Accounting Users And Characteristics Of Financial Statement Accounting Essay

1.0 IntroductionSai Kim, T. et al. , 2001, pg 1, said that â€Å" accounting is the procedure of recording, coverage, and construing fiscal information pertaining to an organisation. Accounting is frequently baffled with book-keeping, which involves merely the recording of economic events and is hence merely one portion of the accounting procedure † . Undertaking 1 is about the different users and their demands for Continental Limited fiscal statements. Accounting users divided into two users, it is internal users ( people within the organisation ) and besides external users ( people outside the organisation ) who use history to deduce fiscal information for their demands. Besides that, the features of these fiscal statements will supply utile information to the users. Continental Limited has an authorized portion capital of 1 million ordinary portions RM1 each. It operates sweeping and retail concern of selling a consumers merchandise. In undertaking 2, prepare the income statement and balance sheet of Continental Limited for twelvemonth stoping 31 Dec 2010 for the internal usage by company manager or publication. Income statement it is made by company at the terminal of each twelvemonth to cipher the net income and loss incurred in concern during the twelvemonth. While, balance sheet it is made by company at the terminal of each twelvemonth to enter the capital, assets, and liabilities of company at the terminal of the twelvemonth. In undertaking 3, prepare the income statement and balance sheet of Continental Limited for twelvemonth stoping 31 Dec 2010 in the recognized format for external coverage or publication. Distribution cost normally defined as the costs incurred to present the merchandise from the production unit to the terminal user. Besides that, administrative disbursals is refer to the costs of runing a concern that are non straight attributable to the production of goods or services. In undertaking 4, must establish on the income statement and balance sheet made in undertaking 2 and 3. Then, cipher the appropriate accounting rations for twelvemonth stoping 31 Dec 2010 and besides necessitate to compare them with the industry norms provided to measure the profitableness and liquidness of Continental Limited.2.0 Accounting users and Features of fiscal statementAccounting information helps users to do better fiscal determinations in the organisation. There have two different types of users in the fiscal information, there are internal users ( people within the organisation such as direction, employees, and proprietors ) and besides external users ( people outside the organisation such as creditor, revenue enhancement governments, investors, and clients ) who use history to deduce fiscal information for their demands. There besides have five regulative features of fiscal statement that will supply utile information to the users. These standards must be fulfilled to do the fiscal statements and histories that are utile to the users. Therefore, company should seek to fulfill the undermentioned standards when choosing and following the accounting constructs in fixing concern fiscal histories.2.1 Accounting usersThere have five different users and their demand for Continental Limited fiscal statements. The fiscal histories supply a wealth of information that is utile to assorted users of fiscal information. Investor is worried about hazard and return in relation to their investings. They need accounting information to cognize whether it is deserving for them to put in a concern or purchasing portions of the company. In add-on, client and debitor are the people who purchase goods and services provided by the company. They need accounting information about the company ‘s fiscal stableness to guarantee that the company is a unafraid beginning of supply and no danger of holding to shut down. As a clients of the company ‘s merchandises, they have a long-run concentration in the company ‘s scope of the merchandises and services. They may even hold to depend on the concern for certain merchandises and services. Besides that, a director is the individual appointed by the company proprietors to responsible for planning and directing the work of a group of persons, supervising the daily work of the company. They need accounting information about the company ‘s fiscal state of affairs as it is presently and as it is expected to be the hereafter to enable them to pull off the concern expeditiously and to do effectual control and planning determinations. Another accounting user is providers or creditor, the people who provide merchandising goods and services to the company on recognition. So, they need accounting information about the company ‘s ability to pay its debts for guaranting their aggregation from the company. The creditors include providers every bit good as loaners of the finance such as Bankss. Furthermore, employee of the company is people employed by the company to transport out concern activities. Therefore, they need accounting information about the company ‘s fiscal state of affairs. This is because, their future callings and the size of their rewards and wages depend on it. Therefore, employees need information refering the stableness and go oning profitableness of the organisation. In the decision, accounting users is of import to the organisation. This is because, the fiscal histories supply information that is utile to assorted users of fiscal information.2.2 Features of fiscal statementFirst is understandability, it means that the fiscal statements must easy to comprehensible. Users of fiscal statements are assumed to hold adequate cognition of concern, economic activities and accounting to analyze the information decently. Harmonizing to Helium.com ( 2010 ) , said that â€Å" understandability ensures that a user equipped with the basic cognition can spot information refering to the public presentation and fiscal place of an endeavor † . Besides that, the feature of the fiscal statement is comparison. The fiscal histories made based on accounting constructs should be comparable within the entity and across entities. Comparability within the entity is means that the fiscal statements can be compared with the old twelvemonth fiscal statements of the same company. While, comparison across entities is means the fiscal statement can be comparable with the history of other company. Another feature of the fiscal statement is relevancy. The fiscal histories prepared based on accounting constructs and policies should show relevant fiscal information which is capable of act uponing the economic determination of the users. Therefore, fiscal statements are for users to do economic determinations, the information must be relevant to the determinations that those users have to do. In add-on, relevant fiscal statements are seasonably, if the histories are prepared to supply required information in clip, it is relevant to the determination devising of the user. Contrary, if the histories are no prepared to supply information in clip, it is non relevant to the determination devising of the user. Furthermore, the feature of fiscal statement is dependability. Fiscal history must show dependable information to the users for determination devising. Harmonizing to SpiffyD ( 2012 ) , reference that â€Å" harmonizing to ACCA, â€Å" dependable † information does non incorporate mistakes that affect the economic determinations of users, nor is it biased or partial. This property is linked to faithful representation, since users should be able to handle with it as such. Users have assurance in dependable fiscal statements. Such statements are non misdirecting or intentionally constructed in a mode that could skew determinations or perceptual experience of the fiscal place or public presentation of an entity. It is deserving observing that the importance of auditing is increasing because it reinforces dependability † . In add-on, the feature of the fiscal statement is accuracy. The fiscal history must supply accurate fiscal information to the users for determination devising. The ground is, the inaccurate history information will take to inaccurate determination made by the user.3.0 Income Statement and Balance SheetIncome statement it is made by company at the terminal of each twelvemonth to cipher the net income and loss incurred in concern during the twelvemonth. Harmonizing to Steven Mark, L. , 2003, pg 25, he said that â€Å" the income statement besides referred to as a profit-and-loss statement, summarizes the company ‘s grosss, disbursals, additions, and losingss for a period of clip, such as three months or one twelvemonth † . While balance sheet it is made by company at the terminal of each twelvemonth to enter the capital, assets, and liabilities of company at the terminal of the twelvemonth.3.1 Working for note inquiry a to hClosing stock should be recorded at cost or net r esale value which one is lower. Since cost RM65000 & lt ; net resale value RM70000, the cost RM65000 should be shuting stock value put in the trading history of income statement and under the current plus in balance sheet. Cash Account RM RM Gross saless 5000 Purchase 4000 Stationery 700 Electricity 300 5000 5000 Gross saless in trading history of income statement = RM360000 from TB + RM5000 = RM365000 Purchase in merchandising history of income statement = RM200000 from TB + RM 4000 = RM 204000 Stationery as disbursal put in P/L history of income statement = RM7000 from TB + RM300 = RM7300 Gross saless committee as disbursal put in P/L history of income statement = RM18000 paid from TB + RM1500 accrued at terminal of twelvemonth = RM 19500 Then, accrued gross revenues committee RM1500 is recorded under the current liability in balance sheet Office wages as disbursal put in P/L history of income statement = RM28000 paid from TB – RM 2000 prepaid at terminal of twelvemonth = RM26000 Then, prepaid office wage RM2000 is recorded under the current plus in balance sheet Debtor Account RM RM Balance b/d 75000 ( – ) Bad debts 5000 Balance c/d 70000 75000 75000 Balance b/d 70000 Bad Debts Account RM RM Debtor 5000 P/L history 5000 ( Bad debts as disbursal put in P/L history ) Provision for bad debts shuting balance = 10 % ten Debtor shutting balance RM70000 = RM7000 Provision for Bad Debts Account RM RM 31 Dec 2010 Closing balance c/d 7000 1 Jan 2010 Opening balance b/d 5000 Increase different 2000 ( As disbursal put in P/L history ) 7000 7000 1 Jan 2010 Balance b/d 7000 and degree Fahrenheit ) Vehicles Account RM RM Balance b/d 300000 Vehicles Account a/c ( cost sold ) 50000 Balance c/d 250000 300000 300000 Balance b/d 250000 Provision for Depreciation on Vehicle Account RM RM Vehicle disposal history 12500 1 Jan 2010 Opening balance b/d 60000 ( Cost sold RM50000 x 5 % x 5 twelvemonth from 1 Jan 2005 to 1 Jan 2010 ) 31 Dec 2010 Balance c/d 60000 Depreciation as disbursal put in P/L 12500 history ( Vehicles shuting balance RM250000 x 5 % ) 72500 72500 1 Jan 2011 Balance b/d 60000 Vehicle Disposal Account RM RM Vehicle cost sold 50000 Provision for depreciation on 12500 vehicle sold Returns from disposal of vehicle 35000 Difference for Loss on disposal of 2500 vehicle ( As disbursal put in P/L history ) 50000 50000 Provision for Depreciation on Premises Account RM RM Balance c/d 5400 1 Jan 2010 Opening balance b/d 40000 Depreciation as disbursal put in 14000 P/L history ( Premisess cost from TB RM350000 x 4 % ) 54000 54000 Balance b/d 54000 g ) Taxation charge RM15300 is deducted from net net income at the underside of income statement. It is besides recorded as accumulated revenue enhancement RM15300 under current liability in balance sheet H ) Proposed divided to be deducted from net net income at the underside of income statement = 2 % x RM500000 Share capital from TB = RM 10000 Then, the proposed divided RM10000 is recorded under current liability in balance sheet.3.2 Income statement of Continental Limited for twelvemonth stoping 31 Dec 2010 for internal usageIncome Statement of Continental Limited for Year Ending 31 Dec 2010 for Internal Use RM RM RM Gross saless 365000 Less Return inwards 10000 Net gross revenues 355000 Less Cost of gross revenues: Opening stock 50000 + Purchases 204000 – Tax return outwards 15000 + Carriage inwards 5000 194000 Less Closing stock 65000 179000 Gross net income 176000 Add Income: Dividend received 5000 181000 Less Expense: Stationery 700 Office electricity & A ; H2O 7300 Office salaries 26000 Gross saless committee 19500 Bad debts 5000 Addition in proviso for bad debts 2000 Loss on disposal of vehicle 2500 Depreciation on vehicles 12500 Depreciation on premises 14000 Vehicle expense 12000 Interest charges 3000 104500 Net net income 76500 Less Taxation charge 15300 Less Proposed dividend 10000 Net income for the twelvemonth 51200 Add Retained net incomes brought frontward 100000 Retained net incomes carried frontward 1512003.3 Balance sheet of Continental Limited as at 31 Dec 2010 for internal usageBalance Sheet of Continental Limited as at 31 Dec 2010 for Internal Use RM RM Fixed assets / Non-current assets Office premises at cost 350000 ( – ) Provision for depreciation on premises 54000 296000 Vehicle at cost 250000 ( – ) Provision for depreciation on vehicle 60000 190000 Long-run investings 100000 586000 Current assets Closing stock 65000 Debtors 70000 ( – ) Provision for bad debts 7000 63000 Bank 42000 Prepaid office wage 2000 172000 758000 Issued portion capital Share capital 500000 Add Reserve Retained net incomes carried frontward 151200 Stockholders ‘ equity 6512000 Add Long-term liabilities / Non-current liability Loan 55000 Add Current liabilities Creditors 25000 Accrued gross revenues committee 1500 Accrued revenue enhancement 15300 Proposed divided 10000 51800 7580004.0 Distribution costs and Administrative disbursalsDistribution costs besides known as distribution disbursals. Distribution cost normally defined as the costs incurred to present the merchandise from the production unit to the terminal user. The distribution cost is points such as gross revenues staff ‘s wages and committee, passenger car outwards, depreciation of bringing new waves, advertisement and show disbursals. Harmonizing to Readyratios.com ( 2011 ) , reference that â€Å" administrative disbursals refer to the costs of runing a concern that are non straight attributable to the production of goods or services. Administrative disbursals are related to the organisation as a whole as opposed to the single sections † . Administrative disbursals consist of such points as wages, legal and accounting charges, the depreciation of accounting machinery, public-service corporations, rent, and housework charges.4.1 Classify the disbursals into distribution cost and administrative disbursalsDistribution costs Administrative disbursals RM RM Stationery – 700 Office electricity – 7300 Office salaries – 26000 Gross saless committee 19500 – Bad debts 5000 – Addition in proviso for bad debts 2000 – Loss on disposal of vehicle 2500 – Depreciation on vehicle 12500 – Depreciation on premises – 14000 Vehicle disbursals 12000 – Entire 53500 480004.2 Income statement of Continental Limited for twelvemonth stoping 31 Dec 2010 for external coverageIncome Statement of Continental Limited for Year Ending 31 Dec 2010 for External Reporting RM RM Employee turnover 355000 Cost of gross revenues 179000 Gross net income 176000 Distribution cost 53500 Administrative disbursals 48000 101500 Operating net income 74500 Dividend received 5000 79500 Interest charges 3000 Net income on ordinary activities before revenue enhancement 76500 Taxation charge 15300 Net income on ordinary activities after revenue enhancement for the twelvemonth 61200 Proposed dividend 10000 Retained net income for the twelvemonth 51200 Retained net income bought frontward 100000 Retained net income carried frontward 1512004.3 Balance sheet of Continental Limited for the twelvemonth stoping 31 Dec 2010 for external coverageBalance Sheet of Continental Limited for the Year Ending 31 Dec 2010 for External Reporting RM RM RM Fixed Assetss Tangible Assetss: Premisess 296000 Vehicle 190000 486000 Investing: Long term investing 100000 586000 Current Assetss Stock 65000 Debtors 63000 Prepaid office wage 2000 130000 Cash at bank 42000 172000 Less Creditors: Sums Falling Due Within One Year Creditor 25000 Accrued gross revenues committee 1500 Accrued revenue enhancement 15300 Proposed dividend 10000 ( 51800 ) Net current Assetss 120200 Entire Assets Less Current Liabilities 706200 Less Creditor: Sums Falling Due After More Than One Year Loan ( 55000 ) 651200 Capital and Reserve Called up portion capital 500000 Net income and Loss history 151200 6512005.0 Accounting ratiosAccounting ratios is used to specify of import relationship between the figures shown on a balance sheet, in a net income and loss history or in any other portion of accounting organisation. Therefore, accounting ratios shows the relationship between accounting informations.5.1 Table of ratio computationRatio with expression Ratio computation for twelvemonth 2010 Industry norm Percentage of gross net income on gross revenues = Gross net income x 100 176000 ten 100 = 49.58 % 30 % Net gross revenues 355000 Percentage of operating net income on gross revenues = Operating net income x 100 74500 ten 100 = 20.99 % 18 % Net gross revenues 355000 Capital employed = Closing capital + Long-term liabilities = ( Fixed assets + Current assets ) -Current liabilities = ( RM586000+RM172000 ) -RM51800 = RM758000-RM51800 = RM706200 Tax return on capital employed ( ROCE ) = ( Net net income + Interest charges ) x 100 76500 + 3000 x 100 9 % Entire assets – Current liabilities 758000 – 51800 = 79500 tens 100 706200 = 11.26 % Current ratio = Current assets = 172000 2: 1 Current liabilities 51800 = 3.32: 1 Stock turnover = Cost of gross revenues Average stock value = Cost of gross revenues = 179000 ( Opening stock + Closing stock ) / 2 ( 50000 + 65000 ) / 2 = 179000 57500 =3.11times Stock turnover period 365 yearss = 365 yearss 90 yearss Stock turnover 3.11 times = 117.36 yearss Debtor aggregation period = Debtor = RM63000 Net recognition gross revenues RM365000 – RM 10000 = Debtor = RM63000 Gross saless – return inwards RM355000 = 0.1777: 1 Debtors collection period = Debtor ratio x 365 yearss =0.177 x 365 yearss 45 yearss =64.6 yearss Creditor ratio = Creditor = 25000 Net recognition purchase 204000 – 15000 = Credit = 25000 Purchase – Tax return outwards 189000 = 0.132: 1 Creditors payment period = Creditor ratio x 365 yearss = 0.132 ten 365 yearss 60 yearss = 48.18 yearss5.2 Profitableness of Continental LimitedThe per centums of gross net income on gross revenues is 49.58 % is higher than industry norm is 30 % because the company is uneffective and inefficient in buying goods and services from the providers doing higher purchase cost and besides uneffective usage of stuff and labor causation higher production cost to diminish gross net income. In add-on, per centum of operating net income on gross revenues is 20.99 % and industry norm is 18 % . Higher per centum of operating net income on gross revenues indicates that company is uneffective in its outgo control. Besides that, ROCE besides higher than industry norm is 20.99 % and 18 % . This is because, it is bespeaking the lower net net income generated in relation to the capital employed.5.3 Liquid of Continental LimitedCurrent ratio of company is higher than industry norm is 3.32: 1 and 2: 1which is much that the thought ratio of 2: 1, the current ratio is higher or equal to 2: 1, th e larger sum of current assets can be used to finance current liabilities, bespeaking that company is financially stable and able to finance its short-run debts. Furthermore, the stock turnover period is higher than the industry norm is 117.36 yearss and 90 yearss. The higher stock turnover period indicate fast stock turnover in concern where the goods and services purchased are kept in stock for a short clip and the fast stock for short clip and so fast taken out from stock for resale. In add-on, debitor aggregation period is higher than industry norm is 64.6 yearss and 45 yearss. Higher of debitor aggregation period indicate that company has given longer recognition clip to let debitor ‘s owing, causation, longer clip taken by company to roll up money. While, the creditor payment period is lower than industry norm is 48.18 yearss and 60 yearss. The lower creditor payment period show that company has obtained shorter recognition clip for having and paying creditors.6.0 Conclu sion and RecommendationIn the decision, making this rule of accounting assignment I have learnt a batch of cognition about the rule of history. I already know the different types of accounting users and besides the features of the fiscal statement. Besides that, making this assignment besides has larn how to fix the income statement and balance sheet. The benefit I get from this assignment is larning accounting will assist us to makes concern or personal fiscal determinations. Another benefit is accounting cognition will assist us to understand the significance of the fiscal information.

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FDI in Sudan agriculture - Research Paper Example However, in subsidiaries, more than 50% of the voting rights must be controlled by the parent company. Foreign direct investment in which the parent enterprise cannot exercise control over the affiliate enterprise is basically termed as a portfolio investment (Organization for Economic Co-operation and Development, 2009, pg 17). Moreover, FSI stimulates economic growth in host countries of the affiliate companies. Host countries therefore undertake to attract foreign investors by introducing tax breaks, specific grants and incentives, investment regulation relaxation and enforcing low interest rates on loans to foreign investors. Foreign Direct Investment in Developing countries, Africa and Sudan Foreign direct investment has in the past few years grown considerably, particularly in developing countries’ agricultural sector. Foreign investors view developing countries to have exceptional potential of economic growth. Primarily, multinational companies have significantly increa sed foreign investments in developing countries because of the competitive advantage in their investments. Currently, foreign direct investment in developing countries constitutes sixty one percent of total foreign investments. ... In a move to promote foreign investment in agricultural sector, African governments have undertaken structural adjustment and liberalization of policies to sourcing and marketing inputs and outputs of agriculture both locally and internationally. The governments have also introduced export-processing zones in targeting foreign investors in the agricultural sector (Basu, et al, 2002, pg 12). FDI and Development: Review of the literature Forms of International Investment in Developing Countries International investors may enter foreign markets through trade, foreign direct investment, or international licensing of technology and intellectual property such as copyrights and patents. Each of the above forms is characterized by different levels of involvement, managerial requirements, and commitment in a foreign market (Schaffer, Agusti, and Earle, 2008, pg 6). Trade in foreign markets usually has the least political and legal risks due to its limited involvement in the foreign economy es pecially in the case where a transnational corporation is maintaining sales agents over seas. Trade is used by investors to import items not readily available in the country and export items that are in plenty or not needed. In addition, foreign governments may regulate trade by enacting laws, policies, and import duties. Licensing of technology and intellectual property are substantial assets with legal rights to artistic or written works, name and government grants owned by domestic and international firms. Lastly, foreign direct investment refers to ownership and active control of productive assets by an investor in a foreign country with the expectation of making profits both in the short run and in the long run. Land and environmental

In pregnant patients, does the use cabbage leaves decrease the Research Paper

In pregnant patients, does the use cabbage leaves decrease the incidence of breast engorgment as well as the application of brea - Research Paper Example However, this paper intends to analyze the effectiveness of swift nursing interventions along adequate patient teaching in relieving engorgement compared to the use of binders. After the comparison, the paper will highlight the best alternative for relieving engorgement. Research Question The research question in this case was to analyze whether the swift action from nurses in offering support pregnant patients before and immediately after delivery can help them in handling engorgement. On the other hand, the paper will analyze the efficiency of breast binders in minimizing the pain brought about by the condition. Mothers face a lot of anxiety after birth, and often need reassurance from informed nurses that they can handle the breastfeeding experience. The action from nurses also involves highlighting the crucial breastfeeding tips to mothers. Therefore, the intervention from nurses must come along adequate patient teaching. This research seeks to examine whether both medical and no n-medical support from nurses is more efficient in reducing breast engorgement in comparison to the advocated use of breast binders. The Search Process The EBSCO database proved to be a reliable source because it provides a wide range of resources. However, it was essential to customize the advanced search settings in order to get access to the most relevant range of articles. Therefore, limits for results included full text research articles, peer reviewed and from journals. Moreover, other limits included customizing the geographical setting to United States of America and limiting the search to articles dated 2007 to 2012. The search words were ‘breast engorgement’. Numerous articles addressing this issue appeared. Among these articles, five proved relevant to the issue and served as reliable sources for this search. The use of CINAHL database proved very resourceful because of the vast collection of nursing articles from renowned journals. How Engorgement Results In the first few days after birth when the baby begins to breastfeed, the milk may not flow easily. In this initial phase of the breastfeeding process, colostrum flows out to supply the baby with both nutritional and immunological components. However, its flow presents irregularities. At first, the mother may not succeed to feed the baby despite her efforts. However, with time the milk may flow to the breast in large amounts. The sudden inflow may cause the breast to swell and become tender. For many mothers, the breastfeeding experience ranging from the anxieties to the pain of engorgement may prove unbearable. Strong (2011) highlights that the pain of engorgement may extend for the initial six days under normal cases, but pain occurring beyond the first week of breastfeeding has other causes. A pregnant patient will require this knowledge prior to delivery. Critical understanding of the causes and remedies of engorgement is an important aspect to each pregnant patient. The pregnant patient requires relevant information concerning the implications of both natural birth and caesarian option concerning engorgement. Nurse Interventions and Adequate Patient Teaching According to Martucci (2012), the entire procedure of initiating breastfeeding can be a lot easier if nurses present the mothers with relevant informat

Supporting Activity Essay Example | Topics and Well Written Essays - 250 words

Supporting Activity - Essay Example th the influx of computer hackers in the market, that information is no longer as safe as earlier thought of and hence it is important to protect it from hackers who sell it to competitor organizations. Confidentiality is also another reason for increasing the security of the information especially from clients (whether high ranking, celebrities or just the local citizen). Unauthorized access to information especially concerning records of medical health or financial records can damage the credibility of the organization and even tarnish the name of the owner and especially if the information is accessed by the wrong people. One of the basic elements is passwords to protect the information. The key to making this effective is in the strength of that password and ensuring that it cannot be easily cracked or hacked into. There is also encryption of most important or sensitive information in the organization. The information is kept in codes whose decryption key lies with the top management or clients of the organization who are the owners of the information (Wilshusen, 2011). There are also asset tracking software and devices that keep track of all the information and where it goes and if it falls to the wrong hands, alarm is raised and hence shut down is necessitated. There are also authentication systems which ensure that only authorized personnel access information and the information is protected from malware like viruses and scam

Memorandom to the Minister- Water Policy alternatives Essay

Memorandom to the Minister- Water Policy alternatives - Essay Example tegy which can balance the domestic needs of the country as well as ensure that Water can serve as one of the lucrative commodity for the country and a mean to earn foreign exchange. This memorandum therefore will provide a brief discussion on the need for having a new water strategy and what economic options may be set to effectively utilize water resources of the country in most optimal manner. Over the period of time Canada has developed a very good market for its water in international markets. However, despite the benefits which country is availing by exporting its water, there is a growing concern that if same practices are continued, the domestic needs of the country for its agriculture as well as domestic purposes may not be fulfilled. There is therefore a greater need for the development of new water strategy which can balance both the objectives and help utilize the natural resources of the country in most optimal manner. (CBC News) 1. New Policy completely put restrictions on the export of the water out of the country in order to fulfill the domestic needs and ensure sustainable levels of water availability for long run. This will however, restrict the country’s ability to generate sufficient foreign exchange and thus may put adverse impacts on its trade balance. (Raider) 2. It is also possible to discuss the possibility of implementing tariffs or quota on the export of water from the water. Imposition of the quote however may result into higher domestic prices for the water. 3. New policy may set the different price alternatives for both the domestic and export use of the water. Further, export duties shall be applied in order to make the export of Canada’s water more expensive for foreign buyers. Minister shall recommend and lobby for the development of a joint forum which can evaluate the domestic needs for the water and develop set of recommendations which can provide a balance assessment of demand and supply of water and how excess water

Student Spending Essay Example for Free

Student Spending Essay Abstract We used a stratified random sample to examine the spending patterns of a traditional student population at one large residential university in a small Midwestern town. Juniors and seniors spent more than underclassmen on recreation, food, general merchandise, and miscellaneous items. Male students spent more on recreation (40 percent more) while females outspent males on books and school supplies. Off-campus residents spent about twice as much on recreation, as well as more on food and for general merchandise. Those paying all their college expenses spent more overall and on general merchandise, food, and utilities. Students paying none of their college expenses spent less overall and less on gasoline and total miscellaneous items. Students who worked spent more overall and more in the following areas: general merchandise, food, utilities, and telecommunications. We also examined budget shares. Overall, books and recreation spending tend to be fixed as total spending increases, thereby reducing budget shares for these items. Women devote larger shares of their budget on  general merchandise, while men favor recreation. Students who pay none of their college expenses spend relatively more on recreation and books. Working students devote larger shares of their budget on rent and telecommunications. Non-working students spend relatively more on recreation and books. These results should be interpreted with caution since they represent a case study and do not apply to all university settings. Introduction Spending by college students has been identified as an important component of total consumer spending in the United States. One marketing firm estimated that â€Å"traditional† college students, i. e. , full-time students enrolled in fouryear institutions, who represent about one-third of all students, spent $23 billion in 1995 on essential items such as rent, food, gas, car insurance, tuition, and books. Another $7 billion was spent on nonessentials (Ring 1997). Spending by college students may be very important to local communities because many residential colleges are large relative to the size of their host community. These colleges are often seen as important players in the local economy through current spending and employment and also as potential catalysts for local economic development (Onear, 2007). Many universities have conducted economic impact studies to measure the overall influence the institution has on the local economy (Bailey et al. , 2007; Beck, 1995; Eliot 1988; Felsenstein, 1996). What is sometimes underplayed is the role of students in determining the overall size and industry mix of the local economy. Local economic impact studies often use figures for student spending derived from secondary sources such as financial aid office estimates of the dollars needed by students for miscellaneous expenditures during the year. More precise information on the magnitude and pattern of student spending would improve the accuracy of studies of universities’ economic impact. In this paper we analyze the spending behavior of traditional college students, who account for a large portion of the revenues of many local businesses in small towns hosting residential colleges. Although total spending by a student is often less than that of a local resident, student spending is concentrated in just a few areas, such as entertainment and food and beverage purchases in stores. In addition, many national retailers view traditional college students as a lucrative market since lifetime buying habits are formed in part during a person’s college years. Spending behaviors established in college may continue through two transition phases: single to young married couple, and young married couple to families with small children at home (Wilkes 1995). Changing personal behaviors and societal trends have contributed to the common perception of college students relying heavily on credit, obtained mostly with credit cards. The average college undergraduate’s credit card debt in 2001 was $2,327 and by 2006 had increased to $2,700 (Young Money, 2007); nearly one-half of all students had four or more credit cards (Hayhoe 2005). These changing attitudes toward the use of credit suggest that today’s college students are likely to spend more than students in the past because spending by today’s students is less constrained by current income and assets. This paper offers data to assess the accuracy of some perceptions about traditional college student spending and its potential impact on local economic conditions. We provide a descriptive analysis of the size and pattern of spending by college students at a single large university in a Midwestern small-town setting. The analysis focuses on a random sample of undergraduate students (stratified by gender and class level) and their spending behavior in the local area while attending classes. Spending behavior across demographic categories (e. g., gender, class standing), housing choice (on-campus or off-campus,) and employment are examined. The results provide insights about the magnitude and pattern of student spending that would be helpful to college officials, community leaders, and local business owners in assessing the impacts of this spending on the local economy and local economic development. Survey Method and Data Many empirical studies of college students’ use of credit cards or attitudes toward money employ so-called â€Å"convenience samples†, e. g. , surveys distributed in classrooms, dormitories or cafeterias (Davies and Lea (1995); Xiao et al.(1995); Eastman et al. (1997); Warwick and Mansfield (2000); Roberts and Jones (2001); Kidwell and Turrisi (2003); and Hayhoe et al. (2005)). These convenience samples are non-random selections from the student population. Students choose classes for specific reasons and, thereby, self-select based on a set of personal and course characteristics. For example, survey answers from students in an introductory-level child development class are likely to be different from students in a senior-level finance course. These samples create problems for interpretation of results and bias inferences about the general student population. The nature and strength of these biases are typically unknown. Other studies survey a wide range of randomly selected students but obtain low response rates that suggest a potential unknown and unmeasured response bias (Medina et al. (1996); Markovich and DeVaney (1997); Hayhoe et al. (1999); Leach (1999); Hayhoe et al. (2000)). The sample data used for this paper was collected through a telephone survey. Staff members of the Center for Applied Research and Rural Studies (CARRS) at Central Michigan University (CMU) helped to write the survey questions. The Registrar’s office used all undergraduate students enrolled on the main campus of CMU in the Spring 2005 semester (a population of roughly 18,000) to provide a randomly selected list of students stratified by gender and class standing. We opted for a telephone survey since it assured us of a stratified random sample. Eliot (1988) concluded that responses by students to questions about their spending behavior are not influenced by whether the survey was conducted by telephone or mail. CARRS conducted the survey during one week in March 2005 using interviewers from two undergraduate social science research methods courses. The use of students to complete the interviews may improve the accuracy of the data as student respondents may be more relaxed and respond more openly to fellow students than older adults. Calls were placed to 2,250 telephone numbers, of which 880 calls were answered and 503 surveys were completed. The overall response rate was 22 percent (503/2250), but 57 percent (503/880) of the students who answered phone calls participated in the survey (see Appendix B for a full survey phone call report). The survey instrument was composed of four parts for four separate research projects. To reduce the length of the survey and avoid respondent fatigue, two parts of the survey were answered by all respondents while the other two parts, including our questions on spending behavior, were answered by onehalf of the respondents (i. e. , 251). Allowing for coding errors, etc. , our sample was reduced to 247 respondents. We believe this is a high-quality data set because of the stratified random sample selection process and the high participation rate. Most of the demographic proportions required of a stratified random sample are met in the student spending sample of 247 observations. Table 1 (below) displays the demographic characteristics of our sample and the proportions for the CMU student population. Gender and ethnicity characteristics of the sample closely correspond to the CMU population. The largest discrepancy occurs in residency, as the sample overrepresents on-campus students and under-represents off-campus students, as residency was not one of the target stratifications that were sought in the sampling process. Class proportions vary across the CMU population and the sample data. A clarification is in order. The Registrar’s office selected students according to the characteristics of gender, ethnicity, and class standing for the Spring 2005 semester, the semester that the survey was conducted. Figures for the CMU population in Table 1 are those reported for the Fall 2005 semester. The only published census of the student population is in the Fall semester; Fall student characteristics vary in a consistent pattern from the Spring semester. There are relatively fewer seniors in the Spring semester as Fall graduation depletes this  class and the proportion of freshman increases in the Spring semester since most freshmen haven’t earned enough credits to move into the sophomore class. The number of freshmen, therefore, remains approximately the same in the Spring semester, while the total student population declines. The survey questions asked for personal information and the student’s typical local spending behavior during the months they spend on campus. Surveyed students were asked about the amount they spent in various categories in Isabella County (where CMU is located) when the university is in session (late August through mid-May). All the surveyed students were asked the amount they spend during a typical week in retail stores, and how much of that was for groceries. The students were also asked about weekly gasoline and recreation expenditures as well as the amount they typically spend each semester for books and other school supplies. Respondents living off campus, but not at-home with parents, were asked about monthly expenditures for rent, communication services (telephone, local cell phone, cable television and internet access), and other utilities (e. g., natural gas and electric). Students were given the opportunity to identify up to two additional types of expenditures that they incurred on a regular basis and up to two out-of-the-ordinary expenses that had incurred during the previous semester. Only a small number of respondents reported any spending in response to these questions. [1] Table 1: Selected Demographic Characteristics of the Student Sample Variable Observations Percent of sample or mean value1 CMU population proportions or mean values2 Gender female 147 60% 57% male. 100 40% 43% Class freshman 57 23% 27% sophomore 45 18% 22% junior 52 21% 20% senior 93 38% 31% Age 247 22 years 21 years Ethnicity white 226 91% 91% Non-white 21 9% 9% Residence on-campus 121 49% 33% off-campus 110 45% 67% W ith parents 15 6% Local in summer 62 26% Have car 205 83% Employed 130 53% Work hours 130 22. 2/week College financing Pay none 42 17% Pay some 77 31% Pay half 30 12% Pay most 38 15% Pay all 59 24% 1: represents the sample characteristics of the Spring 2005 survey 2: represents CMU’s student census in Fall 2005. Table 2 (below) shows the general categories of spending that were reported and the corresponding average amount spent over a nine-month period for those students that reported any spending in these categories. The last category in this table is for spending identified by the respondent but not classified in the other categories. The most commonly reported miscellaneous spending was for automobile repair and services. Questions were asked about the amount and the timing of spending since some spending tends to occur on a weekly basis (e. g. , groceries and gasoline). Table 2: Mean Student Spending by Spending Category, 9-months Spending category Observations 9-month mean Percent of total spending Recreation 239 $1,406 23% Stores (includes food) 222 $1,283 19% Food 211 $842 12% Rent 109 $3,228 24% Telecommunications 103 $776 5% 87 $606 4% Books and supplies 239 $724 12% Gasoline 198 $592 8% Miscellaneous 120 $559 5% 8 $2,415 1% 62 $601 3% 1 $315 0% 19 $1,826 2% Hospitals 2 $208 0% Child care 1 $4,610 0% Other nonprofit 9 $353 0% Religious organiz. 13 $587 1% State local gov’t 9 $725 0% Other miscellaneous 31 $774 2% Total annual spending 247 $5,928 100% Utilities. Computer services Auto repair Recreation clubs Doctors and dentists Notes: Only respondents reporting positive expenditures were included in the calculation of mean values. Total annual spending does not double-count food expenditures. Weekly and monthly expenditures were converted to figures based on a 9month calendar since most students reside in the local area only during the traditional academic year, i. e. the Fall and Spring semesters. Spending by students residing in the local area on a year-round basis was calculated as if they were 9-month residents to provide consistency in the reported figures. [2] A CMU Student Profile Since we take a case study approach, it is appropriate for us to provide a brief description of the CMU student population to aid in the interpretation of the results of our study. CMU is a regional universityone of 15 publicly-assisted universities in the state. In 2005 it attracted students from every county in Michigan as well as 47 other states. Ninety-eight percent of the students are Michigan residents, nine percent are self-identified as African American, Native American, Asian or Hispanic, and 99 percent are U.S. citizens. The greatest proportion of students (29 percent) resided in the Detroit metropolitan area as high school students. The legal-age for drinking alcoholic beverages in Michigan is 21 years. The typical CMU undergraduate fits the description of a â€Å"traditional student† (See Table 1 above. ). Most are full-time students who live either in residence halls on campus (freshman are required to live on-campus) or nearby (i. e. within 5 miles) in off-campus rental housing. Only six percent were identified as living at home with their parents. Most (74 percent) leave town during the summer months to return to their home town or other areas to find work or internships. Their mean age is 22 years. The gender distribution (57 percent female, 43 percent male) reflects CMU’s academic traditions. CMU graduates more teaching majors annually than all but a handful of other universities in the nation and offers newer programs in health professions which attract a large number of female students. According to sample data, most students (83 percent) have use of a car, and about half are employed for an average of 22 hours per week. Thirty nine percent pay most or all, 43 percent pay some or about half, and 17 percent pay none of their college expenses. Patterns of Spending An overall description of the sample characteristics is provided in Table 2 (above). [3] Only students reporting positive expenditures were included in the calculation of mean values. Most students reported spending on recreation, stores, food, books and supplies, and gasoline. Students living on campus were not asked questions about living expenses since rent, utilities and telecommunications expenses are typically aggregated into a one-semester housing charge. Less than one-half of the respondents reported any spending on rent, utilities, telecommunications, or miscellaneous items. The spending categories with the greatest mean values and widespread reporting of are rent, recreation, and general spending in stores (including food items). About one-half of the students indicated that they had spent funds on a variety of miscellaneous items. The most frequently cited items were auto repairs, physician and dentist services, and contributions to religious and non-profit organizations. Some categories of miscellaneous spending (i.e. , child care, computers and computer services, and medical care) had large mean expenditures among those reporting any spending for these things. However, few students reported any spending in these categories. Table 2 (above) shows per student spending for all spending categories. The student sample spends a considerable amount on recreation (about 23 percent of total spending) and most of their spending at stores (about 66 percent) goes for food items. Spending on non-food items, i. e. , general merchandise, is a modest $441 in a none-month period. In fact, students in the survey spent more on text books ($724) and gasoline ($592) than non-food items in stores ($441). Less than half of students pay for rent, utilities and telecommunications equipment and services, but these expenditures are considerable compared with other items of spending. Recall that about half the students lived in on-campus housing and were not asked questions about expenditures on rent, utilities and telecommunications. However, the overall student profile hides substantial variation in the pattern of spending across groups of students. Class standing clearly affects spending patterns shown in Table 3 (below). Perhaps first-year students have lower incomes from summer work and different lifestyles than juniors and seniors. Freshmen are required to stay on-campus, and many sophomores choose to stay in dormitories – only 109 of the 247 respondents (44 percent) reported that they paid rent for off-campus housing and of only five of these were freshmen or sophomores. Freshmen and sophomores spend significantly less than juniors and seniors on a variety of items including recreation, food and non-food items from stores, and miscellaneous purchases. Seniors spend substantially more than underclassmen on recreation (69 percent and 95 percent more than freshmen and sophomores respectively), and they spend more than twice as much on miscellaneous items and general merchandise and food in stores. Some of these spending differences reflect Michigan’s legal drinking age of 21 and off-campus versus on-campus lifestyle choices. Table 3: Mean Student Expenditures by Class Standing, 9-month Figures Spending category Recreation Stores (includes food) Food Rent Telecommunications Utilities Books and supplies Gasoline. Total miscellaneous Total annual spending Freshmen n $1,079 $733 $512 $5,616 $1,350 $0 $686 $595 $462 $2,892 % 53 35% 47 21% 42 13% 1 3% 1 1% 1 0% 57 24% 34 12% 19 5% 57 101% Sophomores $942 $695 $468 $2,948 $495 $795 $700 $493 $217 $3,017 n % 42 30% 39 20% 34 12% 4 9% 4 1% 3 2% 44 23% 31 12% 23 4% 44 101% Juniors $1,358 $1,313 $908 $2,803 $608 $544 $750 $561 $487 $6,267 n % 52 21% 48 19% 49 13% 31 26% 31 6% 21 3% 53 12% 49 8% 29 4% 53 100% Seniors $1,833 $1,822 $1,114 $3,392 $862 $618 $682 $652 $1,014 $8,910 n % 92 20% 88 19% 86 12% 73 30% 67 7% 63 5% 93 8% 85 7% 36 4% 93 100%. Notes: Only respondents reporting positive expenditures were included in the calculation of mean values. n is the number of observations. Percent is each category’s percent of total spending. A t-test for difference in mean values was conducted for each figure in the table. Italicized cells denote that the cell’s mean value is different from the grouped mean value of the other three classes and statistically significant at the 5 percent level. Total annual spending does not doublecount food expenditures. Another approach is to compare budget shares, rather than gross spending across categories. We know from Table 3 (above) that seniors spend, on average, $6,000 more than freshmen. But do seniors apportion their spending across categories in a similar manner as freshman, or do they have different spending priorities? The columns labeled â€Å"percent† represent a category’s share of total spending. Budget shares of categories associated with off-campus living clearly increase as students move through class standings since most underclassmen live on-campus. Two categories of spending, recreation and books, exhibit decreasing shares across the freshman-to-senior years. This suggests that gross spending in these categories increases at a slower rate than total spending across years. This trend may disappear if housing fees for on-campus students were added to their total spending. Previous studies indicate that gender influences college students’ use of credit cards and their spending behavior (Chien and DeVaney (2001); Davies and Lea (1995); Furnham (1996); Hayhoe et al. (1999); Hayhoe et al. (2000); Leach et al. (1999); and Xiao et al. (1995)). We examine gender differences in Table 4 (below). Clearly, male students, on average, spend more than women on recreation. This differential is substantial both in terms of dollars (i. e. , $1,821 vs. $1,289) and in percentages (i. e. men spend 46 percent more). Women spend more on textbooks and school supplies ($738 vs. $647). [4] Other categories of spending exhibit no statistically significant differences in behavior across gender at a 95 percent confidence level. Table 4: Mean student expenditures by gender, 9-month Figures Spending category Recreation Stores (includes food) Food Rent Store: non-food Telecommunications Utilities Books and supplies Gasoline Total miscellaneous Total annual spending. Female $1,289 $1,350 $810 $3,341 $540 $662 $635 $738 $553 183 $5,599 n 147 146 144 58 146 48 58 147 117 60 147 % 23% 24% 14% 24% 10% 4% 4% 13% 8% 1% 101% Male $1,821 $1,234 $858 $3,100 $376 $536 $508 $647 $655 $293 $6,411 n % 100 28% 99 19% 97 13% 51 25% 99 12% 39 3% 47 4% 100 10% 82 8% 43 2% 100 100% t-statistic probability difference value in means 2. 59 0. 53 0. 36 0. 77 1. 29 1. 01 0. 92 2. 16 1. 40 1. 44 1. 39 0. 01 0. 60 0. 72 0. 44 0. 20 0. 31 0. 36 0. 03 0. 16 0. 08 0. 17. Notes: Only respondents reporting positive expenditures were included in the calculation of mean values.n is the number of observations. Percent is the category’s percent of total spending. Total annual spending does not double-count food expenditures. Stereotyping and studies of student attitudes towards money and credit card use suggest that women are more likely to shop for clothing or personal items and use credit cards to purchase them (Hayhoe et al. (1999); Hayhoe et al. (2000); Leach (1999)). Our data does not support that contention. A t-test of the difference in means for the category of non-food store spending yielded insignificant results: a t-statistic of 1. 29 with a p-value of 0. 20. Several factors may explain our conflicting conclusion. One, our stratified random sample could remove response bias inherent in the sampling procedures of the previous studies. Two, if binge shopping is practiced by a very small percentage of students, then it will have little impact on our mean spending figures. Three, since our survey data relies on student responses, binge spenders may under-report spending either to hide their problem behavior or because they do not know how much they are spending. Four, maybe there is some credence to the stereotype of fiscally-conservative Midwesterners. Five, following stereotypes, it may be that women spend more on clothing and men spend more on video games and equipment. Differences in budget shares across gender simply reflect differences in gross spending: women spend a greater dollar amount and share of their budgets in stores (24 versus 19 percent) while men spend a greater dollar amount and share on recreation (28 versus 23 percent). Lifestyle choices may also affect the level and pattern of spending by traditional college students. Table 5 (below) provides a comparison of mean values for on-campus residents, off-campus residents, and those students living at home with their parents. On average, students living off-campus, but not with parents, spend about twice as much as on-campus residents on recreation and stores and nearly three times as much in local stores on food items. Although there are few observations for the category, spending by students living at home with parents does differ from both dormitory and other off-campus residents. This group spends more on recreation, stores, food and miscellaneous items than dormitory residents, but these differences are not statistically significant. Students living at home in the local area spend more than the other two groups on gasoline. On-campus students may spend on gas to intermittently drive home on the weekends while at-home-students are likely to drive to and from campus each day; perhaps multiple times per day. Since this group tends to be underclassmen, the differential between the on-campus and with-parents groups may, in part, measure how much time on-campus students spend away from campus. [5] On-campus students spend a greater share of their budget on recreation (34 versus 19 percent), stores (29 versus 17 percent) and books (24 versus 7 percent) than off-campus students. The book share difference is driven by differences in total spending since gross spending on books in nearly identical. Although off-campus students spend twice as much on recreation and stores than on-campus students, their shares of total spending are lower. Table 5: Mean student Expenditures by Place of Residence, 9-month Figures Spending category Recreation Stores (includes food) Food Rent Telecommunications Utilities Books and supplies Gasoline Total miscellaneous Total annual spending oncampus $1,024 $869 $434 no observ. no observ. no observ. $733 $476 $158. $2,634 n % 121 34% 119 29% 116 14% 0 0% 0 0% 0 0% 120 24% 81 11% 45 2% 137 100% offcampus $2,004 $1,802 $1,263 $3,689 $871 $578 $718 $651 $290 $10,353 n % 110 19% 110 17% 109 12% 110 36% 107 8% 105 5% 107 7% 104 6% 55 1% 110 100% with parents $1,706 $1,103 $748 no observ. no observ. no observ. $700 $864 $175 $4,123 n % 16 41% 16 27% 16 18% 0 0% 0 0% 0 0% 12 13% 14 18% 3 1% 16 100% Notes: Only respondents reporting positive expenditures were included in the calculation of mean values. n is the number of observations. Percent is each category’s percent of total spending. A t-test for difference in mean values was conducted for each figure in the table. Italicized cells denote that the cell’s mean value is different from the grouped mean value of the other two groups and statistically significant at the 5 percent level. Total annual spending does not double-count food expenditures. Students have different budget constraints from one another. Although the survey did not specifically ask questions about the student’s or parents’ incomes or assets, it did ask whether the student worked and what proportion of college and other living expenses was paid by the students. Answers to these questions can measure a student’s ability to pay, particularly for those items which represent discretionary expenditures (e. g. recreation spending). Table 6 (below) examines mean values for student spending based on the students’ financial burden for college expenses. Again, recall that those students living on campus were not asked questions about their spending on rent, utilities and telecommunications. Variation in patterns for these three spending categories in this table could be the result of the surveying procedure. Relatively few of the differentials in spending are significant at the 5 percent level in Table 6; with many of these occurring for the â€Å"pay none† and â€Å"pay all† categories. Those students who â€Å"pay all† have higher overall expenditures than the other groups (when combined) in terms of stores, food, and utilities and overall spending. The â€Å"pay all† category is likely composed of students who are financially independent of their parents and are working substantial hours to support themselves. They are also more likely to be non-traditional students having parental responsibilities and different asset levels and lifestyles. All of these characteristics contribute to a higher overall level of spending. Those who â€Å"pay none† spend significantly less on gasoline, total miscellaneous, and overall spending. An examination of sample data suggests that students in the â€Å"pay all† and â€Å"pay none† categories are substantially different in terms of work behavior and age. Students in the â€Å"pay all† category were more likely to work (61 percent of the group) than the â€Å"pay none† students (36 percent), and when they did work, they tended to work a greater number of hours: 22. 4 versus 16. 9 hours. In terms of age, the â€Å"pay all† group was clearly older. The â€Å"pay all† group had some of the oldest students in the sample (i. e. , the oldest students in this group were 48, 40, 35 and 32), while the â€Å"pay none† group had fewer of the oldest students (i. e. , the oldest students in this group were 37, 24, 24 and 23). The mean age of the â€Å"pay all† group was 23. 5 years, while that for the â€Å"pay none† group was 21. 1 years. These characteristics suggest that more of the â€Å"pay all† group would be classified as â€Å"non-traditional† students. Budget shares for most categories of spending exhibit no consistent pattern in Table 6 (below). Two patterns do emerge, however: those students who â€Å"pay none† of their college expenses tend to spend a greater proportion of their budget on recreation (29 percent) and books (15 percent) than students in the other categories, even though they spend comparable gross dollar amounts. Total annual spending generally rises as the proportion paid by students rises, with the exception of the pay-half and pay-most categories being reversed. The general trend may arise because both proportion of college expenses paid and total annual spending rise with student work hours and earnings. Another possibility is that with a higher proportion of college expenses paid by the student, there is less oversight of spending by the parents, with consequent upward pressure on current spending. Table 6: Mean Student Expenditures by Proportion of College Paid by Student, 9-month Figures Spending category pay none n % pay some n % Recreation Stores (includes food) Food Rent Telecommunications Utilities Books and supplies Gasoline Total miscellaneous Total annual spending $1,308 $1,096 $844 $2,866 $569 $572 $642 $462 $261 $4,423 41 29% 37 22% 33 15% 12 19% 11 3% 7 2% 42 15% 33 8% 18 3% 42 100% $1,328 $1,270 $722. $3,210 $814 $556 $747 $541 $492 $5,268 76 25% 71 22% 68 12% 25 20% 23 5% 20 3% 74 8% 59 14% 35 4% 77 100% pay half n % $1,483 $1,212 $780 $3,293 $503 $456 $688 $675 $346 $6,504 28 21% 28 17% 27 11% 18 30% 17 4% 17 4% 30 11% 26 9% 17 3% 30 100% pay most n % $1,192 $1,052 $885 $3,397 $1,170 $342 $674 $660 $565 $5,461 36 21% 30 15% 29 12% 16 26% 15 8% 13 2% 37 12% 31 10% 20 5% 38 100% pay all n $1,699 $1,584 $1,001 $3,254 $781 $847 $754 $665 $933 $7,953 57 21% 56 19% 54 12% 38 26% 37 6% 30 5% 59 9% 50 7% 30 6% 59 100% Notes: Only respondents reporting positive expenditures were included in the calculation of mean values. n is the number of observations is in parentheses. Percent is each category’s percent of total spending. A t-test for difference in mean values was conducted for each figure in the table. Italicized cells denote that the cell’s mean value is different from the grouped mean value of the other four groups and statistically significant at the 5 percent level. Total annual spending does not double-count food expenditures. Table 7 (below) reports differences in spending between employed and unemployed students. Those who work spend more overall and in the specific categories of stores, telecommunications, and total miscellaneous spending. Using a 10 percent level of significance, one additional difference arises: working students spend more on gasoline. To the extent that these students are living off-campus and commute to work via automobile, these spending differences are plausible. % Table 7: Mean Student Expenditures by Employment, 9-month Figures Spending category Recreation Stores (includes food) Food Rent Telecommunications Utilities Books and supplies Gasoline Total miscellaneous Total annual spending employed n $1,465 $1,506 $911 $3,308 $881 $657 $715.

Outdoor Advertising Using The Aida Model Media Essay

Outdoor Advertising Using The Aida Model Media Essay When using the AIDA model to explain the reasons behind the proliferation of outdoor advertising, among Awareness-Interest-Desire-Action, it is clear that an outdoor ad on billboards, e-displays serves to generate any or all among Awareness-Interest-Desire. Global or local? Globalization has of late become ubiquitous with most people viewing it as a panacea for all ills ailing future world economic development, a process that is in itself inevitable and irreversible. It can also be considered an economic phenomenon, involving integration of economic systems through growth in international trade, investment and capital flows. In his popular book,  The World is Flat: A Brief History of the Twenty-first Century,   Thomas L. Friedman writes that the lowering of trade and political barriers and the exponential technical advances of the digital revolution have made it possible to do business, or almost anything else, instantaneously with billions of other people across the planet. What Friedman really means by  flat  is connected. The rapid and sustained consolidation of media properties over the last decade, particularly within the outdoor segment, is leading toward simplified buying for advertisers across multi-media platforms. An infusion of capital into the outdoor industry has fostered the propagation of vital marketing studies, pioneered the research development of new outdoor formats and has encouraged savvy entrepreneurs to explore new approaches to the worlds oldest medium. Multi-national media companies are investing serious dollars into the outdoor industry and the investments are beginning to pay off in spades with improved infrastructure and expanded services for advertisers. The outdoor advertising industry has been among the  first media channels to successfully craft a global footprint to connect people with concepts. The far-reaching conductivity of companies like Clear Channel, JCDecaux, and Viacom is evident. But, the flattening of the outdoor medium worldwide has even broader implications as global buying groups emerge, consistent measurement systems and standards are developed, and common cultural brands become a part of everyday life. At the 2005 AAAA Media Conference in New Orleans, David Verklin, the Chairman of Carat North America, suggested that outdoor will be the first globally bought and sold medium. His prediction has been proven true with WPPs Kinetic business unit emerging as the first global outdoor buying group, matching the international scope of outdoor operators already consolidated. The fusion of both global outdoor buying and selling units requires common currencies of evaluation and consistent business standards. Industry leaders from around the world are searching for the best approaches for developing a measurement currency for the global outdoor industry. The annual WAM (Worldwide Audience Measurement) research conference provides an excellent opportunity to learn about the enormous strides being made in outdoor measurement. The meeting also underscores the critical need for the development of consistent systems worldwide. The ability to execute global outdoor campaigns will necessitate a widespread business language. Outdoor advertising is ideally suited to global communications since the medium conveys ideas through visual expression. Outdoor is less encumbered with the translation of languages, compared to television and radio which rely heavily on verbal communications or print which requires written translation. Its often said a picture is worth a thousand words. It can also be said that the Coca-Cola brand is elegant on any billboard, in any country. While the notion of a truly global industry is intriguing, the intrinsic local nature of the outdoor business is inescapable. Anyone who has visited Tokyo or Hong Kong, Zurich or Buenos Aires, New York or San Francisco will attest to the fact that every market has unique geographic and demographic characteristics. The composition of outdoor plants found in those places is as different and diverse as snowflakes. The challenge for the outdoor industry is to think globally, but act locally. Most evolutionary changes occur slowly over many years, so its almost impossible to see these changes coming. But in the evolving arena of global outdoor advertising, changes are coming swiftly. Upgraded infrastructure and the innovation of new outdoor formats is changing the industry before our eyes. Many global outdoor companies have begun investing heavily in the development of high-style products and hi-tech display technologies leading to completely integrated product packages across countries and continents. Likewise, cities are partnering with outdoor companies to incorporate impressive outdoor districts into massive reclamation and urban renewal projects, such as the Hollywood and Highland project in Southern California or similar projects in Asia Media fragmentation has had a profound impact on the way media is consumed in the United States and the fallout will undoubtedly reach its distant shores in the years-ahead. Over the last twenty year the proliferation of new television and cable options, radio stations, magazine titles and the birth of the Internet has permanently reshaped the US media landscape. Include the development of on-demand technology, and the mounting challenges faced by advertisers trying to reach their audiences, becomes crystal clear. There are too many media choices. Outdoor offers a means to cut through the clutter of daily life by reinforcing messages that intercept consumers consistently throughout the course of daily routines. Outdoor impacts time-stressed consumers with targeted reach, frequency and continuity when other media struggle for an audience. Outdoor reaches beyond the front door of homes to provide a constant reminder that a brand is a good choice when consumers are mobile and most receptive to advertising messages. From roadside signs that spackled the American highways at the dawn of the automobile revolution, to the promise of hi-tech channels of communications, the outdoor industry has continued to evolve over more than a century. The commitment that the outdoor business offers advertisers is now and has always been powerful presence in a marketplace. The times may change and the methods employed to reach consumers may evolve, but the fundamental principles of outdoor advertising remain the same: a simple idea can cut through the clutter and deliver a message that is powerful and relevant. That is the sustaining power of outdoor advertising and why outdoor is the global medium of the 21st century. Literature review Among the various articles that have been written on the subject, While studying the brand recognition when encountering a billboard, it was found that clear branding and new product information improved brand recognition, whereas large amounts of text, pictures of people, lengthy and large headlines, information cues, humour and images of women all delayed brand recognition (Meurs Aristoff, 2009). The difficulty of reaching out to people through other media, improvements in high resolution digital printing and emergence of electronic display units have contributed to an increase in the popularity of billboards, which has been accentuated by the availability of portable devices to measure billboard exposure (Lupez-Pumarejo Bassell, 2009). While suggesting that outdoor advertising did impact sales, it was emphasized that further research is warranted to conclusively establish a relationship between them (Woodside, 1990). A study on the sales response to outdoor advertising revealed that temporal, spatial and promotional effects were significant, and that outdoor media had spatial effectiveness when used as part of a multimedia campaign (Bhargava Donthu, 1999). In another study these authors have proposed that factors such as length of approach, angle of structure, speed of travel all constitute part of the visibility rating of a billboard. Advertisers aim to maximize this rating, and are heavily investing into it as the cost of this media is low, but the retention is comparable to other media (Donthu, Cherian, Bhargava, 1993).

Can Sri Lanka Apparel Industry Face Future Challenges?

Can Sri Lanka Apparel Industry Face Future Challenges? 1. Sri Lanka has traditionally been an agro-based economy from the ancient time. With the Industrial Revolution taking root in Europe and later spreading to the rest of the world, Sri Lanka too had to take its place in this scenario. Factory scale production of ready made garments in Sri Lanka had its beginnings in the early 1950s to become the largest industry in the Sri Lankan economy. During the pre-liberalization era (pre-1977), the domestic textile industry was essentially an import substitution industry confined to a few large-scale textile industries run by the government. The textile industry did not make much progress during this period. The garment industry has its origins in the mid- 1960s, but unlike the textile industry, the former was mainly run by the private sector. Initially, almost all of the garments produced were for the domestic market and there were hardly any exports during this period. A large share of the industry was in the hands of few companies. Since the importation of textiles was either banned or restricted, locally produced textiles mainly fed the garment industry. GARMENTS: All external and internal finished common clothing items such as shirts, T shirts, pants, dresses, sports clothing, fashion garments, under garments etc. APPAREL : finished clothing that can be considered as supporting clothing or accessories such as jackets, lingerie, leather clothing, knitted garments, shoes, hats, gloves, fashion accessories etc. 2. The period after the late 1970s saw a rapid expansion of the garment industry in Sri Lanka. The phenomenal growth during this period can be attributed to three major factors: a. The first is the market-oriented liberal economic policies introduced in 1977, which placed greater emphasis on the export-led industries. b. The second is the supportive measures taken by the government through the Board of Investment, such as duty free importation of industrial inputs, off-shore borrowing facilities, tax holidays or concessional taxation, etc. These measures together with the availability of labour- intensive industries such as garments. c. The next important factor which contributed to the Sri Lankan apparel industry is the Multi Fibre arrangement ( MFA ). AIM 4. The aim of this research is to discuss about the apparel industry in Sri Lanka and analyse the future challenges. CHAPTER TWO METHODOLOGY STATEMENT OF THE PROBLEM: 1. The apparel sector had grown tremendously after introducing the open economy. Now it has become the leading export industry replacing the traditional tea and rubber. It is the most significant and dynamic contributor of Sri Lankan economy. 2. The major drawback in the Sri Lankan apparel industry is that it has not upgraded with latest technologies and modern consumer demands to compete with the other countries, mostly the South East Asian countries. National economy will definitely be affected if the country fails to address the drawbacks in the industry. 3. The aim of my research is to identify the weaknesses in the apparel sector and to suggest favourable and appropriate solutions to secure the industry. RESEARCH HYPOTHESIS 4. It is hypothesized that the reason for not upgrading with the latest technology and consumer demands is lack of capital, incompatible demands and high competition.    SCOPE OF THE STUDY 5. The scope of the study covers an assessment of the ready made garment industry in Sri Lanka taking three well known factories in to consideration. Factors that had been an impact to the industry will be identified through the research and the root causes of the problem will be then be identified. Recommendations will be made for the improvement. METHOD OF DATA COLLECTION 6. The required data for the research will be drawn from the following sources; a. Primary sources Primary sources will include information collected by interviewing resource personnel in the garment sector. b. Secondary sources Information will be gathered from relevant books, journals, the internet, treaties, conventions as well as international and local enactments of relevance. CHAPTER THREE OVERVIEW OF THE APPAREL INDUSTRY HISTORY   1. The textile and clothing industry had emerged from a modest beginning in the early 1950s A few pioneering industrialists who started out on an uncertain course at this time , confident their manufacture to only some popular items of garments and catered essentially to local demand. By the end of the 1950s there was a reversal in policies and the economy moved towards restrictions on imports and a policy of import substitution in industry began to be perused. While the major basic industries were reserved for the state; a wide range of consumer goods industries were opened to the private sector , which was provide with various investment incentives and a protected market. Over the decade of the 1960s as many as 300 categories of industrial products began to be manufactured locally. Among this range of products a major item was textiles and another ready made garments, though from the outset raw materials required for the garments industry were imported. 2. It was in the late1960s that Sri Lankas ready made garments began to break into export markets. Sri Lankas shirts had found acceptability in markets such as the UK and Soviet Union and a leading shirt manufacture began exporting up to Rs:2 million worth of product annually to the USSR, within the bilateral trade agreement between Sri Lanka and the USSR. 3. Around 1972 there was a change in outlook towards the industry as existing policy was altered to allow certain sectors to adapt an export oriented approach. Special foreign exchange allocations and other fiscal and tax incentives were offered to selected export oriented industries under this package. In the first six years of the 1970s over 2500 industrial units received approval from the Local Industries Approve Committee (LIAC) and of these nearly 2000 were in the product group of Textiles and Textile based industries. By the mid 1970s wage/ pries inflation and imposition of trade quotas on exports of traditional Asian Suppliers of made-up garments such as Hong Kong , Taiwan, South ,Korea and Singapore made Sri Lanka more attractive location for the industry. New units began to be established in collaboration with foreign capital/marketing, while production was being upgraded through import. 4. The period after the late 1970s saw a rapid expansion of the clothing industry in Sri Lanka. The impressive growth witnessed during this period can be attributed to two major factors. The first is the market-oriented liberal economic policies introduced in 1977. The market friendly economic reforms, which identified the private sector as the engine of growth, places greater emphasis on the export-led industries. 5. The second important factor which contributes to the remarkable expansion of the Sri Lanka textile and clothing industry is the Multi Fibre Arrangement ( MFA ). Sri Lanka is one of the countries that benefited from the quota hopping investments. The overseas manufactures of garment who relocated their production facilities in Sri Lanka include firms from both and Newly Industrialize Countries ( NICs) in East Asian and Europe. While the NIC firms moved their operations mainly as a means of quota hopping the motivation for producers of countries such as Germany and the UK to move into Sri Lanka was the rising production costs in their home countries. Given the ability to separate to different stages of the clothing industry, these overseas producers were able to disintegrate their production lines into low-cost countries like Sri Lanka without much difficulty. Investments by these two categories of foreign manufacturers fuelled the growth of the Sri Lankan clothing industry to a lar ge extent. In fact, the factories set up as joint ventures and wholly owned foreign companies account for almost half of the total exports earning from garments. MULTI FIBRE ARRANGEMENT 6. The Multi Fibre Arrangement (MFA) is a system of quotas designed to protect garment industries in first world countries by slowing down the pace of globalization. The MFA does not apply to the expanding garment trade between rich countries. 7. The MFA has had a complex but crucial impact on the development of the garment industry. In the Third World, by imposing limits on poor country exports, it encouraged investors to shop around for new countries. This because of the increase in volumes of ready made garment entering developed countries caused concern and eventually led the developed countries to seek the occurrence of The General Agreement on Tariffs and Trade ( GATT) to protect their markets. The reason for this concern was due to the fact that the industrialised countries never caused to be textile and garment manufactures because the industry employed a large number of women specially minorities and immigrants in the USA and Europe. GATT,s solution to the dilemma of the industrialised nations was the Multi Fibre Arrangements (MFA) which imposed quota restrictions on certain garment categories, there by limiting the quantity of apparels that could be exported to the developed countries by any single developing cou ntry. This curtailed the potential of countries like Hong Kong, South Korea, Mexico and Yugoslavia which were advanced textile manufactures. In turn it allowed countries like India, Pakistan and Sri Lanka to enter the industry with guaranteed markets. It was first introduced in 1974 and will end in 2005. As a result there was a world wide boom in the textile and apparel export industry in the mid 1980s. 200 GARMENT FACTORIES PROGRAMME (200 GFP)   8. In view of the infrastructure facilities and close proximity to the port and airport facilities etc. most textile and clothing manufacturers concentrated their operations in or around the Western province, where the countrys capital is located. As a result, unemployment one for the major problem faced by Sri Lanka continued to remain high in the other parts of the island. Growing unemployment resulted in youth unrest in most of the rural areas. Thus, in 1990,a Cabinet Sub-Committee recommended that garment factories should be opened in provincial areas other than the Western Province. Consequently, the 200 garment factories programme (200 GFP) was launched with the idea of opening at least one garment factory in each of the 200 Assistant Government Agent (AGA) divisions. The main incentive which encouraged the private sector to take part in this programme was quotas. For this purpose, the remote areas of the country were classified into three categories, namely non-difficult, difficult and most difficult. Quotas were allocated on the basis of the location for the industry. The more isolated and difficult the area, the higher was the quota allocated. While about 40 percent of the areas were identified as difficult, just over 40 percent fell within the most difficult category. The rest, just fewer than 20 percent, were classified as non difficult. In addition to quotas, the factories setup under the 200 GFP were also offered various other incentives such as tax holidays or lower corporate taxes, duty-free importation machinery and raw materials, loans from foreign currency banking units, etc. as the main thrust behind the 200 GFP was the high unemployment in the rural sector, each factory was intended to employ at least 500 workers. By the end of 1996, there were 154 factories in commercial operation under this programme, providing 76,821 employment opportunities.   CHAPTER FOUR THE ROLE OF TEXTILE AND CLOTHING INDUSTRY IN THE SRI LANKAN ECONOMY 1. The common features of developing countries are high rates of population growth, high rates of unemployment, low savings, insufficient capital formation, low investment, high capital output ratio, rudimentary technology and cheap skilled and unskilled labour. These countries are also mainly exporters of primary agriculture products. Further being too small to achieve economies of scale in their domestic markets, these countries have adopted export led growth policies which are designed to generate foreign exchange and expose the productive factors of the country to the stimulus of competitive influence. 2. The textile garment industry there for became the initial response of developing countries to this call for export led growth. Being a labour intensive industry requiring a small capital base. Production of textile and apparel shifted to developing countries in the 1960s. It provided employment for a large number of persons earned foreign exchange allowed for diversification of the export industry and paved the way for industrialization. Some countries attracted foreign investors by opening up free trade zones. Many critics called it textile led growth. 3. At the time Sri Lanka began to pursue liberal economic policies in 1977, the textile and clothing industry played only a minor role in the countrys economy. In the light of the broad based economic liberalisation and the benign impact of the MFA, the industry since then has recorded a remarkable growth and assumed a key role in the economy. While garments accounted for the largest share of all commodity exports (27 per cent) in 1986, it became the largest foreign exchange earner (US$ 0.4 billion) by 1992, by 1995; garments export exceeded US$ 1.5 billion, nearly half of all commodity exports. 4. Of the 21 percent contribution made by the manufacturing industries to the countrys economy in 1996, 40 per cent was from the textile and clothing sector. The growth of the garment industry was particularly rapid in 1992 and 1993 due to the attempts taken by the government under the 200 GFP decentralise the industry away from the Western Province. Although the textile and clothing sector registered a slow growth of 5.1 per cent against 14.8 per cent in 1995, it still accounted for 33.7 per cent of the growth witnessed in the private sector industrial output. (The slow growth in 1996 was primarily because of the continued power cuts due to prolong drought). According to the Ministry of industrial Development, there has been a total of 859 garment factories at the end of 2001 while the number of textile manufacturing firms stood over 140, with less than 10 companies accounting for most of the output. The largest garment factories (in terms of employment) were located within the free -trade-zones (FTZs) run by the Board of Investment of Sri Lanka (BOISL) the authority responsible for the promotion of foreign direct investment. 5. Today the textile and clothing sector has replaced the tea industry the traditional front line export industry as the leading foreign exchange earner. Specially, the growth of garment export has been highly impressive. For instance during the period 1980 to 1990 the value of apparel export increased from US $ 100 million to US $ 620 million. In terms of quantity, the exports grew from 52 million pieces to 212 million pieces during the same decade. Exports of garments, which were only 10 percent Sri Lankas total export in 1980, reached nearly half in 1993, registering in average annual increase of 30 percent. In 1996 the textile and clothing sector accounted for 46 percent of the countrys total export earning. Its share among the industrial exports reached as high as 63 percent. The highest growth, (21 percent) was in the woven fabric categories. 6. The textile and clothing sector has also been an outstanding source in generating employment opportunities. Being a highly labour intensive industry, this sector has been successful in absorbing a fairly large number of workers. By end of 2001, garment sector provided direct employment to approximately 391682 personal. The garment sector as whole represented about 14 percent of the 5.5 million of the countrys total employed work force. Approximately 40 percent of which was engaged in the textile and clothing sector. Of the total work force employed in the textile and clothing industry, more than 60 percent was with the clothing sector. CHAPTER FIVE PRESENT POSITION OF THE SRI LANKA APPAREL INDUSTRY MAJOR MARKETS OF SRI LANKA 1. Since more than 90 percent of exports from the Sri Lankas textile and clothing industries consist of ready made clothing, the focus here is on clothing. Sri Lanka currently maintains bilateral textile agreements in the context of the MFA with Canada, the EU and the USA. More than 90 percent of Sri Lankas exports of clothing are accounted by only two markets, the EU and the USA. The USA continues to account for about 60 percent of total clothing exports from Sri Lanka. About 90 percent of exports (by value) to the USA consist of quota items. The bilateral agreement between the US and Sri Lanka contains more than 30 quota categories, covering over 50 clothing items. While the quota performance against the US market is generally high, utilisation rate of certain quota categories such as knitted shirts and blouses, trousers, underwear, coveralls, and overall, terry and other pile towels etc. has reached almost 100 per cent during the recent years  [1]  . 2. The EU has been absorbing about 35 percent of Sri Lankas total exports of clothing every year. The largest buyer of Sri Lankan garments within the EU is the UK (about 45%) which is followed by Germany (about 20%), the Netherlands (about 9%), France (about 5.5%), Belgium- Luxembourg (about 5% ) and the rest Sri Lankas exports to the EU has been subject to quotas under four categories namely, trousers, blouses, shirts and jackets. The utilisation rate of quotas of the first three categories (most sensitive ones) during 1996 was 84 percent, 100 percent and 73 percent respectively, while the rate of the fourth category was nearly 30 percent. Canada continues to account for about 1.5 percent of Sri Lankas total exports of garments. While Sri Lankas bilateral textile agreement with Canada contains about 15 product categories under quotas. THE ABOLITION OF QUOTA SYSTEM 3. Sri Lankas apparel industry is now a major contributor to the countrys economy after its modest beginnings in the seventies. It represents 54% of our total exports and 71% of Sri Lankas total industrial exports. The garment exports make a direct contribution of 7% to the overall economy. The rapid growth of this industry could be attributed to the followings: a. A stable market because of the quota system. b. Low labour cost. c. Liberal economic and trade policies. d. Tax benefits and the concessions granted to the industry. 4. From its inception the quota system was a boom to Sri Lankas apparel industry. The availability of a stable market eliminated the danger of competition from established industrialists in the international field, and attracted direct foreign investment and helped Sri Lanka prosper in this industry. 5. Although the abolition of quota system in 2005 had a negative impact on the industry it also opened up an expanded free market. As such the future of the garment industry in Sri Lanka will depend on our ability to face competition. One third (1/3) of the total exports from Sri Lanka are done by 25 large scale manufacturers. These organizations are in a position to restructure and sustain themselves in a competitive market according to surveys. But the survival of the other small and medium scale industries is at stake, making the situation critical because these small and medium scale manufacturers are the biggest employers in the apparel industry  [2]  . SWOT FOR THE APPAREL INDUSTRY 8. Strengths.   The product quality level for the current market segments is considered high Reputation as a country which follows labour laws and good working conditions. The product price ranks second with large customers confirming that price quality relation of Sri Lanka is good On time delivery is the third best strength with effort towards reducing lead-times. Availability of skilled labour, educated and trainable work force and management of production capacity and ability to handle high volume orders are also considered strengths the Sri Lankan industry presently possesses. Apart from those the geographical size of the country facilitates easy movement with in the country serves a further advantage  [3]  . 9. Weaknesses. The weaknesses in the Sri Lankan industry can be listed down as follows; a. Lack of marketing skills with over dependence on buying officers, and allocation of quotas. b. Low level of marketing information, and knowledge about export marketing with hardly any marketing activities. c. Lack of fabric base and over dependence on input suppliers with long lead times d. Lack of a strong work ethic along with high absenteeism and labour turn over. e. Warm climatic condition of the country which reduces productivity f. Increasing cost of labour and availability of employment in other industries and foreign employment opportunities 10. Opportunities. To overcome the loss of orders due to the expiry of Multi Fibre Arrangement after year 2005, the position in the traditional export markets in the USA and UK by should be strengthened by establishing a strong relationship with distributors and buyers and developing an expansion strategy for the markets with good potential. Thereafter the opportunity exists to gain a higher market share by implementing an aggressive marketing strategy in the markets, where Sri Lanka has a weak positioning. Further there is a very good opportunity to capture a bigger market share in the EU: As at present Sri Lanka is not with in first 15 exporters to the EU. 11. Further opportunities exists in capturing the South Asian Market especially the High Price garments with designer wear and Intimate garments, a market where Sri Lankan Manufactures are now experts in producing and marketing. The available free trade agreements should be exploited in trade between India and Pakistan to export finished garments and to import fabric and accessories. It is also important to establish and identity for of Sri Lanka as a destination, which manufactures very high quality garments   12. Threats. The threats to the present Garment Industry are as follows; a. An intensification of the competition, especially from the sub Asian member countries, before and after the phasing out of the MFA. b. Improvement of the former socialist economies, who have a good textile industry and a large domestic Market which are highly potential and geared to meet the quality and delivery requirements especially from EU. c. The arrival of new competitors in the Asian sub continent such as Vietnam, Cambodia , Myanmar and Laos. d. Special advantages created for the USA market by the NAFTA, consolidation and other regional economic cooperation e. The increase in Sri Lankas labour costs at a faster pace than productivity f. The necessity to reduce lead time from the manufactures to the shop, and the distant suppliers inability to deliver the value added garments on time g. Successive government has not addressed the issue of low productivity, and even at this stage a government funded garment manufacturing and production management training institute has not been established and this posses a threat to the industrys future h. Geographical location of the country. Sri Lanka is located at the furthest end of the Indian Ocean, when compared with other competitive garment exporting countries, which export to the USA, EU and other wealthy nations. Almost all the countries, which are geographically located close to Sri Lanka are under developed and, low income countries struggling to survive. CHALLENGES FACED BY THE SRI LANKAN APPAREL INDUSTRY 13. In the recent past, the global garment industry has been subject to significant changes in terms of changes in consumer demands, changes in technology, and fierce competition. These changes have also filtered down to the Sri Lankan garment industry and there is now considerable pressure on the industry to each higher standard of production and service. 14. As the garment industry is a relatively low skilled and labour intensive operation, over time there has been a shifting of production from countries such as Hong Kong. South Korea and Taiwan to low wage countries such as Bangladesh, India and Sri Lanka. As this process of shifting (or shifting comparative advantage) has continued, Sri Lanka has gradually lost its low labour cost comparative advantage. 15. As the majority of Sri Lankan manufactures currently produce standard garments where competition is primarily based on price, Sri Lanka faces stiff competition from other developing countries of South and South East Asia where production cost is low (India, Bangladesh, Pakistan, Indonesia, Cambodia, Laos and Vietnam). China has also emerged as a dominant force in the global apparel industry with its massive supply capability and low costs of production. These countries have a lower ranking in terms of cost of production in comparison to Sri Lanka. Given this situation, there may be a need for Sri Lanka to move some of its exports to the top end of the market as a reputable and dependable supplier of quality apparel in Asia. In the higher value clothing segment, countries such a Malaysia, Korea, Singapore, Hong Kong and Japan are serious competitors  [4]  . 16. While Sri Lanka s global market share has been recorded at 1.5 percent, more recent estimates indicate that there has been a marginal increase, and stands at 2 percent of the global garment market. During the period 1995 to 2000, Sri Lanka maintained a 19 percent export earning growth in the garment industry. If there is a lifting of the US tariff barriers for Sri Lankas apparels, then according to some commentators there would be a significant increase of exports. As mentioned earlier, although over 90 percent of Sri Lankas garment exports are destined for the USA and the EU, Sri Lanka does not rank amongst the top exporting nations to the EU. Sri Lanka ranked 20th and 16th place among suppliers of apparel products to the EU and the USA market, respectively, in 1998. The positive feature is that the Sri Lankan garment manufacturers, in general, have built up a good rapport and sound reputation the world over. It is a great advantage when compared to her competing neighbours. 17. Buyers now have a range of sources from which to choose, and countries such as Mexico (supplying to the USA) and Turkey (supplying to the EU) have the added advantages of being in close proximity to their major markets, lower transport cost and shorter turn-around times. Moreover, Mexico and free of quota restrictions access to their major markets. 18. One factor contributing to this reduced level of price competitiveness is the increasing cost of labour in Sri Lanka compared to other garment producing nations. Labour costs have been steadily increasing and currently constitute between 15-30 percent of total production costs in the average Sri Lankan garment manufacturing firm, highlighted the hourly wage rates of a number of garment manufacturing nations and indicated that Sri Lankas competitors currently have relatively lower wage cost structures. For those competitors who gave higher wage cost structures (and higher global market shares), their strengths lie particularly in their high levels of productivity. HOW SHOULD WE FACE THE COMPETITION? 18. The researcher recommends the following changes to preserve the garment industry in Sri Lanka. Developing Skills Of Labour Force The skill level on high speed machines have been found to be in sufficient. This resulted in low efficiency levels and low Needle Down Time. Which are two important performance measurements in the garment industry. Intensive training to upgrade skill level, parallel to technological advancement is important to gain a competitive advantage in the garment industry. b. Establishment of a Government Administered Garment industry related training institute. It is recommended to the government, at least at this stage to focus on this issue, and establish a dedicated training institute for all levels of employees in the apparel industry, as the future of thee industry and employment of 350000 personnel will purely depend on countries competitiveness on productivity and cost of labour. e. Increasing Needle Down Time (1) Use of Modern Machinery Needle down time could be increased through training and use of modern advanced machinery. Introduction of modern machines as under bed trimmers and computerised machines will speed up the sewing process and assist the operator to use other advanced facilities of the machines. (2) Reduction of secondary activities Needle Down Time (NDT)could be further increased by following General Sewing Data Standards, which indicates the ideal movements by machine operators to reduced idle time and speed up the sawing process. f. Backward Integration. Due to lack of modernisation and technological advancement in the textile manufacturing sector the garment industry has to depend for its requirement on imported fabric. Therefore to be competitive backward integration is necessary, but it requires high capital expenditure- is around US $ 25-30 million. In Sri Lankan terms this is a huge investment. Therefore it is prudent for Sri Lankan to concentrate from processing stage onwards and import grey fabric from abroad. Given proximity to Asian producers fabric can be soured with minimal lead time. Joint ventures, strategic alliances, etc. will be ideal if can be so arranged. g. Export Alliance. A group of small / medium sized companies with not so unique products and only limited funds available for export market development can form an export alliance. This group of entrepreneurs exporting can exploit the market much more professionally than an individual. In addition they can benefit by sharing the very heavy marketing expenses and the orders received from buyers. h. Product Quality. As the cost of fabric constitutes a major share in the unit cost of garments, a great deal of attention has to be paid for quality controls at the fabric level. An integrated approach in quality assurance in the process from fabric to garments can be a powerful tool in using quality as a differentiation strategy for competitive advantage. i. Management of Lead Time. Lead-time taken by Sri Lankan exporters around 60-120 days is a