Exchange Risks Trough Different Instruments Finance Essay - Free Essay Example

Sample details Pages: 7 Words: 2036 Downloads: 1 Date added: 2017/06/26 Category Finance Essay Type Argumentative essay Did you like this example? Foreign Currency Risk is very important source of managing risk for the banking industry and different research have been done in different parts of the world in that topic. (Papaioannou M. G., 2006). Don’t waste time! Our writers will create an original "Exchange Risks Trough Different Instruments Finance Essay" essay for you Create order Foreign currency exposure and risk management is very important for the firm to avoid any liability from exchange rates instability which can affect the profits and assets values in a negative way. Also different way and strategies for managing foreign currency risk were analysed along with advantage and disadvantages of each strategy and technique. Additionally, best practice widely spread was outlined along with data on financial derivatives and hedging practice by US Firms. A study that is said to USA forty eight largest business banks (Choi, Elyasiani, amp; Kopecky, amp; Kopecky, 1992) for the amount 1975-1987 showed that effects of charge per unit rely on cyber web position of the bank in foreign currencies. in step with them, once banks had positive internet position, depreciation of foreign currencies negatively affected the stock costs of banks before year 1979 and when 1979 banks stock returns responded completely with the depreciation of foreign currencies as banks had modified from positive to negative internet open positions. during a similar study on Canadian banks (Atindehou amp; Gueyie, 2001), its observed for the Canadian Banks that stock costs responded completely with depreciation of foreign currencies. Selecting the appropriate hedging strategy is usually a troublesome task because of the difficulties concerned in mensuration exactly current risk exposure and selecting the appropriate degree of risk exposure that got to be secure. the ne cessity for interchange risk management began to arise when the autumn of the Bretton Woods system and at the top of us greenback peg to gold in 1973 (Papaioannou M. , 2001) the problem of interchange risk management for corporations in non-financial sector is freelance type their principal business and is typically severally handled with by their company treasuries. In most of the corporations there square measure freelance committees WHO operate to manage the treasurys strategy in managing the interchange risk (and rate risk) (Lam, 2003). It clearly shows the importance of the very fact that corporations provide a vital attention to risk management problems and techniques. Contrariwise, international investors sometimes use their underlying assets and liabilities to manage interchange risk. Since the currency exposure of international capitalist is majorly associated with translation risks on assets and liabilities command in foreign currencies, they have an inclination to think a bout foreign currencies as a separate quality category, all break free different assets, requiring a currency overlay mandate (Allen, 2003). Functions of Foreign Exchange Market The foreign exchange market is a market where foreign exchange transactions take place. In other words, it is market in which national currencies are bought and sold against one another. The main functions of foreign Exchange Market:- Transfer of purchasing Power: Foreign exchange market is the primary role to transfer of buying power from one country to another and from one currency to another. The international clearing function performed by foreign exchange markets plays a very significant role in facilitating capital drives and international trade. Provision of credit: this provision of credit function performed by foreign exchange markets also shows a very important role in the growth of foreign trade and international trade depends to a great extent on credit facilities. Exporters may get pre-shipment and post-shipment credit. Credit facilities are available also for importers. The Eurodollar market has emerged as a major international credit market. Provision of Hedging Facilities: The other important function of the foreign exchange market is to provide hedging facilities in the hedger. Hedging refers to covering of unexpected risks, and it provides a mechanism to exporters to protect themselves against losses arising from fluctuations in exchange rates coming in the market. Derivative Market Derivative is the form of financial instrument that is represent from some index, other asset, event, value or condition. Derivative traders enter into an agreement to exchange cash or asset over time based on the underlying asset. Derivative market used for two purposes one is hedging and other is speculation and hedger, speculation take the advantage from the derivative market. Hedging is where a financial risk is eliminated or reduced by passing the risk on to someone else and this is the activity that is usually used by corporate treasurers in managing their IRR. Hedging is a safety net an insurance policy against any open position of a trader. It is an underlying cover. Consider an investor who converts his $15,000,000 at the cash market (where $1.50 = ÃÆ' ¢Ãƒ ¢Ã¢â€š ¬Ã… ¡Ãƒâ€šÃ‚ ¬1) for the British pound, and puts his ÃÆ' ¢Ãƒ ¢Ã¢â€š ¬Ã… ¡Ãƒâ€šÃ‚ ¬10,000,000 at the British bank for a year at 9.5 percent to get ÃÆ' ¢Ãƒ ¢Ã¢â€š ¬Ã… ¡Ãƒâ€šÃ‚ ¬10,950,000. But when he gets that British amount, if the exchange rate becomes $1 = ÃÆ' ¢Ãƒ ¢Ã¢â€š ¬Ã… ¡Ãƒâ€šÃ‚ ¬1, he is turning his $15,000,000 into $10,950,000, which is a total loss of $4,050,000 (27 percent). To prevent such potential economic loss, many financial instruments have been created and are in existence for the investor. If at the time the investor exchanges his $15,000,000 and puts his conv erted amount at the rate $1.72 = ÃÆ' ¢Ãƒ ¢Ã¢â€š ¬Ã… ¡Ãƒâ€šÃ‚ ¬1 a year later, he can then turn his ÃÆ' ¢Ãƒ ¢Ã¢â€š ¬Ã… ¡Ãƒâ€šÃ‚ ¬10,950,000 into $18,834,000. This is the total gain of $3,834,000 (25.56 percent). Selling the future British amount at the available rate of $1.72 = ÃÆ' ¢Ãƒ ¢Ã¢â€š ¬Ã… ¡Ãƒâ€šÃ‚ ¬1 is an example of hedging. (Clark Ghosh, 2004). Speculation is the opposite of hedging; it involves trading in established markets on the basis of informed judgments about how market prices will change. A speculator has the intention of making a profit from favourable exchange rate movements but could lose if exchange rate move the other way. Speculation is a form of short term investment activities. Foreign exchange speculators buy currencies with the intention of re-selling them at a profit in the near future, or sell currencies with the intention of buying them back at a profit. Large returns can be made on a fairly small investment within a short period of time (lane Kent, 2000). There are the two different derivative markets where the different financial instrument buying and selling take place to manage the foreign exchange currencies that is Over-the-counter (OTC) and Exchange-traded-derivatives. Over the counter (OTC) derivatives are contracts takes place when there are two person, without going through any exchange market or any mediator. It means if two party is there, they want buy and sell they can do the trade anywhere in this market. The Products of the ETD market such as forward rate agreements, swaps and exotic options are always traded in this derivative market. The size of the OTC derivative market is bigger market ETD market. This market is highly unstandardized and unregulated. The price of the derivative product is not flash in this market; price of the derivative product depends on negotiation. The OTC market is made for that person who does not want to take a risk or want to earn some profit from the foreign exchange market. This market is private trading so reporting this OTC amounts are difficult. Under this market derivative price wont be visible in the OTC derivative market. The OTC market is the primary platform for the trading of interest rate and fore ign exchange derivatives (Spence, 1999). The most widely traded OTC foreign exchange derivatives are foreign exchange swaps, and lesser extent, currency forwards, while currency swaps and options are rarely traded (Iorgova Ong, 2008). Exchange traded derivatives are characterized by standard contract terms, meaning that all participants trade the same underlying instruments. This helps to generate a greater critical mass of liquidity, leading to tighter bid offer spreads and more cost -effective risk management solutions. The worlds most liquid-listed contracts reference various important financial indicators, such as short-term and long-term interest rates, exchange rates, equity indexes and select commodities. ETD is derivative products in which are traded via specialized derivatives exchanges. This derivative market price is publically visible that is why speculator cannot earn abnormal profit. The example of this market product is future and options on futures contract (Banks, 2004). Dealing on the foreign exchange Market There are some of the important types of transactions which is conducted in the foreign exchange market are given below. Spot and forward Exchanges The term spot exchange refers to the category of exchange dealing which needs the exchange of currencies on the spot or immediate delivery. In practically most of the settlement delivery takes place 2 days in markets. The rate of exchange effective for the spot dealing is thought because the spot rate and also the marketplace for such transactions is known because the spot market. The agreement between two parties is generally called forward transaction. It is requiring the delivery at some specific future date of a specified amount of foreign currency one of the parties and the other party will pay in domestic currency, at the price agreed upon the contract time. The exchange rate which is quoted in forward contract that is called forward exchange rate and the market where the forward contract take place that is called forward market. Forward exchange services, obviously, are of immense help to importers and exporter. They can imitate the risks which are arising out of exchange rate fluctuations by taking into a suitable forward exchange contract. Forward Exchange Rate Forward exchange rate has a relationship with the forward rate; the spot rate might be at premium, discount and par. At Par: if the forward exchange rate price is exactly same to spot rate at the making of the contract that forward exchange rate is called to be a par. At Premium: If the forward rate for the currency is more than spot rate, is said to be the premium. It means this forward exchange contract was issued in premium for example you buy forward exchange contract in 2 dollar but the spot price is 1.5 dollar so 0.5 is the premium. At Discount: When the forward rate for a currency buys less than the spot rate that is called discount with spot rate. The discount is usually expressed in a percentage from the spot rate on a per annual basis. There are the different factor effect the forward exchange rate such as demand and supply for the currency, macroeconomics factor et but mostly demand and supply of the currency effect the price changes in currencies. If the demand is high on that particular date then the forward rate issued in premium, if the demand is low that particular date then issue in discount and if the speculator thinks that there is no changes then they will issue the forward in par. Futures The contract which has standardised features, the contract maturity dates is standardised. This contract can be traded in exchange traded derivatives (ETD) market only. This contract price is publically visible so speculator cannot earn abnormal profit. If you want to do this contract you need to pay deposit some margin amount to the counter. Option The option contract is the form of financial instrument that gives the contract holder right but not full obligation. This contract has certain kind of facility like after the maturity period of time if you want exercise this contract you can. I you dont then you can terminate the contract so in this contract investor has an option where should continue this contract or not. According to their exercise features, there are two kinds of options with different maturity period. One is A European option this can be exercised only after the maturity period and another one is an American option can be take place for trading at any time during the contract.( (Cherunilam, 2011). Swap The meaning of Swap is the form of derivative which shows the facilities to buy the curries and other side you can sell that contract to other person. Commercial banks  who  conduct forward exchange business  might  resort to a swap operation  to regulate  their fund position. The term swap  means that  concurrent  sale of spot currency for the forward purchase of  an equivalent currency or  the purchase  of spot for the forward sale of  an equivalent  currency. The spot is swapped against forward. Operations consisting of a  concurrent  sale or purchase of spot currency  in the middle of  a purchase  or sale, respectively, of  an equivalent  currency for forward delivery,  are  technically  referred to as  swaps or double deals, because the  spot currency is swapped against forward. (Cherunilam, 2011).

Self Analysis Personal Statement - 759 Words

I am a philosophical person by nature who tends to think a lot into life and am impatient with myself for not achieving more. At the same time, I have a love-affair with nature. Possibly the two are combined. I believe that these character traits have influenced the subject of the essays that I have chosen to include in my portfolio. See Robert Frosts the Road less taken for instance. Each and every time I read it, that poem impacts me in different ways and this last time that I read it, it actually gave me the shivers. The road less taken ¦ I see two paths in the yellow wood, one over and again trampled on this may well be the path that I have grown up in, my socialization, the path that my parents/ family/ community may wish me to lead. The path that my friends follow. More so, the path that fellow -Americans seem to tread. This path may not only dictate the career that I should lead, but also all norms of 21st century American perspective of success, psychological health, normality. Achieving success in life has been compared to climbing a mountain. Persist. Persevere with the goal, one step in front of the other, until you make it. But my question: How can I know I am climbing the right mountain. Perhaps this well-trodden path may lead me to disillusionment. Perhaps I should take the other overgrown one thr ough the woods. And this may make me more content, more self-actualized, and happier in this life so that I thrive and achieve my maximum potential. FrostShow MoreRelatedStrategic Management Of Health Care Organization1583 Words   |  7 Pages Personal Strategic Management Plan Ms. Bharati Kusoji Strategic Management in Health care organization Professors Name Professor Mirjana Zivkovic Professor Josh Hyatt United States University San Diego, USA July 18th, 2015 Table of Contents Introduction †¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦..3 Current Roles†¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦3 Personal Vision Statement†¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦ 4 Personal Mission Statement†¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Read MorePersonal Statement : Personal Strategic Management Plan1559 Words   |  7 Pages Strategic Management Personal Strategic Management Plan Table of Contents Introduction †¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦..3 Current Roles†¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦3 Personal Vision Statement†¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦ 4 Personal Mission Statement†¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦. 4 Personal Core Values†¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦..4 Self-Analysis†¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦4 Personal Goals†¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦6 Plan and Strategies for reaching Personal Goals†¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦.. 7 StrategyRead MorePersonal Financial Goals And Objectives Essay1044 Words   |  5 Pagesfrom the set goal. 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Essay on Black Ocean Strategy-Magazine Writing

Question: Discuss about the Magazine Writing of Black Ocean Strategy. Answer: Introduction: Complicated situations arise for many companies in their business journey. Some of the complications are due to their recent activities that they conduct as a part of their strategic planning, while some are due to their past experience. In order to cope with these difficulties, the companies are expected to adapt certain strategies to pursue in their business (Dibbs et al., 2015). There are various strategies that are adapted by various organizations. Some of those strategies to be name are customer retention, comparative advantage in terms of improving quality or price of the product so that the company would be able to improve the satisfying level of the customers (Moriarty Kosnik, 2012). One of the most trending strategies in recent market scenario is the blue ocean strategy. The strategy has been applied by major industries such as Apple, Zara, Facebook, Body Shop and even the online gaming company Candy Crush. A greatest example is of the strategies adapted by Apple Inc. It can be easily assumed that the success of these companies is a result of the various business strategies undertaken by the companies in their business journey (Schewe Smith, 2013). Marketing concepts: The philosophy that a firm or organization undertake in order to make decisions regarding satisfying the target consumers are known as marketing concepts. These are actually tools that are undertaken by various companies to fight against the competition in the market (Bresser, 2014). There is no doubt that the market is saturated with various options and substitutions for the consumers to choose from. It has become clear that unless proper marketing strategies are not applied, there is very less chance of survival for the company. Competitive strategy: The success of the company mentioned above can be easily ascertained due to the fact that they have been applying correct strategies at proper instances. The most commonly used marketing strategy is setting a competitive strategy (McDougall Robinson, 2015). Competitive strategy is mainly related to two objectives, one is product development and the other is setting a proper price of the product. For developing a product, various companies take various approaches. If certain examples are to be given of those companies who have agreed towards product development as one of their business strategies then the names of Zara, Primark, Facebook and lots of others who have understood that developing or making changes in their product can attract more consumers to them. It has been evident that these companies have been altering in their products or services at a random basis. Their approach is sufficiently correct and the same can be easily reflected in their market share or increasing margi nal profit of the companies. There are more than 10 million active users of Facebook; this mark has only been able to achieve by the company because they have focused on product development (Fruin, 2014). On the other hand, retail or clothing companies like Zara, Puma, and Adidas have been able to attract more customers due to their pricing strategy. Adidas, Puma, and Nike, all are great competitors. These companies keep a good eye on the price and variety of the products that each company introduces. Based on the findings, the price of the products are decided. Thus, a tough and healthy competition keeps going on among these companies (Govindarajan, 2015). Customer service gap model: Todays customers are smart and literate. They are ready to spend a good amount of money if the product or the service is capable enough to satisfy their needs. However, there is no doubt that the customers have become demanding as well. They want everything to be delivered for them at very quick instances (Lindi  et al., 2012). It is not that consumer products like cars, mobile phone, computers are able to market their product according to their own criteria but they are also restrained to do so. Companies like HP, Compaq, Dell and many others have to recognize the need of the customers and then proceed with their marketing activities. As proposed by Kaenzig, Heinzle and Wstenhagen, (2013), there always lay a gap between what is delivered by the company and what is gained by the customers. This gap has been explained by calling it to be the expected service and the perceived service. The creation of this gap is responsible due to the fact that the companies fail to understand the demand of the customers. Sometimes, the right product is not delivered to the customers either in terms of service or in terms of quality of the product. It has also been observed that the products delivered by the company fail to meet the expectation of the customers. The same situation has been faced by Deloitte in its business (Malik, 2012). The service that the company promised to deliver to its target consumers were not up to the standard and thus failed to meet the expectation of the consumers. For the same reason, in the year 2012 the company had to face a critical situation in its business. The company has called this crisis period of their business journey. Figure: Gap strategy Example of gap: Once there was a havoc raised regarding the menu that Pizza Hut offered. The customers were not satisfied with the company offering only pizza, but they wanted Pizza Hut to serve some kind of desserts also, may be Lemon Pie or Brownie. Again, when it was found that HBL did not have online payment option, the customers again got unsatisfied. Zone of tolerance: This term is used identify the difference between the desired service by the consumers and the actual service provided by the company (Nguyen Rosetti, 2013). Sometimes, the service or the product provided by a company is not satisfying enough for the customers that they would be glad to accept the new incorporation made by the company. For example, it can be said that when it was demanded that pie is to be included in the menu of Pizza Hut, it was included following the demand of the customers. However, the proposed idea was not able to satisfy the customers completely because then people complained that the dessert was not up to the standard. Now, what more does the customers expect from a pizza maker (Rahman, Khan Haque, 2012). The Gap and the Zone of tolerance can be wide as well as narrow at different instances of time. Product adoption: Prior to the purchase of a product, the customers undergo certain instances for the understanding the various aspects of product evaluation in the market. There are a number of steps that are involved in the product adoption process. There are basically five stages in the process of product adoption: Awareness- It is the first step that is done to create awareness among the consumers about the product. There is no doubt that unless people are informed about a product, it cannot be expected that the product will sell in the market. In order to meet the same criteria, companies usually take the help of advertising or promoting the product among the consumers (Ham, 2013). Not the awareness is created, it is expected that consumers would befall for the product. Interest- It is assumed that the promotional activities done by the companies to create awareness among the consumers automatically create an interest in them (Yaqin, Chuanyong Liang, 2015). Once this interest is created, people are more drawn towards the arrival of the product and this creates hype in the market. Evaluation- This step considers the importance of the product whether the product is useful or beneficial for the consumers. It is evident that a person would like to purchase a product only if the product offers something usefulness and benefits to the customers (Ritchie et al., 2015). Trail- At the time of purchasing a product for the first time, the consumer usually uses a trail product. It is only if the customer gets satisfied with the product, further purchasing is made. This is the trail method of a product. Adoption- Only if the product is capable enough to satisfy the need of the customer, that they adapt the product and make regular purchase of the product. A perfect example of the above discussed marketing plan can be given of a deodorant company Garnier. The company at the time of launch of product did a great research on the demand and need of deodorants among the consumers (Krger, 2016). A very creative and attracting advertisement was made to promote the product. The created a great interest among the consumers and they were drawn towards the product. Customer lifetime value: It is a prediction that is adopted by the marketers or company that there is a lifetime value of the customers towards a particular product. This prediction also ensures a good and healthy relationship of the company with the consumers. In this respect, it can be said that there are certain instances that are responsible for the creation of a lifetime customer value. The foremost thing is the creation of a brand value (Hsieh et al., 2013). Once a brand value is created, a particular group of customers are bound to the particular company. This way, it is also ensured that the company has a fixed customer based even in this competitive market scenario. As pointed out by Hinz, Schulze and Takac, (2014), a brand usually creates a loyal customer who will make repetitive purchase from the same company just because they have a faith towards the company that the product provided by them will be of good quality and that they will not be cheated. Companies like Tesla, Tesco, Wal-Mart all have a loyal group of customers because of the quality and the diversity of the product that these companies offer to the consumers. The profit margin or the market share of the companies are sky soaring and the reason behind this achievement of them can be easily assumed to be their loyal customer base. Expectation/confirmation theory: It can be easily ascertain that when a particular thing is expected by a person, if the same thing could not hold the expectation after the confirmation process done after purchasing the product, then the level of dissatisfaction increases. This level of dissatisfaction automatically decreases the number of loyal customers. Again it can be said in this respect that the market is full of substitution and options (Baksi, Parida, 2013). Thus, if a company loses a particular base of loyal customers there is other provisions open for the person. However, on the other hand, if the product or the service is satisfying enough for the customers then it can be said the company has been able to meet the expectation of the customer and there is a greater chance of confirmation of getting positive response from the market. In this respect, example of a herbal product developed by one of cosmetic company can be given. The promotion made by the company was very attractive and it had promised to deliver great result to the users. However, on using the product, the response of the customers was not very satisfying. This created a negative impact among the customers and in longer run, it lost many customers. In fact, a good deal of customers was seemed to part away from the company due to the disloyalty played by the company. The expectations of the consumers were not met in this respect. Figure: Marketing concepts Net promoter score: This is the method by which the management of a company takes the help of the loyal group of customers to ascertain their performance in the market. The score is given in the form of a score. It is usually expected that a score of 9-10 are those customers who are very loyal to the company and they keep on buying products from the company. In fact, they are regarded as promoters of the company. Every company has great faith towards these customers. In fact, it is the goal of the companies to get this range of customers. Customers given the score of 7-8 are regarded as the enthusiastic customers. They are loyal to the company because the products provided by the company have been able to meet the expectation of the customers (Helmes, Schlosser Weber, 2013). However, these customers can shift their buying choice to other companies as well. The last segmented group of customers is detractors who have been given the score between 0 and 6. These customers are unhappy customers and they are the major threats for the company. The power of word of mouth publicity cannot be denied. If there is something good or if it is bad, the news is easily spread (Bhagat, Goyal Lakshmanan, 2012). Bad reviews are accepted more easily than the good reviews. Thus, any kind of bad reviews creates great damage for a particular company. Blue Ocean Strategy: One of the most recent trends as being adopted by majority of the companies in their business and marketing strategy is the concept of Blue Ocean Strategy. The rapid pace in the innovation and changes in the marketing and the business strategies of the company is one of the components of the blue ocean strategy. As opined by Nakata and Weidner, (2012), this strategy is more effective than the Porters Five Forces that has been applied for understanding the market framework and develops the product in a similar manner. In order to attract more customers, it is a common phenomenon that there has to be inclusion of certain innovative ideas from the end of the company to attract more and more customers towards the company. Several companies have been applying this strategy for the sake of customer retention. Many big and small companies are adopting the blue ocean strategy for their company. In this respect, the best example of the company following the blue ocean strategy is TESCO. Some of the innovative strategies undertaken by the company as an innovative approach towards retaining customers can be discussed here. Renovation in the store: The Company has focused in the renovation and decoration of the store at various outlets. Focus has been made towards segregating the departments of the various products in the store. This has helped to attract more customers towards to shop from their retail outlets than using other companies service. Club card: This could be assumed to be the most effective and innovative approach, made by the company. With the help of the club card, TESCO provide certain benefits such as discounts or offers to the loyal customer base of the customers. With the effective use of the club card, more customers were retained in the company. There has been an increase in the number of visit of the customers in the store because they get benefit by using this card while shopping. Value for product: Since, TESCO is one of the largest retail sectors; it deals with variety of product. At many instances, it is seen that the company keep giving discounts and offers with the other products (Kim Mauborgne, 2014). This ensures a better buy for the customers and also a value added purchase to them. These offers attract more customers to the company. Multi- retailing channel: The provision of online marketing has given the opportunity to the consumers to buy products from anywhere. In fact, the company has installed small e-counters at the bus stops in major parts of UK. This has enabled the consumers to buy products from the company without wasting much time. Now people can easily order product while waiting for their bus. Easy payment mode: The Company gives provision to pay in terms of plastic money or direct paying through online mode (Lindic, Bavda Kova i , 2012). This has helped the customers to make their payment easily. All these approaches can be easily regarded as the most innovative and effective way of retaining customers and creating a loyal base of customers that is indeed needed in a competitive market scenario of today. Along with these, the effectiveness of promotional strategies cannot be denied. Companies are using various promotional tools such as the social media networks or other publicity means for the purpose of attracting more and more customers and fight with the competition in the market. With the advent of globalization, the impact of competition and the availability of various options have lead to impact on the survival of the companies in the market. Conclusion: In contemporary scenario, it can be said that marketing is no longer something that a company adapt to perform well in the market but it is something that is necessary for the sake of retaining customers. Two kinds of servicing has been observed; one that is perceived and it is required for the sake of marketing a product, and the other one is expected service that the company has to carry on for the sake of making the consumers happy and satisfied with the product. For understanding the needs and wants of the customers, it is expected that every company would carry out proper research of the market as well as the product that they are selling. A proper market orientation, communication with the internal and external stake holders and a focus on their market would definitely result in approaching a positive result towards their business. There have been many approaches made by several companies towards developing their product and gaining in the market. Some of the strategies have be en discussed here along with many company examples where the companies have been using the strategies for achieving better results in the market. The most effective strategy in this respect could be easily considered as the blue ocean strategy. This strategy has been proving to be fruitful for every company who are incorporating them in their business. No wonder any kind of idea and plan can be clicked into ones mind and this could give rise to a new strategy. 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