular 149 implemented the Currency Rate Risk Protection Program (CRPP). | 2 October 2006| A new peso-dollar trading platform was launched, replacing the Philippine Dealing System in providing the main reference rate for dollar-peso conversions. | 2 April 2007| Circular 561 s. 2007, dated 8 March 2007, took effect. In the face of strong inflows, the BSP liberalized the foreign exchange regulations to allow greater market access to foreign exchange for outward investment and over-the-counter transactions. January 2008| The second phase of reforms in the foreign exchange regulatory framework (Circular 590 dated 27 December 2007) was implemented. These reforms focus mainly on promoting greater integration with international capital markets, diversifying risk supportive of an expanding economy with global linkages, and streamlining the documentation and reporting requirements on the sale of FX by banks. | Source: Bangko Sentral ng Pilipinas (BSP), Working Paper Series I. STATEMENT OF THE PROBLEMThe general problem of the study, â€Å"The Philippine Peso-US Dollar Exchange Rate: The Impact of Strength ening Currency† is to determine the impact of the appreciation of Philippine peso during the year 2009-2010. Specifically, the problems are the following: 1. Effects or impact of the appreciation of Philippine peso on consumption, government spending, investment, import-export and debt servicing; 2. What are the reasons for the appreciation of Philippine peso 2009-2010; 3. What is the role of the Bangko Central ng Pilipinas in the Foreign Exchange Market; 4.What are possible future movements on the Philippine peso against US dollar and how does it affect the country’s economy. II. OBJECTIVE OF THE STUDY General Objective: To determine the economic impact of the appreciation of Philippine peso. Specifically, the study attempts to: 1. Determine the effect of the appreciation of Philippine peso: a. Consumption b. Investment c. Government spending d. Import and export e. Debt servicing 2. To examine the reasons behind the appreciation of the Philippine peso during 2009-2010 3. To determine the role of the Bangko Sentral ng Pilipinas (BSP) on the Foreign Exchange Market 4.To determine the future movement of Philippine peso against the US dollar and its effect to the country’s economy. III. HYPOTHESES The researchers believe to the following hypothesis: 1. The effects of appreciation has a great impact—positive and negative—on consumption, government spending, investment, import-export and debt servicing; 2. Philippine peso appreciation was caused by several factors such as the robust economy of the Philippine as well as the increasing amount of remittances from the overseas Filipino workers (OFWs). 3.The role of the Bangko Sentral ng Pilipinas(BSP) is to maintain the stability of Philippine peso against other currency 4. The Philippine peso will further appreciate in the near future against the US dollar and this appreciation will boost the economy through saving. IV. SIGNIFICANCE OF THE STUDY The study is conducted to determine th e impact of peso appreciation on the economy. It shows the effect on different sectors of the economy. It attempts to show the impact of strengthening peso against the US dollar and what are the consequences behind it.It also attempt to show where should the government place itself—through the use of Bangko Sentral ng Pilipinas—when the opposing interest of the public are at stake. It also attempts to show how to maximize the advantage of strengthening peso against the dollar on the term of government spending. And to some extent, to serve as guide in policy making through the use of recommendation. V. SCOPE AND LIMITATION The study â€Å"The Philippine Peso-US Dollar Exchange Rate: The Impact of Strengthening Currency† limit its scope on Philippine peso against US dollar from year 2000 to 2010.VI. REVIEW OF RELATED LITERATURE â€Å"The Indian Rupee–US Dollar Exchange Rate: The impact of Strengthening Currency† Reasons behind the appreciation of th e Rupee in 2006-2007 Toward the end of 2006, foreign exchange inflows, especially of dollars, into India started rising sharply. This put upward pressure on the rupee’s exchange rate against the dollar. India’s steady economic growth offered several opportunities for foreign companies. Between April 2006 and March 2007, FDI of $16 billion flowed to India. VII. RELATED STATISTICSForeign currency reserves, gold, special drawing rights (SDRs), foreign investments as well as the Reserve Position in the Fund (RPF) are main components of the Gross International Reserves (GIR). The GIR constitutes the foreign assets valued mark-to-market, which are readily available to and controlled by the BSP for direct financing of payments imbalances and for managing the magnitude of such imbalances. The BSP estimates the level of Overseas Filipino Worker (OFW) remittances, which props up the country’s foreign currency reserves. (BSP website) VIII. DISCUSSION (Impact on the Philipp ine economy)A. Consumption The appreciation of Philippine peso against the US dollar affects the consumption of Filipinos. Especially the families of overseas Filipino workers (OFWs) who receives remittances coming from abroad—which are commonly dollar denominated. According to BSP, the US dollar remittances of OFWs increase by 8. 16% from 2009 up to 2010. On the year 2010, the overseas Filipino workers remittances reflect 29. 55 percent of the Gross National Products (GNP). According to Bangko Sentral ng Pilipinas, on the year 2010 the peso appreciated at an about 5. % on average basis (see table 2). This means that the purchasing power of the dollar remittances lower for an about 5. 6% in the Philippines. On the letter written by the Filipino Community in Riyadh, Saudi Arabia, to the President in Malacanan in August 2006, they stated their predicament regarding appreciation of Philippine peso against the US dollar: (a) the salaries remained the same while the cost of living have increased, which means less income to be available for remittances; which worsen when peso appreciated from Php55 to Php45 versus US dollar. b) the continued appreciation effectively reduced the value of remittances at an average 18%. The strengthening or appreciation of Philippine currency had a positive effect on consumption, it enable to somewhat, catch the effect of inflation of the commodities that are being imported from abroad. Ironically, disadvantage of a strong peso is that the beneficiaries of OFWs who contributes significantly in making the peso strong, get less of the remittances that their relatives send them since the Dollar loses its purchasing power by the peso appreciation.And finally, a sector which for us is really getting the worst out of the situation are the domestic producers since a strong peso would make imported goods cheaper since the peso appreciates thus making it purchase imported goods more. Table 2. The Philippine Peso – US Dollar Exchan ge Rate CROSS RATE OF THE PESO| in pesos per unit of foreign currency| period averages| Period| Dollar to Peso| 2000| 44. 194| 2001| 50. 993| 2002| 51. 604| 2003| 54. 203| 2004| 56. 040| 2005| 55. 086| 2006| 51. 314| 2007| 46. 148| 2008| 44. 475| 2009| 47. 637| 2010| 45. 110| Source: BSP (edited)The table above shows how much a dollar worth in peso term during the year 2000 up to 2010. B. Investment Another advantage of a strong Philippine Peso is that it would reflect a robust economy for the country, which could leverage itself to attract foreign investors in the country which could provide significant inflows for investments to the country that further improve the economy. A positive outlook is very important to a country to seek investors to show confidence in investing to country since their outlook would be one of the considerations investors would consider.The first thing that an investor would want to know is that if they would get their desired rate of return at a certain p eriod of time. Facing uncertainties and risks, investors would like to gather as much information to aide them to their decision making minimizing uncertainties and factors such as oil prices, stability of the government and the economy are some of the preliminary facts to consider. If from these preliminary factors as country fails to impress investors, important investment inflows would be going to somewhere else.It affects the foreign exchange since as we have stated earlier, foreign investments helps the Peso appreciate. The Philippine Daily Inquirer published in their December 1 2006 paper that business confidence, which reflects foreigners outlooks to the country, has soared to a 5 and a half year high of 49% compared to just 22% a quarter ago. Another outlook factor that could affect the foreign exchange market is the credit rating by firms such as S&P and filch. These firms are respected firms and reliable so anything that they publish would be taken seriously by interes ted parties.A credit downgrade by these agencies affects the Peso negatively as it gives of a bad image of the country to interested investors but at the same time a positive rating would help the Peso strengthen. Just like the OFWs, investments from foreigners improve and help peso appreciation and generally the economy as a whole. Having superb Dollar inflow allows the BSP to increase international reserves of debt curbing down Peso devaluation and aiding to Peso appreciation.According to BSP, transactions during February 2011 resulted in a net inflow of US$534 million, nearly thrice the US$193 million net inflow in January due to lower outflows (US$935 million in February 2011 against US$1. 3 billion in January 2011). The net inflow also represented almost four times the US$139 million recorded a year ago due to more registered investments this year, US$1. 5 billion compared to only US$500 million last year. This year’s rise in registered investments is backed by a surge i n investments in Peso-denominated government securities (Peso GS), to US$730 million of total (or 49. percent) against US$90 million in 2010. Favorable yields have attracted foreign investor to Peso GS placements. Investments in PSE-listed shares amounted to US$740 million (or 50. 4 percent of total registered investments), twice the US$370 million recorded in February 2010. The US$730 million balances of registered investments were in Peso GS and Peso time deposits with minimum maturity of 90 days (nil in February this year against US$40 million last year). Singapore, the United States, the United Kingdom, Luxembourg and Hong Kong were the top five (5) investor countries, collectively contributing 89. percent to total registered investments. Registration of inward foreign investments with the BSP is voluntary. It entitles the investor or his representative to buy foreign exchange from authorized agent banks or their subsidiary/affiliate foreign exchange corporations for repatriatio n of capital and remittance of dividends/profits/earnings that accrue on the registered investment. For the first two months of the year, transactions netted an inflow of US$727 million, 135. 6 percent higher than the figure recorded for the comparable period in 2010.Registered investments reached US$3. 0 billion, or an increase of 179. 3 percent from last year’s performance. Investments in PSE-listed shares of US$1. 4 billion exceeded the 2010 figure by 68. 3 percent. Major beneficiaries were banks (US$336 million); holding firms (US$248 million); utility companies (US$241 million); property firms (US$182 million); and telecommunication companies (US$167 million). Portfolio funds have also been re-rating Asia as an investment destination and their flows have reinforced the uptrend in Asian currencies.With developed markets weighed down with debt and facing years of sluggish growth, fund managers are looking into Asia, citing the region’s fast growth rates and strong c orporate balance sheets. (BSP, issuances) Asia is set to continue being a strong destination of portfolio flows over the coming months. The high Asian equity correlation with local currencies will help fuel further gains in the Philippine peso and other Asian currencies. C. Government SpendingWe all know that the government’s responsibility is the acquisition of goods and services for current use to directly satisfy individual or collective needs of the members of the community. They allocate the fund for Personal Services, Maintenance and Other Operating Expenses, Capital Outlays and Net Lending, Public Infrastructure and effectively marginalized resources for the poor. But it’s not that easy because the government must be aware of those risks that might affect their expenditures. One of it is the Philippine Peso condition in exchange rate – if the currency appreciates or evaluate. Now therefore, how thus the exchange rate may affect the government spending? Pa ying Philippines’ debt will affect our Government’s spending. In fact, based on the data from Bureau of Treasury, more than 77. 6 percent of the P104. 4 billion increase in the 2011 budget came from the huge P80. 99 billion rise in interest payment for government’s spending. The Aquino administration is proposed interest payment of P357. 09 billion in the 2011 budget, or 21. 7 percent of its planned spending program. But the total debt burden for this year could actually reach P823. 27 billion.Thus, debt burden represents 38. 9 percent of what the Aquino administration is willing to spend this year. If peso appreciates, it has a good impact in our external debt since our debt will decrease in peso terms. We will pay less and that will affect our spending. The remaining money that allocated for payment of external debt will be used for government spending. More resources are available to spend for social and economic development of our country. On the other hand, peso depreciates has a bad effect. Our debt will increase so we will pay more, that is, in peso terms.Little amount of money will be allocate for government spending. The government will force to minimize their expenditure. Such a heavy debt burden means fewer resources are available to spend for social and economic services badly needed by the people. Let’s now look at the effect of peso condition in trade. Strong peso has a negative effect in exporters. They will lose income since there was less peso in exchange of their dollar earnings or a strong peso translates to lesser value for their dollar-denominated revenues. Prices of their products may also become less competitive in the world market.The smaller the earnings or profit of exporters, the smaller tax they will pay in the government. That will affect the governments’ spending. If there are small fund comes from tax, government need to minimize their expenditure. On the other hand, strong peso has a positive e ffect on importers. They will pay less in foreign products. They will earn more and pay more tax. Again, the tax will proceed in government’s fund so more tax, more funds that government may spend for the people’s benefits. Weak peso has good effects in exporters.Prices of their products become more competitively in the world market. They will receive more peso in exchange of their earnings so they will pay more tax. More tax, more funds that government may spend for the benefits of the people. When peso depreciates importers will force to pay more for foreign products. That is bad for them and for government spending. Since the smaller the earnings or profit of importers, the smaller tax they will pay. Government will force to minimize their expenditures. As we observed, peso condition has different effects in different factors.That is the reason why it’s hard for the government to ask the Bangko Sentral ng Pilipinas (BSP) to intervene the strengthening peso. W e cannot easily believe that a strong peso means a strong republic. So government must look at different factors and learn before engaging the country in different risk. As we also observed, the effect of peso condition in the sources of government funds is the same in the impact of peso condition in government spending. If the effect in the sources of funds is negative, the impact in the government spending is also negative.When the effect is positive, the impact in government spending is also positive. Overview: Import and Export Since World War II, the Philippines experienced frequent trade deficits, aggravated by inflationary pressures. Deficits were counterbalanced by US government expenditures, transfer of payments from abroad, official loans (US Export-Import Bank, IBRD, and private US banks), net inflow of private investment, tourist receipts, remittances from Filipino workers overseas, and contributions from the IMF. In 1996, trade liberalization policies helped to push imp orts up by 22% while exports rose by only 18%.The result was a widening trade deficit that amounted to 13% of GDP. Foreign investment in the stock market and remittances from overseas workers helped to offset the deficit and avert a balance-of payments crisis. In 1998, the Philippines recorded a trade surplus at about 2% of GNP in the current account due to high electronics exports and low imports due to the devaluation of the peso. This was the first surplus in 12 years. Merchandise exports, in double digits through most of the 1990s, slowed to a single-digit growth pace in 2000, reflecting fewer export receipts from electronics and telecommunications parts and equipment.This decline was attributed by the electronics industry to weaker prices for maturing products and technologies, and to the decline in electronic industry investments from the 1994–97 boom years (when investment averaged $1. 5 billion a year). Traditionally, exports of primary products failed to balance impo rts, leading the government to restrict imports. Structural change accelerated in the 1970s, as the contribution of industry (including construction) to GDP rose from 29. 5% in 1970 to 36. % by 1980, primarily as a result of export-oriented industrialization promoted by the Marcos government. The Aquino assassination in August 1983 had immediate economic consequences for the Marcos government, as did the broader Third World Debt Crisis. Hundreds of millions of dollars in private capital fled the Philippines, leaving the country with insufficient foreign exchange reserves to meet its payments obligations. The government turned to the IMF and its creditor banks for assistance in rescheduling the nation's foreign debt, and an austerity program was set up during 1984–85.In December 1986, under IMF guidance, the Aquino government launched a privatization program with the establishment of the Assets Privatization Trust (APT). Monopolies established under the Marcos administration i n coconuts, sugar, meat, grains, and fertilizer were dismantled and a ban on copra exports was lifted. All export taxes were abolished; and the government allowed free access to lower-cost or higher-quality imports as a means of improving the cost-competitiveness of domestic producers.Many difficulties remained, however. The prices of commodity exports, such as sugar, copper, and coconut products, were still weak, while demand for nontraditional manufactured products, such as clothing and electronic components, failed to rise. The structural reforms produced an initial recovery between 1986 and 1989, but this was arrested by the series of natural disasters in 1990–1991. In 1986, Aquino had also embarked on a Comprehensive Agrarian Reform Programme, but its goals remain unfulfilled.In the 1990s, the government concluded three additional financial arrangements with the IMF—a stand-by agreement signed 20 February 1991 for about $240 million (all drawn); an arrangement und er the Extended Fund Facility (EFF) signed 24 June 1994 for about $554 million (all drawn), and a stand-by agreement signed 1 April 1998 for about $715 million (76. 7% drawn down as of 31 December 2002). At the end of 2002, the Philippines owed over 140% of its quota to the Fund. Scheduled debt repayments to the IMF for 2003 are about $330 million, and outstanding loans and purchases are not due to be retired until at least 2007.The country also had five debt reschedulings in the period 1984 to 1991 with the Paris Club—for official debt owed to aid donor countries—on which some payments are still owing. In January 2003, the Trade and Development Department announced at least a partial retreat from its 15 years of trade and investment liberalization, stating that it plans to bring tariff rates to the maximum allowed by the WTO for industrial imports, particularly petroleum imports, and for products produced in the Philippines. (Tradechakra. com) D. Import The Philippine economy is largely import oriented in terms of the value of merchandise trade.A sizable trade deficit continues primarily because of merchandise imported to meet the strong demand for raw materials, intermediate goods, industrial upgrades and infrastructure related capital goods. An emerging market, the Philippine economy continues to recover from the political instability of the 1980s, a series of natural disasters in the 1990s. Many of the products being imported are for improvement of the country's production capabilities. The development of industry has been hindered by such factors as electric power shortages and a still developing infrastructure.The Philippine government has taken several significant steps to reduce bureaucratic regulations and foster competition. In recent years it has revised and enacted tax, labor, health, safety environmental and other laws and policies with the aim of regulating industry. The Philippines import commodities such as electronic products, mi neral fuels, machinery and transport equipment, iron, and textile fabric. Philippines’ trading partners are Japan 15. 32%, US 11. 47%, Singapore 9. 54%, China 8. 93%, Taiwan 8. 27% (2009). Year| Imports | | (Billion US dollars)| 2001| 35| 2002| 30| 003| 33. 5| 2004| 35. 97| 2005| 37. 5| 2006| 42. 66| 2007| 51. 6| 2008| 57. 56| 2009| 60. 78| 2010| 46. 39| Source:  International Trade Center – UNCTAD / WTO Source:  CIA World Factbook  Ã¢â‚¬â€œ Unless otherwise noted, information in this page is accurate as of March 11, 2010 The table and graph above show that Year 2009 has the highest imports recorded with $60. 78B. On the other hand, the lowest imports recorded in the past ten years was on 2002 having $30B. This entry provides the total US dollar amount of merchandise imports on a c. i. f. (cost, insurance, and freight) or f. o. b. free on board) basis. These figures are calculated on an exchange rate basis. i. e. not in purchasing power parity (PPP) terms. E. Exp ort An export-oriented economic policy had boosted the economies of the newly industrialized countries of Asia. Philippines policy makers have also realized that the Philippines cannot achieve its aim of becoming the next â€Å"economic tiger† of Asia without shifting to an export-oriented economic programme. Export promotion programmes are public policy measures which actually or potentially enhance exporting activity at the company, industry or national level.Ideally, an export promotion policy should be backed up with an appropriate political and economic philosophy of the government. Export promotion policies should take into account the nature, size, and distribution of the individual exporting firms. As a developing country, the Philippines really does not have much choice in the matter. It needs to increase its export volume as a matter of economic survival, and within its national context, only the public sector has the resources to provide export promotion services t o small and medium-sized businesses in a cost-effective way.It was evident by the end of the 1970s, that the institutional reforms did not go far enough in achieving the major objectives of development. Typical of most small developing country trades, Philippines export trade has been characterized by a high degree of commodity and geographic concentration. As late as 1970, ten principal traditional export commodities comprised three quarters of total exports value. The first three top dollar earners (sugar, logs and lumber and copper concentrates) easily accounted for a little more than half of total export earnings.A definite shift to export promotion was observed in the decade of the 1970s. In spite of the export orientation reflected in exchange rate and industrial promotion policies, the structure of protection accorded by tariff policy remained basically inward looking. The general picture that emerges from the above discussion is that while foreign exchange, trade and industr ial incentive policies in the seventies had taken an unmistakable shift toward export promotion, they had stopped short of completely eliminating the biases against export sales. Philippines’ export partners are US 15. 35%, Japan 14. 19%, China 13. 9%, Singapore 9. 44%, Hong Kong 9%, South Korea 5. 12%, Germany 4. 1% (2009). Year| Exports| | (Billion US dollars)| 2001| 2. 677| 2002| 2. 929| 2003| 2. 748| 2004| 3. 303| 2005| 3. 431| 2006| 4. 243| 2007| 3. 899| 2008| 4. 081| 2009| 3. 189| 2010| 4. 288*| *Source:  International Trade Center – UNCTAD / WTO Source:  CIA World Factbook  Ã¢â‚¬â€œ Unless otherwise noted, information in this page is accurate as of March 11, 2010 The graph and table show the Philippine exports to all countries. The highest export reported in the past ten years was during on 2010 having S4. 288B while the lowest was on 2003 having S2. 3B A strong peso is generally favorable to the economy as a whole but there are certain sectors of the indu stry and society that are affected by a strong peso. Weakened by a strong peso since their good would become offensive since the peso appreciates which makes them less competitive in the export market. Although may be affected, all is not lost since there are financial solutions to at least mitigate the handicap they are facing because exporters could enter into hedging agreement or derivatives where they could enter into a contract to protect them from the Peso appreciation.The tourism industry weakens as well since a strong peso makes staying for a vacation in a country would make it more expensive. The effect of a strong peso on tourism industry also affects the hotel industry since it is some what related as a strong tourism industry means more bookings with hotels for a place to stay. An ironic advantage of a strong peso is that the beneficiaries of the OFWs who contribute significantly in making the peso strong, get less of the remittances that their relatives send them since the dollar loses its purchasing power by the peso appreciation.And finally, in sector which for us is really getting the worst out of the situations are the domestic producers since a strong peso appreciates thus making it purchase imported goods more. The industry is for direct investments. The negative aspects of a strengthening peso is very much in the news, what with OFW families getting into financial trouble, and exporters complaining about their products getting to be too expensive for foreign buyers. What often gets overlooked is the fact that the Peso appreciation also has a positive side, and if one takes a good look at this, it is at least equally important as the negative side to this trend.These are some of the positive effects of strengthening peso: Increases in the world market prices of imported goods have lesser effect. Oil prices have shot up in dollar terms, and thanks to the increased value of the peso, the actual effect on the prices of oil products have not bee n as much as otherwise would have been the case. The same could be said of wheat prices, etc. which have also risen. Dollar-denominated foreign debts can be repaid with less pesos. The Philippine government has saved billions of pesos as a result of the dollar’s drop in value. Philippine companies with foreign debts have likewise benefited.Capital flight from the Philippines has lessened. The strengthening peso means that it is no longer a wise financial move to move funds to a foreign dollar account. It would be much more profitable to keep the money in pesos. At the same time, there is some kind of poetic justice that corrupt officials with funds abroad suffer from a severe cut in the value of their â€Å"loot†. Skyrocketing real estate prices would be dampened. Many Overseas Filipinos (mostly in the dollar area) have driven up prices of real estate throughout the country. The decreased value of their dollars may result in the cooling down of the buying frenzy for la nd by OFs.Increased attention to the domestic market from investors and (former) exporters. Some exporters are coping with the decreased demand for their products in the US by either shifting to other countries or to selling domestically. The increased supply of products to the domestic market would help to lessen prices and improve the product quality of domestically available goods. At the same time, the value of the local market for foreign investors has increased. Since the peso’s value has increased, the potential sales and profits offered by the domestic market has increased in terms of dollars.Lower interest rates. The steadily depreciating dollar is pushing the US Fed to decrease their interest rates – in response, countries like the Philippines decrease their interest rates accordingly, in order to avoid the interest rate differential to get too high. Low interest rates are good because it stimulates business, and also consumer spending, both of which are good for the economy. Lower cost of imported capital goods. For example, the peso value of new airplanes is now much less than it was even a year ago. This is the same for other items e. g. heavyconstruction equipment, computers, etc.This would help stimulate the economy, and could also lead to decreased prices for consumers. Posted: by butalidnl on 18 January 2008 F. Debt Payment As we all know, Philippine peso had appreciated in these past few years against the US dollar and implies high advantage to our economy. One of the advantage of the peso appreciation is the lower debt servicing, in which, it lessen the external debt of the country. As of December 2010, the National Government debt was recorded at P4, 718 billion, lower by P1 billion from end November 2010 level of P4, 719 billion.Of the total debt, P2, 000 billion or 42. 4% is owed to foreign creditors and P2, 718 billion or 57. 6% to domestic creditors. The decrease in NG’s foreign debt of P2 billion from the level as of end November 2010 was brought about by the P5 billion net repayment and P16B appreciation of the peso against the US dollar. This however was partially offset by the P18 billion net appreciation of the third currencies against the US dollar and P1 billion adjustment resulting from late receipt of notices of availment.The domestic debt increased by P1 billion from the previous month’s level resulting from the net issuance of government securities by NG. On the other hand, the contingent debt of the National Government, composed mainly of guarantees issued by the National Government, increased to 550 billion, lower by P10 billion from end November 2010 level of P560 billion. The decrease in domestic contingent obligations was due to the misclassification of the P12 billion HGC guaranteed PAGIBIG bonds as NG direct guaranteed loan.The increase in foreign contingent obligations was due to the combined effects of the P3 billion appreciation of the peso against the US dollar, P2 billion net repayment and P7 billion net appreciation of the third currencies against the US dollar. (Bureau of Treasury, Press Release) Source: Bureau of treasury Source: Bureau of treasury G. Reasons for the appreciation on 2009-2010 One of the key reasons why the Philippine currency had experienced a significant increase on its value during the last two years was because of the increasing number of Filipino dollar remittances from abroad.The strengthening of the value of Philippine peso during 2008 was attributed to the recession that the America had experienced during the last quarter of that year. However, the Philippine currency had experienced depreciation on the year 2009; because that is the year the country receive the impact of recession from 2008 that America had experienced. This has same effect on the ASEAN region where the Philippine is belong; their currency had also experienced depreciation. The Philippine had set a cushioning effect against the recession due to it s dollar remittances coming from OFW’s in different part of the work.H. The role of Bangko Sentral ng Pilipinas The Bangko Sentral ng Pilipinas (BSP) maintains a floating exchange rate system. Exchange rates are determined on the basis of supply and demand in the foreign exchange market. The role of the BSP in the foreign exchange market is principally to ensure orderly conditions in the market. The market-determination of the exchange rate is consistent with the Government’s commitment to market-oriented reforms and outward-looking strategies of achieving competitiveness through price stability and efficiency.In the Philippines, peso-dollar trading among Bankers Association of the Philippines (BAP) member-banks and between these banks and the BSP are done through the Philippine Dealing System (PDS). Most of the BAP-member banks which participate in the peso-dollar trading use an electronic platform called the Philippine Dealing and Exchange Corp. (PDEx). The BAP appoi nted PDEx as the official service provider for the USD/PHP spot trading (which involve the purchase or sale of the US dollar for immediate delivery, i. e. , within one day for US dollars), and Reuters, as the exclusive distributor of all PDEx data.Trading through the PDEx allows nearly instantaneous transmission of price information and trade confirmations. I. The future movement of Philippine Peso Against US dollar Remittances from overseas Filipinos workers (OF) coursed through banks continued to show strength at the start of 2011, rising year-on-year by 7. 6 percent to   US$1. 48 billion, Bangko Sentral ng Pilipinas (BSP) Governor Amando M. Tetangco, Jr. announced. This positive development reflected increased remittances from both sea-based and land-based workers, with their ransfers rising by 13. 3 percent and 6. 2 percent, respectively. Remittance flows into the country remained resilient on the back of sustained demand for skilled overseas Filipino workers in different dest inations worldwide. The Philippine Overseas Employment Administration (POEA) reported that, of the total approved 99,926 job orders for land-based workers for the period  Ã‚   1 January – 28 February 2011, more than two-fifths represented processed job orders for service, production, and professional, technical and related workers.The processed job orders are intended for the manpower requirements in Saudi Arabia, UAE, Qatar, Taiwan, and Kuwait. In its market update, the POEA stated that the Department of Labor and Employment's Philippine Overseas Labor Office in Rome, Italy, reported that a new quota decree has been signed in November 2010, which will allow the entry of 100,000 foreign workers in Italy, of which 4,000 new hires are allotted to the Philippines. Meanwhile, the POEA also reported that the country's seafaring industry is aggressively targeting to capture at least 50 percent of the global requirement for seafarers in the future.To achieve this, the seafaring in dustry has invested in world-class training modules and facilities to upgrade the quality of skills of Filipino seafarers. The continued enhancement of financial services worldwide through tie-ups with foreign financial institutions, establishment of remittance centers and marketing offices abroad, as well as the stronger partnerships forged with correspondent banks and branches/representative offices abroad also helped shore up the flow of remittances into the country.The expansion of the remittance network indicated the continuing efforts of local banks and other financial institutions to capture a larger market share of the global remittance industry and provide safe, affordable and accessible fund transfer system for the overseas Filipino workers and their beneficiaries.The peso strengthened in the first trading day of the week as beliefs that the economy would grow in 2011 given its positive fundamentals offset concerns over the ill-effects of adverse offshore developments, suc h as the earthquake in Japan and lingering unrest in selected countries in the Middle East and North Africa. The local currency closed at 43. 59 against the US dollar on Monday, up by 6 centavos from Friday’s finish of 43. 65. Intraday high hit 43. 56:$1, while intraday low settled at 43. 72:$1. Volume of trade inched up to $1. 023 billion from $772. 8 million previously. Traders said external factors had been weighing down on the peso and other Asian currencies. Nonetheless, they said, the peso has been expected not to depreciate and that domestic factors have beefed up sentiment on the economy. Traders and other economic players still expect the Philippines to post a decent growth this year, aided by remittances and improving business and consumer sentiment. In 2010, the economy grew by 7. 3 percent, the fastest pace registered in over three decades. (inquire. net) IX. GENERALIZATIONThe study, â€Å"The Philippine Peso-US dollar Exchange Rate: The impact of Strengthening C urrency†, aimed the following objectives: 1) to determine the economic impact of the appreciation of Philippine peso; 2) determine the effect of the appreciation of Philippine peso (consumption, investment, government spending, import, export, debt servicing); 3)to determine the reasons behind the appreciation of the Philippine peso during 2009-2010; 4) to determine the role of the Bangko Sentral ng Pilipinas (BSP) on the Foreign Exchange Market; 5) to determine the future movement of Philippine peso against the US dollar.The significance of this study was to determine the impact of peso appreciation on the economy. It shows the effect on different sectors of the economy. It attempts to show the impact of strengthening peso against the US dollar and what are the consequences behind it. It also attempt to show where should the government place itself when the opposing interest of the public are at stake through Bangko Sentral ng Pilipinas. Based on the date gathered, the first hypothesis is accepted. The effects of appreciation have a great impact consumption, government spending, investment, import-export and debt servicing.There were two impacts on consumption, first is the value of imported commodities are cheaper in terms of peso. Second, the purchasing power of dollar remittances will decrease. In government spending, If peso appreciates, it has a good impact in our external debt since our debt will decrease. We will pay less and that will affect our spending. The remaining money that allocated for payment of external debt will be used for government spending. More resources are available to spend for social and economic development of our country.Peso appreciation will cause the exports become less competitive in the international market that will result to less revenues in terms of exports. Imported products will become cheaper that can cause the people to purchase more of it. Another advantage of a strong Philippine Peso is that it would reflect a robust economy for the country which could leverage itself to attract foreign investors in the country which could provide significant inflows for investments to the country furthering improving the economy.A positive outlook is very important to a country to seek investors to show confidence in investing to country since their outlook would be one of the considerations investors would consider. One of the advantage of the peso appreciation is the lower debt servicing, in which, it lessen the external debt of the country. The second hypothesis is also accepted. Philippine peso appreciation was caused by several factors such as the robust economy of the Philippine as well as the increasing amount of remittances from the overseas Filipino workers (OFWs).The Bangko Sentral ng Pilipinas has the role of maintaining the inflation and has the power to intervene in Foreign Exchange market. It is the tool being used by the government in monetary policy. Based on the information that was rel eased by the BSP the peso is expected to appreciate, prior to the events that struck one of the major Economic Partner of the Philippines—Japan—and prior to the political instability from Arab nations, which is one of the major source of dollar remittances of the country.X. RECOMMENDATION The researchers’ believe that the government should maintain the peso appreciate so that it will lessen the burden of paying excessive debt–principal and interest. And to maintain the prices of the commodity that are being imported at a low price, such as oil which is vital in the daily economic activity and other commodity that is not produce in the county.On the other hand, the government should provide a OFWs remittance stabilization fund—from the money that the government had saved in debt servicing—that pegged the exchange rate between peso and dollar, because OFWs’ remittances are crucial in maintaining the high value of the peso against the do llar and the effects that it will brought to the economy. . We cannot easily believe that a strong peso means a strong republic. So government must look at different factors and learn before engaging the country in different risk.As we also observed, the effect of peso condition in the sources of government funds is the same in the impact of peso condition in government spending. If the effect in the sources of funds is negative, the impact in the government spending is also negative. When the effect is positive, the impact in government spending is also positive. XI. REFERENCES 1. Bangko Sentral ng Pilipinas. (2008). Adjustments in the Face of Peso Volatility: Perspective from the Past and Policy Directions. : Retrieved February 21, 2011 retrieved from      http://www. bsp. gov. ph/downloads/Publications/2008/WPS200802. df 2. http://www. investopedia. com/ask/answers/08/what-is-foreign-exchange. asp 3. http://en. wikipedia. org/wiki/Foreign_exchange_market 4. http://www. bsp. g ov. ph/financial/forex. asp 5. http://business. inquirer. net/money/breakingnews/view/20110314-325428/Peso-rises-against-dollar-as-positive-view-of-local-economy-stays 6. http://www. philstar. com/Article. aspx? articleId=565592&publicationSubCategoryId=66 7. Monetary Stability Sector of the Bangko Sentral ng Pilipinas (2006). The Exchange Rate. Retrieved from http://www. bsp. gov. ph/dowloads/publication/FAQs/exchangerate. pdf

Children of Heaven Essay

Watching the movie entitled â€Å"Children of Heaven† made me realize how a simple plot/ story can be as heart-warming and inspiring as any other film available out there in the market. It doesn’t take an elaborate story with so many twists and turns to make a terrific film for everyone to appreciate. Although the movie has some parts which are heavily dramatic like the scene where Zahra was crying due to Ali losing her shoes, the movie still has a predominant light tone. The film makes the audience including myself feel sympathy towards the main characters – portrayed by Ali and Zahra, two siblings who sincerely care for each other. This technique of touching the emotion of the audience is surely effective since it makes them want to go on and finish the film (as I did when the earlier mentioned scene was shone in the very beginning of the film). Captivating the audience, however, does not stop there. Including certain exciting and problematic moments in their life makes the story more interesting and natural. Examples of which are: the scene when the sneakers fell off Zahra’s foot then landed into the canals so she had to follow where the waters went to recover it and the scene when Ali was at the sprint race about to win when another boy bumped him off the course. More than that, the film also brings the audience to capture the daily lifestyle and culture of the Iranian people (as this film was set in that country). Having a background of the characters helps me understand their values and way of thinking. Therefore, I could comprehend the film in an easier way since it has this characteristic. Capturing the realistic view of the world aided me in relating to the film even though I am foreign to the concept it was showing. Having so many values encompassed in the story, I have learned many things regarding determination, compassion and familial love. These values were interspersed in the different scenes of the story. There were some in the beginning about familial love when both Ali and Zahra agreed that they share the sneakers since they attend school in separate shifts – a natural dramatic device for the story. Determination was clearly seen when Ali tried so hard in the race to win the rubber shoes. Compassion was evident in scenes when they took care of the sick neighbor and their mother. Using the typical backdrop and props (as I see it) made everything very earthly. Nothing to fancy was used to show the social status of the family – it was not exaggerated. The objects to be found in the film were ordinarily available in the daily life of everyone. Also, the acting of the characters in the story was very natural. It almost looked like it is a life-story being told and not just a scripted one. I deem that the view of most people regarding those of Iranians will change after seeing this movie. Their genuine care for each other shows how much they appreciate those people and things around them. This contradicts the stereotype given to them as those violent people of the Middle East. Moreover, the film serves as a heart warming meditation about real goodness in humanity – helping balance the negative prejudices that most people project towards Iranians especially nowadays. With all these to be found in the film, I can say that everyone is encouraged to watch it. Not only will they learn family values and self-discipline, the audience could also be inspired to live out their lives to the fullest in each day that passes.

Does the Internet make us smarter Essay Example | Topics and Well Written Essays - 1250 words - 1

Does the Internet make us smarter - Essay Example However, the various faces of the internet today are used by all kinds of people; both professionals as well as amateurs in every field. This has brought people to debate about the topic whether or not the internet actually makes an individual smarter, which has been further discussed within the scope of this paper. According to a news report, it was stated that ‘amid the silly videos and spam, the internet has been able to create a new reading and writing culture’, thus leading to making a person smarter. As per this report, the demerits of the internet have been highlighted in the form of the social networking websites as well as random videos that take up most of the time of a person browsing through the web. These appear as popups and distract a person from the work that he is actually supposed to do. For example, a student sitting down to finish a homework assignment would easily be distracted by websites like Facebook while trying to search for information for his work. This usually results in him spending three to four hours on the internet, wasting time looking at other people’s profiles and gallivanting across videos here and there. If this distraction was not present, it would have taken him an hour and not four of them to complete his work on an average basis. How ever, the internet still provides for a reading and writing culture because search engines help people to stumble upon interesting websites with good information. These days, most newspapers and magazines have also gone the ‘e-way’, that is, printing their news articles online instead of on paper in order to contribute to the environment in their own personal way. Thus, the information from these pieces of news is available to people around the world; where a man in one country was only reading the newspaper belonging to his country, he now has access to news from around the world. In much the same way,

Assignment Example | Topics and Well Written Essays - 250 words - 121

Assignment Example This method has been proven to effective in treating PSTD (Coble 60). In conducting a Systemic desensitization for a survivor of 9/11, Cognitive behavioral therapy is highly recommended. This is a common type of metal health planning in which a psychotherapist in a structured way and holds a number of session with the patient. This process helps to make sense of the overwhelming problem by breaking it down into smaller parts (Coble 64). It will help the patient to see how they are connected and their effect. A situation, which is the problem this is closely followed by thoughts, emotions, physical feelings then lastly actions. The most effective treatment in this case is the flexible application of a manualized cognitive behavioral therapy. Treatment delivery ranges from about 12- 25 sessions. Relaxation is an imperative component of CBT. It deals with the process of learning about somatic cues, after which the body is taught to relax. In progressive relaxation, the patient first learns the relaxation skills and latter he and the therapist create the anxiety hierarchy. He is able to provoke the situation in a gradual process. He faces the situation progressively by developing a consistent paring of relaxation. Gradual desensitization closely follows. Virtual reality exposure has proved to more effective than mental imagery (Coble

Review the molecular mechanisms used by adult schistosoma worms to Essay

Review the molecular mechanisms used by adult schistosoma worms to survive in the bloodstream - Essay Example The remaining eggs often go into circulation and get filtered in the periportal tracts within the liver, and this causes periportal fibrosis. According to Ashton and Wilson (2001), the major schistosome species that affect individuals are: Schistosoma haematobium, Schistosoma mansoni and Schistosoma japonicum. These parasites experience remarkable physiological and morphological changes throughout their life as a means of survival and adaptation to their varying living conditions in different hosts. These parasites are unique because they exhibit unique adaptations both to free-living, as well as parasitic living. The adaptations exhibited by these parasites allow movement between intermediary hosts and the ultimate host. Schistosomes survive within the host by adopting mechanisms that counter the effect of the hosts’ defense mechanisms. These adaptations occur both at the molecular and structural levels. Schistosomes have various adaptations at the molecular level and these i nclude anti-oxidant production and glycoproteins secretion among others. Structural adaptations also help facilitate survival, and these include tails or cilia for swimming, secretory glands for penetration into the host, a glycocalyx for host immuno-modulation or protection of the parasite, a gynaecophoric canal for continued coupling between sexes, and a well-organized reproductive system for proper egg fertilization, as well as muscular suckers for feeding and attachment. This paper reviews these adaptation strategies, and how they are employed in survival. Additionally, possible interventions are proposed to counter the effect of these adaptations so as to make the parasites vulnerable to the host’s immune system and possible elimination. Adaptations for survival among schistosomes entail evasive strategies that enable the parasites to survive within the host without being affected by the hosts’ immunity. The evasion

APU fuel saving VS cost of availability of ground carts for cooling Essay

APU fuel saving VS cost of availability of ground carts for cooling and electricity - Essay Example Nevertheless, the APU requires a typical maintenance plan that costs approximately $50 per hour (John, 2015; 210). Considering an aircraft that flies 400 hours in a year, the cost of APU fuel would be $80, 000/year. The cost of maintenance would be $20,000. Therefore, the total annual cost of using the APU power generator would $100, 000. However, the cost might vary depending on changes on fuel price and also labor charges (Thom, 2014; 120). According to Green (2015; 216), there are other expenses that are associated with the use of APU power generators. They have to undergo through a process of approval by the FAA and other governing bodies. This process is very expensive and adds cost to the specified operational costs. Therefore, it is evident that the cost of using APUs is higher than $100, 000 during the first year of use. These expenses are made high due to factors such as high expense of the JET-A fuel that is used by the APUs (Williams, 2015; 514). On the other hand, the cost of using Ground carts is generally lower compared to that of APUs. The cost of using Ground Power Units varies according to the size of aircraft being serviced and also the overall services required (McCartney, 2014; 22). The initial cost of a Ground cart ranges between $12,000 and $18,000. However, charges for 400 Hz electricity and pre-conditioned air are administered on hourly rates, and they depend on the group of the aircraft (Middel, 2015; 418). Most airports classify aircrafts as; size A, size B and size C. For the size A aircrafts, the charges for 400 Hz electricity and pre-conditioned air are $38 per hour and $80 per hour respectively. The charges for size B aircrafts are $66 per hour and $139 per hour for 400 Hz electricity and pre-conditioned air respectively. On the other hand, size C aircrafts are charged $93 per hour and $200 per hour for Hz electricity and pre-conditioned air respectively (Nielsen, 2013; 244). Therefore, considering

Power Dynamics between Health Insurer and Its Service Providers Essay

Power Dynamics between Health Insurer and Its Service Providers - Essay Example The research focuses on the power dynamics that arise between the health insurers and the service providers, whereby the power dynamics are the interplays between the insurance company and the healthcare providers regarding the provision of services. Â  Health providers may not concur with the providers regarding the supply of the insurance policies, whereby, the insured person may require more than what the insurance provider is offering leading to supply-chain disagreements. The insurers may need to market their products through the providers since the providers are in direct contact with patients who need the insurance policies. This implies that each party has its catch and if they disagree in marketing their policies, there may be power dynamics between the insurers who are marketing their product and the providers who are the pathway for the marketing. Power dynamics entails the relationship between the insurers and providers in terms of the services provided to the members co nducting studies regarding health care provision is important so as to link the insurers and the patients. According to the study by Booth, Colomb & Williams, the power dynamics, in this case, can be correlated to previous theories including the relationship marketing. This is because each party plays a vital role in ensuring that the members receive quality services, especially from the service providers who are the hospitals and clinics. The research focuses on the health insurers, who are the insurance companies, and the service providers who are clinics and hospitals which are in contact with the health insurers to provide the insured members with health care services, including treatment in hospitals and other services provided for in the insurance policy of members. In regard to previous research work of Goddard & Melville, there are many theories relating to the subject matter. In regard to the current research, the power dynamics that arise between the two parties regarding the provision of services may arise as a result of different preferences including marketing preferences where different patients prefer different insurance policies from different insurance companies, while most providers do not approve the use of some insurance policies.

Online issue Essay Example | Topics and Well Written Essays - 1000 words

Online issue - Essay Example sing with the advancement in technology and the most common today affect money transactions, social websites, corporate security and personal privacy. When it comes to conducting money transactions online the main challenge is based on password management where the passwords that most people put in place are likely to be broken or hacked easy. However, this is not only an educational challenge but also an administrative one since the company under which a person is doing their transaction should be able to counter this (Bortz, 1). The common issue is that when the transaction is being conducted there is no sure way to determine if it is really that person doing it; additionally, with current authentication standards, often people take on faith that theyre being contacted by the "real" sender the message claims. Concurrently, with social websites becoming more popular day after day, the chances and issues of insecurity continue to pile up too in terms of information and privacy concerns all over the world. Malevolent people have been attracted by the tome and easy access of user’s personal information available on social networking sites; surprisingly, the same technologies that attract users to participate also make the sites prone to infectious malware that can shut down an organizations networks or even steal credentials (Pelgrin 1). Common risks on social websites include phishing, spoofing and web application attacks that attempt to steal a person’s identity; the attacks are often successful due to the assumption of being in a trusting environment social networks create and the more information a person posts, the more information becomes available for a potential compromise by those with malicious intentions. It’s very advantageous conducting business online since it offers entrepreneurs a variety of recompenses and to be more convenient than other methods; despite the advantages, however, there are also some problems that can arise when doing

Sheikh Mohammed and the Making of Dubai Inc Essay

Sheikh Mohammed and the Making of Dubai Inc - Essay Example He founded the Emirates airlines that now covers over 100 destinations, and developed the thriving real estate market of Dubai. Such rapid development was primarily achieved by adopting capitalist market values, and despite the unfavorable conditions in the surrounding countries Sheikh Mohammed with his strong leadership qualities managed to turn Dubai into a story of success. However the success story of Dubai were not without its pitfalls, and there were claims of violation of human rights of thousands of laborers that had migrated from other countries in search of jobs, while there were claims by local inhabitants of the place losing its own cultural values. Besides these, the real estate business which had been one of the major driving forces behind Dubai’s astronomical economic growth was showing signs of falling apart during the global economic crises that started in 2007-2008. In order to counteract these negative aspects and maintain a stable socio-economic growth of D ubai, HH Sheikh Mohammed had to adopt tactics that integrated his skills as a business entrepreneur and a skillful business leader, with that of an effective political head of a country. Sheikh Mohammed’s leadership style and approach shows traits of a visionary leader with traits of transformational leadership qualities.... This quality is evident in Sheikh Mohammed where it is seen that while serving as Head of Police and Security, and Director of the Department of Oil, he successfully collaborated with Conoco and many other foreign companies, while concurrently dealing effectively with a large number foreign consultants, laborers, and field workers from countries across the world, residing in Dubai. An effective leader is generally motivated to seek one of the two types of power, personalized (where one looks for personal power and sense of authority) or socialized (seeks collaboration). From the aforementioned style of working, it is clear that Sheikh Mohammed looked for socialized power where he sought collaboration from firms, experts and workers worldwide. Sheikh Mohammed, through various interviews can effectively communicate and pass his messages regarding his visions and strategy, as regards growth and development of his country, and he uses it successfully to convince his own countrymen and ot her powerful leaders and businessmen all across the world. Effective leaders also must possess self-confidence, in order to create a sense of self-esteem in others working around him or her, while still preserving a high level of personal integrity. Along with this ability the leader must possess the ability to affect an organization horizontally, vertically, externally and internally. Here the leader must gain acceptance of others involved, if he or she wishes to see a particular idea come true. The capability to forge collaborative relationships and to form an atmosphere that is conducive in nature for team work, are typical characteristics of an effective leader. This characteristic is

Oxygen and Trees Essay Example for Free

Oxygen and Trees Essay Trees alter the environment in which we live by moderating climate, improving air quality, conserving water, and harboring wildlife. Climate control is obtained by moderating the effects of sun, wind, and rain. Radiant energy from the sun is absorbed or deflected by leaves on deciduous trees in the summer and is only filtered by branches of deciduous trees in winter. We are cooler when we stand in the shade of trees and are not exposed to direct sunlight. In winter, we value the sun’s radiant energy. Therefore, we should plant only small or deciduous trees on the south side of homes. Wind speed and direction can be affected by trees. The more compact the foliage on the tree or group of trees, the greater the influence of the windbreak. The downward fall of rain, sleet, and hail is initially absorbed or deflected by trees, which provides some protection for people, pets, and buildings. Trees intercept water, store some of it, and reduce storm runoff and the possibility of flooding. Dew and frost are less common under trees because less radiant energy is released from the soil in those areas at night. Temperature in the vicinity of trees is cooler than that away from trees. The larger the tree, the greater the cooling. By using trees in the cities, we are able to moderate the heat-island effect caused by pavement and buildings in commercial areas. Air quality can be improved through the use of trees, shrubs, and turf. Leaves filter the air we breathe by removing dust and other particulates. Rain then washes the pollutants to the ground. Leaves absorb carbon dioxide from the air to form carbohydrates that are used in the plant’s structure and function. In this process, leaves also absorb other air pollutants—such as ozone, carbon monoxide, and sulfur dioxide—and give off oxygen. By planting trees and shrubs, we return to a more natural, less artificial environment. Birds and other wildlife are attracted to the area. The natural cycles of plant growth, reproduction, and decomposition are again present, both above and below ground. Natural harmony is restored to the urban environment.

Current Issues Facing Revenue Management

Current Issues Facing Revenue Management This dissertation provides an analysis on how revenue management developed through out the years in different industries with more focus on hotels. It discusses the different revenue management strategies including pricing, capacity control, overbooking and forecasting. Related issues such as economic concerns, customer perception, competition, and common techniques and approaches used for solving revenue management problems are also discussed. Finally, I give my suggestion on some important areas that warrant further research. Introduction Tradditionally the main purpose of revenue management has been to maximise revenue. It is the business practice with aim to see the right inventory to the right customer at the right price at the right time in order to maximise total revenue. (B.C Smith, J.F Leimkuhler and R.M.Darrow Vol 22). The concept of right in this definition means achieving the maximum revenue for the sellers, and gaining maximum value for the buyers(S.E Kimes Vol 40). The basic of revenue management is to offer discounted rates to stimulate demand for inventory that would otherwise go unsold, while limiting the availability of the discounts to customers who are willing to pay a higher price. Hotel companies reported revenue increases of 2 to 5% as a result of using revenue management (Ibid) The Brief History of Revenue Management According to Carroll and Grimes 1995; Hanks, Noland, and Cross 1992; Smith, Leimkuhler, and Darrow1992) Revenue management, also known as yield management, has been widely adopted in the airline, hotel, and rental car industries, but has only recently gained attention in other industries (Kimes 2000; Kimes et al. 1998). Companies using revenue management have reported revenue increases of 2% to 5% (Hanks, Noland, and Cross 1992; Smith, Leimkuhler, and Darrow 1992). In 1980s The airline industry launched revenue management practices. During that time yield management techniques became a common practice among airlines. On January 17, 1985 American Airlines launched its Ultimate Super Saver fares in an effort to compete with the low cost carrier People Express. ( www.ehotelier.com ) The need to fill at least minimum number of seats without selling every seat at discounted was the main reason that triggered the born by revenue management. ( www.ehotelier.com) As new Airline companies started to enter the market in the 1980s, Airline companies were eager to sell enough seats to cover fixed operating expenses. Then once fixed expenses were covered, and there were now fewer remaining seats to sell, the remaining seats could be sold at high prices in order to maximise on revenue and profits. According to (Boyd,1998), the application of correct revenue techniques by US Airlines and Delta Airlines resulted of an increase in revenue of US$500 and $300 million respectively, on the other hand Cross (1997) reports that revenue management helps Marriott Hotel to gainUS$100 million additional annual revenue Elliott (2003) presents how revenue management can contribute substantially to cost savings and revenue maximisation while helping maintain quality. Research on revenue management has extended to several industries, with three major streams of investigation: descriptive (whether revenue management will work for a particular industry), pricing control, and inventory control. Industries that can use revenue management can be classified further by their relative ability to exercise pricing- and demand-control levers. An important aspect of implementing revenue management is to ascertain the extent to which customers will view pricing controls as being fair. While customers may initially view nearly any manipulation as potentially unfair, research on perceived fairness has found that customers generally will accept price manipulations as long as they believe they are gaining a benefit at the same time the business is receiving a benefit from pricing changes. Duration control involves some combination of manipulating customer arrivals and managing actual duration of use, depending on the industry in question. Revenue management uses the basic principles of supply and demand economics, in a tactical way, to generate incremental revenues. There are three essential conditions for revenue management to be applicable: There is a fixed amount of resources available for sale. The resources to sell are very perishable. Customers are willing to pay a different price for using the same resources. The hotel industry fits these criteria extremely well. Obviously, hotels have a fixed inventory of rooms to sell; these rooms are also extremely perishable. Hotel rooms perish every day, any room that is unsold tonight is gone forever. There is also no question that different segments of business are willing to pay different rates under various circumstances. Revenue management is of especially high relevance in cases where fixed costs are high as compared to variable costs. The less variable costs there are, the more added revenue will contribute to overall profit. This makes revenue management perfect for the hotel industry. Effective market segmentation is the key to successful revenue management for hotels. Market segmentation begins with seasonal demand. For years, hoteliers recognized that almost all hotels experience periods of high and lower demand. This is even more obvious in hotels, located in resort and attraction areas. Hotels quickly recognized that consumers would also pay more for rooms with a superior view, such as ocean or mountain views and other unique features of their location; larger or unusual rooms; and rooms with unique features. Hotel revenue management hit its stride when hoteliers examined airline RM and realized that the factors of supply and demand, beyond natural seasonal demand, present opportunities to generate higher revenue. As room demand increases and room supply decreases, hotel rate opportunities also increase. The airlines have taught us that supply demand opportunities appear all year long because of conventions, group bookings, room production through web site marketing, special events and local attractions; all create revenue management opportunities.( Ehotelier ) This dissertation address the way revenue management is applied in hotels in UK and discusses the latest issues that faced revenue managers during the economic down turn last year This dissertation Study has been undertaken through detailed analysis on how revenue management is applied in hotels and then discuss the issues facing Revenue managers today through the analysis of responses to a survey that was sent to revenue managers working at hotels in UK. The research also include several working papers, conference proceedings and case studies that I believe are valuable in this study. Overall, 20 articles have been examined. Several review papers have provided an overview of research on revenue management. A list of these papers is in Table 1. In This dissertation will focus on the progress of revenue management in recent years, especially after 1999. Literature review How Revenue Management is Applied Gallego and Phillips (2004) introduce the concept of flexible products for revenue management. They define a flexible product as a menu of two or more alternative, typically substitute, products offered by a constrained supplier using a sales or booking process. In this context, products include not only physical products but also service offerings. Researchers have applied revenue management models in a wide variety of industries where suppliers offer flexible products. Airlines, hotels and rental car industries represent three major traditional applications of revenue management. These industries share some similar characteristics. All of their products are perishable, the demand for their products vary significantly over time, and they have large fixed costs while variable costs are small in the short run. Because of revenue managements success in these industries, researchers and practitioners have begun trying to adopt it in a wide range of miscellaneous industries such as resta urants, casinos, cargo, Internet services and apartment renting. These industries share some similar characteristics with the traditional industries. Some of these practices have acquired great success. In fact, all service providers can take advantage of revenue management theory. Just as ( Berman 2005) says, revenue management is an effective mechanism to allocate a service providers relatively fixed capacity and to provide discounts on a much broader scale. The table below provides examples of revenue management application in different industries. We are not going to discuss the application of revenue management in every industry. In the following section, we provide a brief overview and examples of revenue management research in three non-traditional industries Revenue management practices in different industries (Berman (2005) Industries Example of practices Hospitality Industries Hotels Provide special rate packages for periods of low occupancy; use overbooking policy to compensate for cancellation, no-shows. Restaurants Move customers to off-peak periods by offering discount coupons, or charging reservation fees and higher meal prices on Friday and Saturday nights. Attractions Set different admission charge levels, provide joint-entry tickets, group discounts, coupons, membership rates. Cruise lines and ferry lines Provide luxury class, economy class; change prices frequently according to demand; sell more tickets than seats to avoid cancellation and no show. Casinos Customize offers such as complimentary room, tickets, gifts, discounts, etc., based on customers profitability. Saunas Determine price based upon factors such as room type, duration, and service type. Resort Provide different resort packages to attract different customers. Golf Use different prices to reflect the value of different times of the golf course. Sports events and distribution Determine ticket price for an event based on based on factors such as customer tastes and area of seating; determine the price of season tickets; determine the number of tickets sold for each seat segment. Conference Provide different packages and rates to satisfy different customers requirements. Transportation related industries Airlines Provide business class, economy class; adjust prices frequently according to demand; provide more tickets than seats to avoid cancellation and no-show. Rental cars Adjust prices frequently according to demand; serve highvalued fleet utilisation with priority; accept or reject booking requests based on length-of-rent controls. Railways Divide customers into standard class and first class; provide different prices based on the day of travel and the time of the day. Subscription services IT Services and Internet Services Allocate resources such as human resource, computing capacity, storage and network capacity among segments of customers and determine appropriate price for each segment, high class customers will be served with priority. Cellular network services Control call admission based on customer priority, higher class customers will be served with priority. Major revenue management problems Revenue management problems can be categorized into several different, but related, areas: pricing, auctions, capacity control (or inventory control), overbooking, and forecasting. In the following subsections, we will review each of these areas, but before we start, there are two points that need to be mentioned. First, although we categorize revenue management into several areas, this does not mean that these areas are completely isolated. In fact, these areas are highly correlated and need to be considered jointly when solving practical problems and some researchers are indeed trying to solve these problems jointly. For instance, Feng and Xiao (2006) present a comprehensive model to integrate pricing and capacity allocation. Second, auction is a specific type of pricing strategy. Here we separate auctions from pricing, because we want to emphasise the importance of auctions in the future application of revenue management. In addition, in this section, we also discuss other related issues regarding revenue management, including economic theory, the impact of competition and consolidation, customer perception and behaviour, the development and implementation of revenue management, performance evaluation of revenue management and techniques used for solving revenue management problems Managing Seasonal versus Daily Demand Revenue management principles apply to all levels of demand. Resort hotels with seasonal rates have been using a form of revenue management for years by posting higher or lower rates based upon seasonal demand; this is the essence of revenue or yield management. If these hotels thought they could get in-season rates all year long, they certainly would. They are adjusting for supply and demand. ( ehotelier) Yield management provides the ability to build a base of business by posting a wide range of rates, low to high, to appeal to the broadest range of consumers. For hotels which are capable of handling group business, this is the theory behind quoting lower rates for groups; getting the business on-the-books. Once this base business is booked, either by groups or transient individuals, lower rates can then be closed for sale. This is daily demand. Its important to understand that yield management is the process of closing-out lower rates when there are fewer rooms to sell; leaving only higher rates as occupancy increases. Rates are not increased; lower rates are closed for sale. There is an important distinction between the two. As demand increases, there are more methods of yielding higher revenue; the use of restrictions. Many hotels use restrictions very effectively. E.g. hotels with high weekend demand often restrict weekend reservations to a minimum of two nights by placing a minimum of two nights stay on Saturday, the more popular night. This limits stays to Friday/Saturday or Saturday/Sunday, the two weaker nights. The same can be applied to holiday periods. The key to successful revenue or yield management is to review advance reservations and make rate close-out decisions as often as might be necessary; generally, three times per week. Hotels practicing revenue management gain an insight into the ebb and flow of business, knowledge of reservations booking pace, and a true understanding of factors which impact occupancy and average rate. Capacity control Koide and Ishii (2005) consider the hotel room allocation policies with early discount, cancellations, and overbooking, but without no-shows. The presented model can provide the optimal solution under certain conditions. They also derive an optimal allocation for a simplified problem, which considers early discount but ignores cancellations and overbooking. McGill and van Ryzin (1999) consider the allocation of capacity for rental businesses with two classes of customers. Their research suggests that the capacity reductions enabled by allocation schemes can help to lift profit margins significantly. Zhang and Cooper (2005) address the simultaneous seat inventory control of a set of parallel flights between a common origin and destination with dynamic customer choice among the flights. They solve this stochastic optimization problem through simulation based techniques. Most of the current capacity control practices are based on forecasting. However, forecasting is difficult, costly and the results are sometimes unsatisfactory. Therefore, researchers are trying to find alternative approaches. van Ryzin and McGill (2000) present a simple adaptive approach to optimize seat protection levels in airline revenue management. Instead of using the traditional method that combines a censored forecasting method with a seat allocation heuristic (EMSR-b), this approach uses historical observations of the relative frequencies of certain seat-filling events to guide direct adjustments of the seat protection levels. Their preliminary numerical studies suggest that this method can be used to augment traditional forecasting and optimisation approaches. Overbooking control A number of researchers have developed dynamic optimization approaches to the airline overbooking problem and the related problem in the hotel/motel industry. The usual objective in these formulations is to determine a booking limit for each time period before flight departure that maximizes expected revenue, where allowance is made for the dynamics of cancellations and reservations in subsequent time periods and for penalties for oversold seats. KOSTEN (1960) develops a continuous time approach to this problem, but this approach requires solution of a set of simultaneous differential equations that make implementation impractical. Rothstein (1968), in his Ph.D. thesis, describes the first dynamic programming (DP) model for overbooking and reviews the results of test runs of the model at American Airlines. ALSTRUP et al. (1986) describe a DP treatment of overbooking for a two-class, nonstop flight and describe computational experience with the approach at Scandinavian Airlines. A DP analysis similar to Rothsteins but developed for the hotel/motel industry and extended to two fare classes is described in LADANY (1976, 1977) and LADANY and ARBEL (1991). A control-limit type structural solution to the (one class) hotel overbooking problem is described in LIBERMAN and YECHIALI (1977, 1978 Since McGill and van Ryzin (1999) had already presented a list of publications in overbooking, we will only discuss the new publications. Zhang and Cooper (2005) focus on the overbooking problem for hotels with multiple tour-operators and conclude that an overbooking policy that treats the capacity of the hotel as a whole gives better cost savings than an overbooking policy that allocates the capacity to each tour-operator separately. Zhang and Cooper (2005) proposes two models (stationary-fares model and nonstationary-fares model) to deal with a multi-period airline-overbooking problem for a single-leg flight with a single service class and use the model to calculate the optimal booking limits. Coughlan (1999) presents an airline revenue maximisation-overbooking model at a fare class level for one service compartment-cabin where class level demand is used to determine the number of bookings for each class. He concludes that this model shows significant improvement over previous methods by testing the model with data of Irelands national airline, Aer Lingus. Biyalogorsky et al. (1999) propose that a strategy using overbooking with opportunistic cancellations can increase expected profits and improve allocation efficiency, then derive a rule of how to allocate capacity to consumers optimally. Under their strategy, the seller can oversell capacity when high-paying consumers show up, even if capacity has already been fully booked, then the seller will cancel the sale to some low-paying customers while providing them with appropriate compensation. Toh and Dekay (2002) create an overbooking model for hotels to find the optimal level of overbooking considering customer service level, unexpected stayovers, and cost of walking displaced guest. Forecasting Forecasting is a critical part of revenue management. The quality of revenue management decisions, such as pricing, capacity control, or overbooking, depends on an accurate forecast. PÃ ¶lt (1998) estimates that a 20% reduction of forecast error can translate into a 1% incremental increase in revenue generated from the revenue management system. Revenue management forecasting includes demand forecasting, capacity forecasting, and price forecasting, each of which has its specific requirements. All forecasting tasks need to address issues such as what to forecast, the type of forecasting method, the aggregation level, the data to use and the accuracy of forecast. Forecasting can have different aggregation levels, from full aggregated forecasting to semi-aggregated forecasting and to fully disaggregated forecasting. The data used in forecasting can be based on historical arrivals or bookings. In addition, forecasting must be adjusted according to special An overview of research on revenue management 111 events, for example, holidays. Zaki (2000) gives a summary of forecasting for airline revenue management. Weatherland et al. (2001) discuss different ways to forecast demand for hotel revenue management systems and assess the effectiveness of aggregated approach and desegregated forecast. Furthermore, Weatherford and Kimes (2003) use data from Choice Hotels and Marriott Hotels to conduct a comparative test on a variety of forecasting methods for hotel revenue management systems to find the most accurate method. Their research suggests that exponential smoothing, pickup method and moving average models provide the most robust forecasts. Despite the mounting forecasting methods, human judgment is still indispensable in forecasting demand. Schwartz and Cohen (2004) make a study on 57 experienced revenue managers to evaluate the bias of this kind of subjective judgment. They find that the nature of the user interface can influence the way the revenue managers adjust the computers forecasts, although the managers are given the same predictions. The managers with a deliberate computer and no chart made the smallest volume of adjustments to the computers forecast, while the managers with a slow computer and an interactive chart made the highest volume of adjustments. How to develop revenue management How to develop and implement revenue management systems is another key issue. Kimes (1999) and Kimes et al. (1999) present a 5-step approach for implementing restaurant revenue management and provide insights from the implementation. Secomandi et al. (2002) present a case of how PROS Revenue Management Inc. worked with three non-airline companies to determine the applicability of revenue management, and to design, develop, and implement Revenue Management systems. Skugge (2002) discusses issues that need to be considered when implementing a revenue management system. He presents risks associated with development and implementation and ways to reduce these risks, and then proposes a two-step process to maximise the likelihood of a successful project completed on time and within budget. Okumuss (2004) research reveals the complexity and difficulty of developing and implementing a centralised revenue management project. He argues that this is because revenue management implementation is often viewed as a tactical activity, but this is not correct. He suggests that researchers and practitioners should view the implementation from the perspectives of strategic management, and they should change management fields. Revenue managers play a crucial role in implementing revenue management. Skugge (2004) finds that one of the reasons why some companies enjoy much greater success with revenue management is they have more effective revenue managers and suggests several methods to improve revenue management education and training programs. Zeni (2003) presents a study performed at US Airways to measure the value of revenue managers contributions to a revenue management system and concludes that analysts can add up to 3 percent in incremental revenue. Parker (2003) presents that airlines need to establish and provide support for a community of practice, which is a group of revenue management related people who interact on an ongoing basis. This group takes responsibilities of establishing protocols and standard procedures with respect to revenue management. The implementation of revenue management requires management to make a series of business decisions. Yeoman and Ingold (2000) discuss the decision-making processes using examples from airlines and hotels. All business decisions have risks, as do revenue management decisions. Therefore, every company must evaluate the potential risks of revenue management. Lancaster (2003) focuses on the risk incurred in the revenue management policies and analyses how risk management measurements and methods can be applied to the revenue management practices. In addition, companies want to make sure that their investment on revenue management can achieve the expected return. Delain and OMeara (2004) illustrate how a company can build a business case to estimate the incremental revenues and costs associated with developing or enhancing a revenue management programme IT service and internet service Revenue management also has application opportunities in subscription services, such as on-demand information technology service and Internet service. Internet service is, in fact, a special case of on-demand information technology service. Nair and Bapna (2001) find that Internet Service Providers (ISP) have perishable capacity for users to log on, a fixed number of units, and the possibility of segmenting price-sensitive customers. These three characteristics are common with industries where revenue management is traditionally applied. They also identify that revenue management in Internet service is different than traditional applications. The Internet service is continuous in state and time, the request and the service happen simultaneously, and overbooking is impossible for ISP. Furthermore, they formulate the revenue management problem for ISP as a continuous time Markov Decision Process to maximize the discounted value while improving service levels for higher class customers. Wynter et al. (2004) introduce a revenue management model for a specific information technology service on-demand computing service. Dube et al. (2005) make a further analysis on the model of Wynter et al. (2004) both analytically and numerically, and conclude that the application of revenue management can significantly increase revenue of on-demand computing service providers Economic concerns To better apply revenue management in the industry, practitioners must have a thorough understanding of underlying economic theory, such as supply and demand, opportunity cost, competition, consolidation, etc. Dana (1999) presents how revenue management techniques, such as price dispersion, can shift demand even when the peak time is unknown. Firms must compete with each other to get customers, so revenue management decisions of one firm unavoidably affect the demand for other firms in the same industry. The sudden reversal in the lodging industrys fortunes from 2008 to 2009 made the focus on customer rate resistance, contract renegotiations, competition, and price wars as top priorities for revenue managers. This contrasts with a 2008 study by Cornell university , where human resources and technology issues were ahead of economic concerns. The recent bad economic situation made it for revenue managers to maintain price positioning, because the drop in demand has shifted considerable pricing power to the customer. Although many hotels can compete effectively on price (and others may have little choice), revenue managers may also draw on numerous non-price competitive techniques, including adding value. One pricing approach might be to create a set of targeted rate promotions that are protected by rate fences and designed to attract price-conscious guests. Another technique is to bundle services into packages that disguise room rates. Non-price techniques include competing on the basi s of quality, creating strategic partnerships, taking advantage of your loyalty program, developing additional revenue sources, and developing additional market segments Even as they agreed that customers have gained considerable negotiating power, a research by Cornell university see a larger role for RM as the economy recovers. In the meantime, revenue managers have a key responsibility to determine ways to offset the loss of business by creating special rates that are protected by rate fences to attract different market segments or to augment existing packages to retain current business Looking ahead, revenue managers should be aware that customers will be strongly focused on price and less so on brand loyalty. The common thread in this view of hotels future is that RM is a valuable tool for hotel marketers and managers as they consider tactical price setting and strategic price positioning. The managers are well aware that revenue management cannot help in all cases. Also revenue managers should broaden the perspective on revenue management to include as many customer touch points as is appropriate. In a sense, this represents a combination of marketing principles with revenue management tactics. As demand returns, application of RM approaches will be able to help hotels find the way back to rate integrity. Based on that idea, now is the time to set price strategies and be ready with revenue management tactics when the recovery comes. Customer perception According to Cornell University research many managers have been reluctant to adopt revenue management practices because of possible customer dissatisfaction. They may well find support for their fears in the fairness literature, which has shown that customers will refuse to patronize companies perceived as unfair. Customers from different cultures and nationalities often have different service expectations (Donthu and Yoo 1998). For example, Lee and Ulgado (1997) found that American fast-food customers considered low prices to be of paramount importance when evaluating satisfaction, whereas Korean consumers were more concerned about service dimensions such as reliability and empathy. Also, Asians often see eating out as more of a social or family activity than do Americans or Europeans (Hall 1966)