eco project sem 3

8/3/2019 Eco Project Sem 3

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MANAGERIAL ECONOMICS

PROJECT

SUBMITTED BY:

KRITIKA TIWARY (10104760)ANKIT GUPTA(10104723)

SANYUJ GULATI (10104742)PARUL JINDAL (10104713)

VAIBHAV ARORA (10104706)B.TECH (IT) B9


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ACKNOWLEDGEMENT

We would like to express our sincere thanks to our teacherMrs.Mukta

Mani for entrusting us with a challenging project and along with it, her

help and encouragement has been exemplary.

We wish to place our sincere gratitude to the officials of concerned

organization and libraries who in spite of their busy schedule always

spared their time whenever needed.

We take this opportunity to thank our parents and friends who have been

with us and offered emotional strength and moral support.


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CONTENTS

AcknowledgementContentsIntroductionMICROECONOMICSMethods used : Trend projection method

Calculations of forecasted sales and profitGraphs representationMACROECONOMICSProblem

Adverse Balance of Payment(BoP)SolutionsConclusion

Bibliography


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INTRODUCTION

Type: PrivateIndustry: Motorcycle manufacturer

Founded: 1926 Founder(s)Bruno Ducati

Adriano Ducati

Marcello DucatiHeadquarters: Bologna, Italy

Key people: Giampiero Paoli (CHAIRMAN) The first Ducati logo, 19261930s

Gabriele Del Torchio (CEO)Products: Motorcycles

Revenue: 403.2 million (2008)

Net income: 32.3 million (2008)

Employees: 1,172 (2008)

Subsidiaries: Ducati Corse (MotoGP and SBK Superbike racing)

Ducati Motor Holding S.p.A. is a motorcycle manufacturerin Bologna, Italy. It produces motorcycles for both road use andmotorcycle racing.

In the 1960s, Ducati earned its place in motorcycling history byproducing the then fastest 250cc road bike available, the Mach

1.

Since 1926, Ducati has been owned by a number of groups and

companies but since 2008, Performance Motorcycles SpA(Italian hands and going private) has the ownership of the

ducati company.


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Ducati is best known for high performancemotorcycles characterized by large capacity four-stroke, L-twin

(90 twin-cylinder) engines featuring a desmodromic valvedesign.

It also extensively uses the Trellis Steel Frame configuration,although Ducati's MotoGP project broke with this tradition byintroducing a revolutionary carbon fibre frame for the Ducati

Desmosedici GP9.

CURRENT LINEUP:

Monster,Multistrada,sportClassic,Diavel,Superbike,Hypermotard,streetfighter.

Ducati has a long history with racing, still subscribing to the "winon Sunday, sell on Monday" business model allocating 10% ofthe companies revenue (approximately $60 million) on racing.

Ducati has also won 16 SBK manufacturer worldchampionships for years 19911996, 19982004, 2006, 2008and 2009.

In theAMA Superbike Championship, Ducati has had itsshare of success, with Doug Polen winning the title in 1993 andTroy Corser the following year in 1994. Ducati has entered a bikein every AMA Superbike season since 1986, but withdrew from

the series after the 2006 season.


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TREND PROJECTION METHOD

This method makes use of statistical technique known as

the time series. Time series is an ordered sequence ofevents over a period of time relating to a certainvariable.It shows a series of values of a dependent variable as itchanges from one point of time to another. By using timeseries it is possible to project the trend of scales infuture.

Constant Rate of Change:

St = So + bt

Where:

St = value of time series to be forecasted for period t

So = estimated value of time series in the base period

b = is the absolute amount of growth per period

t = time period for which series is to be forecasted

7 S = nSo + b 7 t7 S*t = So7 t + b 7 t

2

Where:

? A dtSttSSo /*2

!

? A dSttSnb /* !

!22 )( ttnd


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CALCULATIONOF FORECASTED SALES

AND

PROFITS OF DUCATI

ANNUAL SALES & PROFIT REPORTS OF DUCATI FOR

THE PAST 10 YEARS:

YEAR SALES PROFIT

2002 379.53 10.483

2003 407.82 10.553

2004 412.97 6.25

2005 388.24 40

2006 489.07 50

2007 310.88 -41.546

2008 304.81 -8.456

2009 398.26 13.345

2010 469.26 75.546


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CALCULATIONOFTREND PROJECTION

EQUATIONFORPROFIT:

t S t^2 Sxt

(in million euros)

1 75 1 75

2 13 4 26

3 -8 9 -24

4 -41 16 -164

5 50 25 250

6

40

36

240

7 6 49 42

8 10 64 80

9 10 81 90

t= 45 S = 155 t^2 = 285 Sxt = 615

Putting above values in & we get-

P = 30.58 b = -2.67

AS, P(t) = S + bt

Therefore, P(t) = 30.58 + (-2.67)t

Thus, forecasted sales for the year 2011 is found by putting t=10 in

the above equation.

So, for the year 2010,

P(t)=3.88


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ACTUAL PROFIT FORECASTED PROFIT

2002 10.483 27.9

2003 10.553 25.24

2004 6.25 22.57

2005 40 19.9

2006 50 17.23

2007 -41.546 14.56

2008 -8.456 11.89

2009 13.345 9.22

2010 75.546 6.55

2011 3.97

-60

-40

-20

0

20

40

60

80

100

2002 2003 2004 2005 2006 2007 2008 2009 2010 2011

ACTUAL PROFIT

FORECASTED PROFIT


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CALCULATIONOF TREND PROJECTION EQUATION FOR

SALES

t S t^2 Sxt

(in million euros)

1 469 1 469

2 398 4 296

3 304 9 914

4 310 16 1240

5 489 25 2445

6 388 36 2328

7 412 49 2884

8 407 64 3256

9 379 81 3411

t = 45 S = 3556 t^2 = 285 Sxt = 17743

Putting above values in 1 & 2 we get-

S = 398.2 b = -0.62

AS, S(t) = S + bt

Therefore, S(t) = 398.2 + (-0.62)t

Thus, forecasted sales for the year 2011 is found by putting t=10 in

the above equation.

So, for the year 2010,

S(t)=392


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ACTUAL SALES FORECASTED SALES

2002 379.53 397.58

2003 407.82 396.96

2004 412.97 396.34

2005 388.24 395.72

2006 489.07 395.10

2007 310.88 394.48

2008 304.81 393.86

2009 398.26 393.24

2010 469.26 392.62

2011 392.00

0

100

200

300

400

500

600

2002 2003 2004 2005 2006 2007 2008 2009 2010 2011

ACTUAL SALES

FORECASTED SALES


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The Problem of an adverse Balance ofPayments (BoP)

India has a chronic deficit on current accounts. What bridges thegap between payments and receipts is mainly external aid tourismearnings, and remittances from Indians working abroad. Heavyimports of food grains and armament purchases caused a declinein India's foreign exchange reserves in the mid-1960s.

By November 1993, however, India's foreign exchange reserveshad risen to $8.1 billion, the highest level since 1951. A substantialreduction in the trade deficit, increased inflows from foreigninstitutional investors, a stable exchange rate, and improvedremittances all contributed in the recovery of reserves.In the early 2000s, India's exports to East and Southeast Asiaincreased, including to Japan and South Korea. High growth rates

were registered for textiles, chemicals and related products,engineering goods, and leather and manufactures.

The Balance of Payment deficit in accounts for India hasincreased for the year 2008-2009. For the fiscal '08-09, the

balance of payment deficit went up to $20 billion from a surplusof $92 billion in 07-08, implying that the country hasreceived far less dollar in the last fiscal than the yearbefore. The modes through which dollars leave the country are inthe form of foreign loans, higher remittance by NRIs and serviceexports, besides the trade exports and also when FIIs pull out.

The amount received from selling goods and services to foreigncountries as compared to the payments made to buy haveincreased between January and March 2009 for India. Currentaccount which captures the trade flows has shown a surplus of$4.75 billion during the quarter as against a deficit of $1.5 billion


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in the year-ago period.

India's balance of payment surplus the sum of current and capitalaccounts, has dropped to as low as $300 million. It is low, as

compared to $24.99 billion in the comparable previous period, asper the dollar outflow on account of FII selling in the stock marketand repayment of short-term foreign currency loans by localcorporates.

Analysts identify the current account deficit which will putdownward pressure on the Indian rupee alongside double-digitinflation as the biggest challenges for the Indian economy.

Indias current account deficit has widened in the past year asfast-paced economic growth drives greater demand for importedgoods, and is forecast to grow larger in the year ahead.One reason, the central bank said, for the deteriorationin the balance of payments was a decline in aninvisibles surplus, caused in part by falling revenues toIndias prized outsourcing sector.Indias current account deficit, the largest among Bric countries,could hit 3 per cent in the coming months to extend the widest

margin for three decades.Although India is unlikely to face difficulties financing its currentaccount deficit provided one of the fastest growing largeeconomies attracts capital inflows, some senior policymakers haveurged action to reduce the deficit.They warn that although the Indian economy is forecast to grow at8.5 per cent this year, it is imprudent to widen the deficit at a timeof global economic uncertainty and financial volatility.

A current account deficit occurs when a country'simports of goods and services is greater than its exportsof goods, services and transfers. A wide current account


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deficit is not necessarily a bad thing for a fast-growingdeveloping country provided that it is attempting to boost localproductivity and exports.Brazils current account deficit has widened to $43.76bn, or

about 2.24 per cent of GDP, on strong demand for imports. Datareleased this week showed that Brazil had also suffered a steep fallin foreign exchange inflows.China and Russia, by comparison, both run current accountsurpluses.


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The Solutions

Solution to correct balance ofpayment disequilibrium lies in earning more foreignexchange through additional exports or reducingimports. Quantitative changes in exports and imports requirepolicy changes. Such policy measures are in the form of monetary,fiscal and non-monetary measures.

Monetary Measures for Correcting the BoP

The monetary methods for correcting disequilibrium in thebalance of payment are as follows-

1. Deflation

Deflation means falling prices. Deflation has been used as ameasure to correct deficit disequilibrium. A country faces deficit

when its imports exceeds exports.

Deflation is brought through monetary measures like bank ratepolicy, open market operations, etc or through fiscal measureslike higher taxation, reduction in public expenditure, etc.Deflation would make our items cheaper in foreign marketresulting a rise in our exports. At the same time the demands forimports fall due to higher taxation and reduced income. This

would build a favourable atmosphere in the balance of paymentposition. However Deflation can be successful when the exchange

rate remains fixed.


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2. Exchange Depreciation

Exchange depreciation means decline in the rate of exchange ofdomestic currency in terms of foreign currency. This device

implies that a country has adopted a flexible exchange rate policy.Suppose the rate of exchange between Indian rupee and US dollaris $1 = Rs. 40. If India experiences an adverse balance ofpayments with regard to U.S.A, the Indian demand for US dollar

will rise. The price of dollar in terms of rupee will rise. Hence,dollar will appreciate in external value and rupee will depreciatein external value. The new rate of exchange may be say $1 = Rs.50. This means 25% exchange depreciation of the Indian

currency.Exchange depreciation will stimulate exports and reduce importsbecause exports will become cheaper and imports costlier. Hence,a favourable balance of payments would emerge to pay off thedeficit.3. DevaluationDevaluation refers to deliberate attempt made by monetaryauthorities to bring down the value of home currency againstforeign currency. While depreciation is a spontaneous fall due tointeractions of market forces, devaluation is official act enforced

by the monetary authority. Generally the international monetaryfund advocates the policy of devaluation as a corrective measureof disequilibrium for the countries facing adverse balance ofpayment position. When India's balance of payment worsened in1991, IMF suggested devaluation. Accordingly, the value of Indiancurrency has been reduced by 18 to 20% in terms of variouscurrencies. The 1991 devaluation brought the desired effect. The

very next year the import declined while exports picked up.When devaluation is effected, the value of home currency goesdown against foreign currency, Let us suppose the exchange rateremains $1 = Rs. 10 before devaluation. Let us suppose,devaluation takes place which reduces the value of home currencyand now the exchange rate becomes $1 = Rs. 20. After such a


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change our goods becomes cheap in foreign market.This is because, after devaluation, dollar is exchanged for moreIndian currencies which push up the demand for exports. At thesame time, imports become costlier as Indians have to pay more

currencies to obtain one dollar. Thus demand for imports isreduced.Generally devaluation is resorted to where there is serious adverse

balance of payment problem.4. Exchange ControlIt is an extreme step taken by the monetary authority to enjoycomplete control over the exchange dealings. Under such ameasure, the central bank directs all exporters to surrender their

foreign exchange to the central authority. Thus it leads toconcentration of exchange reserves in the hands of centralauthority. At the same time, the supply of foreign exchange isrestricted only for essential goods. It can only help controllingsituation from turning worse. In short it is only a temporarymeasure and not permanent remedy.


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Non-Monetary Measures forCorrecting the BoP

A deficit country along with Monetary measures may adopt the

following non-monetary measures too which will either restrictimports or promote exports.

1. Tariffs

Tariffs are duties (taxes) imposed on imports. When tariffs areimposed, the prices of imports would increase to the extent oftariff. The increased prices will reduced the demand for imported

goods and at the same time induce domestic producers to producemore of import substitutes. Non-essential imports can bedrastically reduced by imposing a very high rate of tariff.

2. Quotas

Under the quota system, the government may fix and permit themaximum quantity or value of a commodity to be importedduring a given period. By restricting imports through the quotasystem, the deficit is reduced and the balance of paymentsposition is improved.Types of Quotas :-

ythe tariff or custom quota,ythe unilateral quota,

ythe bilateral quota,

ythe mixing quota, andyimport licensing.


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3. Export Promotion

The government can adopt export promotion measures to correctdisequilibrium in the balance of payments. This includes

substitutes, tax concessions to exporters, marketing facilities,credit and incentives to exporters, etc.The government may also help to promote export throughexhibition, trade fairs; conducting marketing research & byproviding the required administrative and diplomatic help to tapthe potential markets.

4. Import Substitution

A country may resort to import substitution to reduce the volumeof imports and make it self-reliant. Fiscal and monetary measuresmay be adopted to encourage industries producing importsubstitutes. Industries which produce import substitutes requirespecial attention in the form of various concessions, which includetax concession, technical assistance, subsidies, providing scarceinputs, etc.Non-monetary methods are more effective than monetary

methods and are normally applicable in correcting an adversebalance of payments.


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CONCLUSION

MACROECONOMICS:

Indias economic policies and performance are constantlyunder the spotlight, considering its consistent pattern ofgrowth and development, its sectoral development and theconstant predictions of its emergence as the new world

superpower.However, there are several problems that remain to betackled; poverty, illiteracy, unemployment, high foreigndebt, poor rural infrastructure, fiscal/budgetary deficitsetc. Another very important issue, a crushing balance ofpayment deficit, is what addressed through his project.What emerged from our research was the picture of a

system that has yet to develop completely and tie up allloose ends and still relies to quite a large extent upon anantiquated ethic beleaguered by necessitated demands.However, despite pessimistic projections of a burgeoningcurrent account deficit of almost 15% of GDP, we believethat if the aforementioned solutions are adhered to, itwould lead to a decrease in the deficit to about 4% of GDPby 2020.

In conclusion, this was an enlightening project for all of us

and has clearly shown the power and potential of

economic understanding on each


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and every level of the modern world.

MICROECONOMICS:

In the end we would like to conclude that Ducati since its

establishment has been on non stable path. Whenever theylaunch some new model the sales and profit both increases

significantly but in due course of time the sales and profit

fluctuate between high and low sales.


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BIBLIOGRAPHY

y Managerial Economics, (Fourth edition) H.CraigPetersen, W. Cris Lewis.

yAnnual reports Levis Strauss & Co.

ywww.wikipedia.comy www.google.com

ywww.wikipedia.org

y Managerial Economics by Craig H Petersen

y Managerial Economics by Dwivedi

y Managerial Economics by Yogesh Maheshwari

eco project sem 3

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