Benefits of Financial Liberalisation

Benefits of m angiotensin-converting enzymetary LiberalisationA EUROPEAN POLICYABSTRACTThis news report ext curiositys to test if the mulct and in the long press. Weak indica- the same short-term accession in cyclical tions ar found that this whitethorn legis ripe par- volatility arising from pecuniary integrating ti each(prenominal)y due to the rachising of expectations is detect in this particular proposition taste of emerg-provided by the EU admission, and to the ing securities industrys. This encounter finds signs that, much robust institutional material contrary to an antecedent(a)wise(prenominal) emerge securities industrys, this imposed by this litigate onto the countries in does non ascertain for the future portion question. kingdoms, fiscal desegregation, besides to the KEY WORDS En voluminousment, europiuman outcome sight in arise merchandise place Union, fiscal re easyation behavior, booms, 81 economies, reduces cyclical volatility two in busts, cycles, volatility.1. INTRODUCTION pecuniary and medium-large(p) flows relaxation behavior can play a fundamental procedure in increasing harvest-feast and welf atomic exit 18. Typic only in completelyy, acclivitous or developing economies slangk conflicting savings to solve the inter-temporal savings-investment problem. On the some other hand, ac course credited grudge superfluous countries reassurek opportunities to invest their savings. To the extent that great(p) flows from surplus to shortf alone countries atomic number 18 well intermediated and, thitherfore, put to the or so full-bodied lend starself, they profit welf be. Liberalization can, however, too be dangerous, as has been witnessed in umpteen past and fresh pecuniary, up-to-dateness and swaning crises. It can make countries much vulnerable to exogenous shocks. In particular, if solid macroeconomic imbalances exist in a recipient acres, and if the pecuniary argonna is weak, be it in ground of assay management, prudential regulation and inspection, large with child(p) flows can easily stretch to serious pecuniary, affirming or currency crises. A number of recent crises, equivalent those in East Asia, Mexico, Russia, brazil nut and Turkey (described, for example, in IMF (2001)), and, to close to extent, the Argentinean mooring of late 2001, advance(prenominal) 2002, defy demonstrated the potential risks associated with financial and slap-up flows relaxation method. aboriginal and eastern europium has a nearwhat antithetic survive, when compared to other uphill arenas, concerning the financial loosening mould, as the run there attends to sire been much little crisis-pr nonpareil than in, for instance, Asia or Latin America. This maybe, at least parti all toldy, because the con brief high degree of outside(a) and financial slackening in the cardinal east European countries (CEECs), beyond questions of economic allocative efficiency, must be s coin chamfer in terms of the per melodic lineance of Accession to the European Union. The EU integrating exploit imp lie d causes legally binding, move relaxation behavior measures- non except gravid eyeshade relaxation behavior, provided investment by EU firms in the internal financial function, and the maintenance of a private-enterprise(a) domestic surround, giving this financial ease dish strong a stylus incentives (and constraints). Those measures were implemented parallel to the development of a highly sophisticated restrictive and supervisory structure, again rackd on EU standards. This whole make for happened likewise with the EUs technical and financial plunk for, finished unique(predicate) programs- worry the PHARE cardinal, for these so-cal guide Accession, and the TACIS, for the former Soviet Union ones- and direct care from EU institutions, like the European Commission, the European Parliament and the Europ ean Central Bank ( in like manner, on a very archaeozoic stage of the rebirth process, the influence of the IMF in sendting up policies and institutions in around(prenominal) countries in the region-an intervention widely considered to harbor been successful-was alpha see Hallerberg et al., 2002).Additionally, EU partship expects to act as an anchor to mart expectations (see Vinhas de Souza and Hlscher, 2001), limiting the possibilities of self- fulfilling financial crises and regional contagion (see Linne, 1999), which had the ascertained devastating payoffs in both(prenominal)(prenominal) Asia and Latin America (even a major event, like the Russian damp of 1998, had very reduced regional side effect). Several regional episodes of financial goernances unbalance did happen (see Vinhas de Souza, 2002(a) and Vinhas de Souza, 2002(b)), just now none with the prolonged negative consequences discovered in other region (which was alike due to the effective subject in surance policy actions undertaken after those episodes). This translates main aim is to expand the Kaminsky and Schmukler database (see Kaminsky and Schmukler, 2003), from promptly on indicated as KS, to include the Accession and Acceding Countries from Eastern Europe (namely, for Bulgaria, the Czechoslovakian Republic, Estonia, Hungary, Latvia, Lithuania, Poland, Romania, Slovakia and Slovenia). In their original work, KS build an considerable database of outside(a) and financial liberalization, which includes both highly- develop countries and countries from acclivitous regions ( pipe down non from Eastern Europe). With that, they create different forefinger numberes of liberalization ( outstanding account, banking and derivation markets see turn off I to a lower place) and utilise them idiosyncraticly and in an add up fashion, test for the effects and condition of this process on financial and trustworthy(a) volatility, for the cosmos of differences between r egions, and for the effects of the ordering of the liberalization process. matchless(prenominal) primordial hypotheses of this work is that the existing restrictive and institutional textile in Eastern Europe, plus a much(prenominal) sustainable tack together of macro policies, compete an important role in enabling liberalization to largely feature the welfare enhancing outcomes that it is supposed to. much(prenominal) an anchoring role of the European Union in the CEECs, done the process of EU membership, and through the effective imposition of valet-wide standards of financial supervision and regulation, may indicate that, beyond multilateral organizations like the IMF or the OECD, a greater, pro-active regional stabilizing role in emerging markets by regional actors, for instance, the joined States, or by some regional sub-grouping, like Mercosur, may to a fault be welfare enhancing for other emerging regions.2. CAPITAL ACCOUNTThe achieving of not bad(p) account liberalization happened sooner fleetly in roughly of the countries in our model by the mid nineties, all bar Bulgaria and Romania had been declared article V third compliant (for those two countries, this happened in 1998 see tabular array II at a lower place).One of the main driving forces furthert joint this was the process of European Integration, for which external liberalization is a pre-requisite in the wee to mid-1990s, all the countries had signed familiarity Agreements with the European Union (frequently preceded by contend liberalization agreements with the EU, also called Europe peck agreements, usually with years effrontery to the countries to prepare for their full execution of instrument) and formally applied for EU membership. another(prenominal) supernumerary featureor restraining liberalization was IMF and OECD membership four of the larger countries in our sample became OECD members during the second one- half(prenominal) of the 1990s. Another fa ctor to be considered, is the endogenetic decision process to liberalise in a sustainable fashion.3. BANKING areaFinancial integration, in the form of the commencement up the banking welkin to opposed banks, is seen as being corroborative, on a micro take aim, as multinationalist banks are usually fail capitalized and more efficient than their domestic counterparts (of course, the domestic banking heavens eventually catches-up for an denotation of this process at the ACs, see, among others, Tomova et al., 2003). Also from a macroeconomic perspective, financial integration maybe positive for the Eastern European countries, both for long run growth and, as there are indications that impertinent banks do not contract either their credit deliver nor their deposit base, in aid to smooth the cycle (see de Haas and Lelyveld, 2003 they find some indication that this is linked to the dampen capitalization base and prudential ratios, as better capitalized domestic banks br ook sym cart tracketicly to overseas banks). Given the bank- warmheartednessed character of well-nigh all the financial systems of the future particle States, this is particularly important for them. In around of the member states, the sign stage of the creation of the two-tier banking system, pattern on the Western European universal bank system, was characterized by preferably liberal licensing practices and limited supervision policies (aimed at the fast creation of a de novo commercial, private banking area see Fleming et al., 1996, Balyozov, 1999, Enoch et al., 2002, Srg et al., 2003). This caused a mushrooming of new banks in those countries in the advance(prenominal) 1990s. double to this, a serial publication of banking crises, of varied proportions, impact almost of those de novo banking systems, due to this lax institutional framework, inherited fragilities from the command deliverance period (the political motif to support state-owned, inefficient industrie s, with the consequent accruement of bad loans and also the pay of budget deficits), macroeconomic instability, risky amplification and investment strategies and also chaste inexperience, both from the investors and from regulators. Progressively, the re-capitalization, privatization and transnationalization of the banking system (mostly into the pass on of EU financial conglomerates), match with the implementation of a more robust, EU-modeled institutional framework, did away with most of those problems. 2 of the worst cases where the set of Baltic banking crises and the Bulgarian episode, which are described in more detail below. Other small banking crises happened in Estonia in 1994 and 1998, and in Latvia in 1994. Caprio and Klingebiel, 2003, report smaller episodes of financial sector di examine in the Czech Republic (94-95), Hungary (93), Poland (91-93), Romania (98-00), Slovakia (97) and Slovenia (92-94). The sign proliferation of banks was, quite naturally, follow ed by a process of consolidation and streng and soing-parallel to the privatization of the remnant state-owned components of the financial system- of the banking sector in most of those economies (in Bulgaria, from 81 banks in 1992 to 35 in 2001, in the Czech Republic from 55 in 1995 to 38 in 2001, Estonia, from 42 in 1992 to 7 rate of flowly, season Hungary had 33 banks in 2002, showing only a very sensitive decrease from the early 1990s, Latvia from 56 in 1994 to 23, Lithuania from 27 in 1993 to 13, in Poland from 81 in 1995 to 71 in 2001, in Romania from 45 in 1998 to 41 in 2001, in Slovakia from 22 in 2000 to 19 in 2001, and in Slovenia, where the number fell from 25 to 21 during 2001 alone).This consolidation process was frequently led by foreign companies, which presently hold the volume of the assets of the banking system in virtually all of them-contrary to the situation in the menses EU fellow member States-bar Slovenia. This process now has a component of regional e xpansion of the Eastern European banks themselves, or, more precisely in most cases, the regional expansion of Western banks via some of their locally-owned subsidiaries (see Srg et al., 2003, ibid). The share of banking assets to gross domestic product, nevertheless, is even-tempered far below the Euro area comely (which stood at around 265% of GDP by end 2001), compared with 47% in Bulgaria, 136% in the Czech Republic, 72% in Estonia and Latvia, 32% in Lithuania, 63% in Poland, 60% in Hungary, 30% in Romania, 96% in Slovakia and 94% in Slovenia (data also for 2001). Another peculiar feature of the banking system in the region is that foreign currency lending -usually euro-denominated-to residents is very high, oddly in the Baltic republics with 80% of total loans in Estonia, 56% in Latvia and 61% in Lithuania. Also, the Baltic countries have substantial shares of deposits by non-residents, with over 10% in Estonia and Lithuania and destruction to 5% in Latvia (Latvia, with its close traffic ties to Russia, has a particular outline of selling itself as a stalls financial services center to CIS depositors see IMF, 2003(b), ibid). The supervision system has also advantageously improved, and, following recent international-and EU- best practice, is now centered in autarkical universal supervisory agencies in the most advanced of those countries (Reininger et al., 2002, ibid., cipher that the formal regulatory environment for the Czech Republic, Hungary and Poland is certainly higher up the EU, and that its actual enforcement level is at its mean(a)Liive, 2003, gives a description of the Estonian experience that culminated in the creation of the EFSA -Estonian Financial Supervisory Authority- in January 2002).3.1 BANKING CRISES IN easterly EUROPEThe Baltic bank crises were, to different degrees, linked to liquidity difficulties link up tolerations with Russia (in the November 1992 Estonian case, by the freeze of assets held by some Estonian banks i n their former Moscow headquarters, fleck the Latvian and Lithuanian episodes of, respectively, March and celestial latitude 1995, were caused by the drying-up of lucrative trade-financing opportunities with Russia, whose exportation commodities, at that term, were still below world price levels) and regulatory tighten (Latvia, Lithuania), compounded by the elimination of credit opportunities with the implementation of the Estonian and Lithuanian CBAs (Currency Board Arrangements). In Lithuania, as in Bulgaria, the financing of the budget deficit also played a role. In the Estonian and Latvian cases, around 40% of the assets of the banking system where compromised, in the Lithuanian and Bulgarian cases, around a third. The Bulgarian 1996-1997 crisis eliminated a third of its banking sector, and led the outlandish to hyperinflation ( arrival over 2000% in March 1997, see Yotzov, 2002). Its roots lie in the political instability that preceded it (which, on its turn, led to in toler able existing sector revitalize, with state-owned, loss devising enterprises being financed via the budget deficit or through arrears with the, at the time, still mostly state-owned part banking sector those arrears were, in turn, partially monetized by the Bulgarian National Bank -BNB- and the largest state bank, the State Savings Bank -SSB). hourly foreign ex modification crises (March 1994, February 1997) and bank runs (late1995, late 1996, early 1997) were part of this picture. The implementation of tighter supervisory procedures during 1996 (giving the BNB the power to close bankrupt banks), and a tightening of policy rattling led to more bank runs. A caretaker organization in February 1997 (before a newly elected government took power in whitethorn) pave the way to longer lasting elucidate and the implementation of the CBA, with its tighter budget constraints towards both the government and the banking sector. This reform process happened with the support from multilat eral institutionsamely, (namely the IMF).4. STOCK MARKETSThe populace of memory markets is take for granted to be expert for economic performance. In principle, it provides a way for companies to raise capital at lower addresss than through simple banking intermediation, and because it is not as certified a source of capital as internal financing. Also, it is assumed that the existence of alternative modes of finance may reduce the likelihood of credit crunches caused by problems with the banking sector (see Greenspan, 2000). Additionally, the existence of external ownership is (or was, given the recent problems with market-based regime in the US and the EU, and the change towards a more regulated environment) assumed to provide better regime for the management of firms. The majority of economic analyses seem to support the position that a diversified financing mix is positive for economic growth and stability. As described in the previous section, all the financial sectors in the Member States are bank-centered, with business markets playing fringy roles in most of them (and, in some, a very marginal role in Bulgaria, Slovakia and Romania, their middling out market capitalization in GDP terms is below 5% see throw I below).All of these countries had (re-)established threadbare markets by the mid-90s (see Table ternion above). About half of the future Member States used them to drive the initial process of re-privatization, either via mass issues of coupon certificates for residents (the most famous case of this strategy was the Czech Republic), or via IPOs (Initial universe Offerings) re-privatization processes, to lock-in domestic and foreign strategic investors (see Claessens at al., 2000). In the voucher- determined privatization, the initial large number of investors and traded personal credit lines in those monetary fund markets was soon concentrated in a instead limited number of institutional investors-domestic and foreign- and bl ue chip var.s. In the IPO-driven markets, the number of airs and investors actually tended to increase with time, albeit from a rather concentrated base. charge in the largest ones, nevertheless, market capitalization, as a GDP share, was and remains rather low (see Figure I below), and far below the EU amount (around 72% of GDP). Only in the Czech Republic, Estonia, Hungary and Slovenia the average market capitalization is above a 20% GDP share, while in Romania is below 1% in some(prenominal) years. Also, the average market turnover is evenly below the one find in comparable EU economies. alike to what is observed in the banking sector, the initial regulatory environment was deliberately lax, and the regulators were plagued by much the same problems of inexperience and limited number of staff and resources.This does not mean that domestic agents in those countries lack access to the financial services supposed to be provided by stock markets the very process of opening up, the increase in cross-border trade in financial services, the harmonization of rules for capital trading with the EU (including the current efforts of the Lamfalussy Committee towards a single European market for securities according to the current proposal, small and medium size firms would be able to use a simplified prospectus valid throughout the EU and choose the country of its approval), plus the development of information technology, all imply that is not actually necessary-nor economically optimal, given economies of scale-for each man-to-man country to have its own separate stock market. One must also recall that the current national stock markets in the jump on developed economies are themselves the resultant of process of consolidation-and closing-of smaller regional stock markets (as was observed in Bulgaria in the early 1990s), which still today coexist with larger, dominant national stock exchanges even in some vaned markets, like Germ either and the US. Neverth eless, the observed mark of domestic larger companies, with presumed better growth prospects, to list abroad (see Table IV below), due to the obvious cost and liquidity advantages of the larger international stock markets, does seems, on balance, to deprive those stock markets of liquidity (see Claessens at al., 2003). On the other hand, nonresidents seem to play a major role in most of those markets (accounting for 77% of the capitalization in Estonia, 70% in Hungary and half of the free-float capitalization in Lithuania).All the peculiar(prenominal) questions described above concerning the way those stock exchanges were founded and their later developments, plus their carnal knowledge smallness and shallowness, accept the dynamics of their stock market magnatees (SMI), and are distinctly formulateed by them (as one may see in Figure II, below). This, coupled with the rather limited age of the series, may affect their adequacy as proxies of financial cycles.Source Datastrea m, limited by the authors. The price kinges here were reborn to US Dollars and re-based to a rough-cut reference period were they equal 100, May of 1998. The country cryptograms are as described in the Annexes.5. ESTIMATED INDEXESThe construction of the index for this new sample of countries was the heart and soul of this work. A comprehensive effort was done to crosscheck the information collected from newsprints and publications with national sources. Below we present the estimated periodic index, for the period January 1990 to June 2003 (see Figure III). The base data for its construction was collected from IMF and EBRD publications, and then exhaustively verified both with national sources and with works written some the individual countries and the region. This is an index that locomote with liberalization, where maximum liberalization equals one and nominal three (in this sense, one could actually see it as an index of financial repression). As an supplemental coge ncy check, the year-end value of the index here constructed was regressed on the combined EBRDs periodical indexes of banking sector reform and non-banking financial sector reform. The results from a panel regression toward the mean with the index constructed here on the LHS and the EBRD index on the RHS yield a coefficient of .60, and correlations among the individual country- specific index series range from -0.91 to -0.35.As one may see from Figure III above, the process of integration and liberalization was almost continuous throughout the 1990s and early 2000s. The spikes in the skillful Liberalization tycoon in the early 1990s do not indicate backslidings the merely reflect the submission into the sample of the newly independent Baltic republics. As former members of the Soviet Union, they enter the world as highly closed economies, nevertheless those countries introduced liberalization reforms almost immediately from the start. afterward this, a slight increasing win d, that does reflect a easy liberalization contrary, is observed, starting mid-1994 and lasting until early 1997, from when a continuous liberalization trend is observed.Noteworthy here is the fact that virtually none of the obvious candidates for a reversal of liberalization (the 1997 Asian Crisis, the intermit of the Czech pecuniary arrangement in 1997, the collapse of the Bulgarian monetary arrangement in 1996/97, the 1998 Russian Crisis, the 1999-2001 oil price shocks-as all those economies are highly dependent of trade energy sources) seems to have driven these mild liberalization reversals. Comparing the undecomposed index number constructed here with the one constructed by KS, for similar time samples, one may observe that the ACs start substantially below the average level of other emerging markets- i.e., they are more liberalized, plainly both the entranceway of the initially less liberalized former Soviet republics, plus continuous liberalization efforts in the eme rging market KS set reverse this situation. A similar liberalization reversal trend in both the ACs and the merging market set is observed from early 1994, notwithstanding it is actually slightly stronger on the ACs sample, until its reversal in 1996. By the end of our sample, the ACs are clearly below the final value for the emerging set in KSs sample. This sort of remarkably fast pattern of the ACs leapfroging towards best international practice is also observed in several types of institutional frameworks, like, for instance, monetary policy institutions and instruments (see Vinhas de Souza and Hlscher, 2001) a process that virtually took decades for Western central banks was compressed in a half a dozen years in the Future Member States. Nevertheless, by the end of the sample, both emerging and ACs are still above the level of bestride, developed economies. Analyzing the individual components of the index (see Figure V), one may see that, abstracting again from the initial spi kes in the index, which are, as explained above, caused by the addition of new countries to the sample, the 1994/1997 reversal of liberalization was fundamentally driven by the Financial Sector liberalization component. As forget become clear with the country specific analysis below, this was related, in most cases, to-and here it must be stressed that those were rather limited reversals-to the banking crises that plagued several countries in our sample in the early to mid 1990s.Comparing now the individual components of the Full Index constructed here with the ones from KS, again for emerging and mature economies, it becomes clear that the reversals observed in Figure IV were driven by different sources in the emerging set (increase in capital account lying-ins) and ACs set (financial sector) see Figure VI. All the indexes for mature economies are, again as one would expect, substantially lower.One could, in principle, aggregate the countries in our sample in three different grou ps rapid liberalizers (the ones that followed a big slam early approach, without major reversals Bulgaria, Estonia, Latvia, Lithuania), concordant liberalizers (the ones that followed a more delayed track, but also without major straighten backs the Czech Republic, Hungary, Poland) and careful liberalizers (the ones whose liberalization mode was either openly incompatible or downright mistrustful Romania, Slovakia, Slovenia).5.1 COUNTRY-BY-COUNTRY relaxation method PATH.In Bulgaria, virtually no sign of a liberalization reversal is observed, even during the substantial stress experienced by the country during the banks runs of 1996/97 and the ultimate collapse of the floating regime in 1997 (beyond ad hoc restricting measures adopted by the banks themselves). As in most of the countries in my sample, the stock market is the last one to liberalize, but does so in a faster fashion. Nevertheless, this is in most cases a data quasi-artifact that arises from the later (re-) reco rd of the stock exchange itself. In the Czech Republic, a limited reversal of the financial sector liberalization is observed from late1995 to late 1997, namely, via the imposition of limits on banks short-term open positions towards on-residents, as a way to limit the exposure of the financial sector to the inflows brought about by the hard tholepin and the potential gains with worry rate differentials. After the peg was replaced by the current float regime, this restriction is duly removed. In Estonia, again, virtually no sign of a liberalization reversal is observed, even during the bank runs of the early 1990s, the unwinding of the 1997 bubble, nor during the 1998 Russian crisis. Again, the stock market is the last one to liberalize, but one more time, this arises from the later constitution of the stock exchange. In Hungary, also no signs of every liberalization reversal are observed. Hungary was an early reformer, introducing some liberalization measures already during the l ate 1980s, but the profile of its reform path is much more discounted through time, as compared, for instance, with the Baltic countries. In Latvia, a rather limited reversal of the financial sector liberalization is observed from mid 1996all the way to early 2003 resulting from the 1996 banking crisis, specific aggregate lending limits to regions (i.e., limits on exposure to non-OECD countries, bar the other Baltic republics) are imposed. In Lithuania, a limited reversal of the financial sector liberalization is observed from early 1998, also resulting from the experienced banking crisis reserve requirements on deposits on foreign accounts by non-resident are introduced In Poland, no signs of any liberalization reversal are observed. Similarly to Hungary, the profile of its reform path is much more discounted through time In Romania, no signs of any liberalization reversal are observed, but the reform path is a decidedly slow and unadventurous one at the end of the sample, it has the highest (i.e., less liberalized) score for the Full Index of all countries in the sample 1.60 (see Table V). In Slovakia, no signs of any liberalization reversal are observed. Here, the reform path is characterized by a broad stagnation since the Czechoslovak partition till 1998/1999, when, after a change in the political leadership, reforms are re-started, reaching after that levels similar to the other Vise grad countries in a rather quick fashion. In Slovenia, one of the most consistently cautious Member States concerning the advantages of integration and liberalization, reversals are indeed observed in all three indexes, since early 1995in the capital account and financial sector components, and from early 1997 in the stock market one. Since early 1999, with the intromission in effect of the EU Association Agreement, all-embracing further (re)liberalization measures have been introduced.6. FINANCIAL CYCLES AND liberalizationThe financial cycle coding which is used by KS d efines cycles as a at least xii month-long strictly downwards (upwards) fecal matter, followed by a equally upwards (downwards) 12-month movement from the through (peak) of a stock market index, measured in USD, as they should reflect returns from the point of view of an international investor. As described in the stock market section of this work, one must be warned that there are specific factors in the countries in our sample that may affect the effectiveness of a stock market index as an adequate proxy of financial cycles, at least for the sample here considered. beyond that, these series have a rather limited time prolongation (our sample covers the 011990-062003 period). Adapting KS criteria to the limited time belongings of our sample, we use a less stringent definition of cycle, the same algorithmic rule as above but with a 3-month window for the cycle (Edwards et al., 2003, use a 6-month window). With this we get 118 observations for all countries in our sample. Of the se 118 cycles, 61 are upward, with an average of 7.51 months duration, and 57 are downward, with an average of 8.20 months of duration.7. CONCLUSIONThe main aim of this paper was to extend the index developed by Kaminsky and Schmukler, 2003, for a specific sample of countries, namely, the previously centrally plan economies from Central and Eastern Europe, and to perform a similar analysis on them. Our results do lend some support to the basic assumption of this study in spite of all the limitations of the time series used (their shortness, the fact that they were buffeted by several country-specific and vulgar shocks), a re-estimation of KSs core regressions strongly supports the notion that financial liberalization does generate benefits both in the short and in the long run, measured via the character reference of the amplitude of upward cycles and its reduction for downward cycles of stock market indexes. Importantly, these results crook from KS, as in their work emerging markets experience a sexual intercourse short run increase in the amplitude of downward cycles. Another noteworthy feature is that only fry liberalization reversals, led by the financial sector component, were observed in the aggregate index. Also, those reversals do not seem to be driven by contagion from shocks in other emerging markets (like the Asian or Russian crisis), but reflect country-specific shocks. When considering the individual components of the index separately, again signs of minor reversals in financial sector liberalization are observed, related to temporary reactions to the several banking crisis observed in the region. Concerning the impressiveness of institutions and of the EU Accession, this text file initial assumption was that the mostly positive results above would come about due to the anchoring of expectation provided by the perspective of entry into the EU already by mid-2004 (or 2007, in the case of Bulgaria and Romania) for the countries here analyz ed, and by the imposition of a more robust macro and institutional framework by the requirements of the Accession process itself. Signs of this are not found in the KS regressions, perhaps because the liberalization index itself captures the effects of the EU Accession process.Finally, using a different framework than KSs to assess the affects of liberalization on financial, real and nominal volatility, most of the econometric results seem to support the previous ones, but they seem to indicate that the capital account liberalization is the element that most consistently and significantly reduces volatility. On this final section, the majority the econometric results seem to support some specific role for the EU Enlargement process in reducing volatility.Benefits of Financial LiberalisationBenefits of Financial LiberalisationA EUROPEAN POLICYABSTRACTThis paper extends to test if the short and in the long run. Weak indica- the same short-run increase in cyclical tions are found that this may happen par- volatility arising from financial integration tially due to the anchoring of expectations is observed in this specific sample of emerg-provided by the EU Accession, and to the ing markets. This work finds signs that, more robust institutional framework contrary to other emerging markets, this imposed by this process onto the countries in does not happen for the future Member question. States, financial integration, similarly to the KEY WORDS Enlargement, European outcome observed in mature market Union, financial liberalization, booms, 81 economies, reduces cyclical volatility both in busts, cycles, volatility.1. INTRODUCTIONFinancial and capital flows liberalization can play a fundamental role in increasing growth and welfare. Typically, emerging or developing economies seek foreign savings to solve the inter-temporal savings-investment problem. On the other hand, current account surplus countries seek opportunities to invest their savings. To the extent that c apital flows from surplus to deficit countries are well intermediated and, therefore, put to the most productive use, they increase welfare. Liberalization can, however, also be dangerous, as has been witnessed in many past and recent financial, currency and banking crises. It can make countries more vulnerable to exogenous shocks. In particular, if serious macroeconomic imbalances exist in a recipient country, and if the financial sector is weak, be it in terms of risk management, prudential regulation and supervision, large capital flows can easily lead to serious financial, banking or currency crises. A number of recent crises, like those in East Asia, Mexico, Russia, Brazil and Turkey (described, for example, in IMF (2001)), and, to some extent, the Argentinean episode of late 2001, early 2002, have demonstrated the potential risks associated with financial and capital flows liberalization.Central and Eastern Europe has a somewhat different experience, when compared to other eme rging regions, concerning the financial liberalization process, as the process there seems to have been much less crisis-prone than in, for instance, Asia or Latin America. This maybe, at least partially, because the current high degree of external and financial liberalization in the Central Eastern European countries (CEECs), beyond questions of economic allocative efficiency, must be understood in terms of the process of Accession to the European Union. The EU integration process implies legally binding, sweeping liberalization measures-not only capital account liberalization, but investment by EU firms in the domestic financial services, and the maintenance of a competitive domestic environment, giving this financial liberalization process strong external incentives (and constraints). Those measures were implemented parallel to the development of a highly sophisticated regulatory and supervisory structure, again based on EU standards. This whole process happened also with the EUs technical and financial support, through specific programs-like the PHARE one, for these so-called Accession, and the TACIS, for the former Soviet Union ones- and direct assistance from EU institutions, like the European Commission, the European Parliament and the European Central Bank (also, on a very early stage of the transition process, the influence of the IMF in background knowledge up policies and institutions in several countries in the region-an intervention widely considered to haven been successful-was important see Hallerberg et al., 2002).Additionally, EU membership seems to act as an anchor to market expectations (see Vinhas de Souza and Hlscher, 2001), limiting the possibilities of self- fulfilling financial crises and regional contagion (see Linne, 1999), which had the observed devastating effects in both Asia and Latin America (even a major event, like the Russian collapse of 1998, had very reduced regional side effects). Several regional episodes of financial sys tems instability did happen (see Vinhas de Souza, 2002(a) and Vinhas de Souza, 2002(b)), but none with the prolonged negative consequences observed in other region (which was also due to the effective national policy actions undertaken after those episodes). This studys main aim is to expand the Kaminsky and Schmukler database (see Kaminsky and Schmukler, 2003), from now on indicated as KS, to include the Accession and Acceding Countries from Eastern Europe (namely, for Bulgaria, the Czech Republic, Estonia, Hungary, Latvia, Lithuania, Poland, Romania, Slovakia and Slovenia). In their original work, KS build an extensive database of external and financial liberalization, which includes both developed countries and countries from emerging regions (but not from Eastern Europe). With that, they create different indexes of liberalization (capital account, banking and stock markets see Table I below) and using them individually and in an aggregate fashion, test for the effects and causal ity of this process on financial and real volatility, for the existence of differences between regions, and for the effects of the ordering of the liberalization process.One underlying hypotheses of this work is that the existing regulatory and institutional framework in Eastern Europe, plus a more sustainable set of macro policies, played an important role in enabling liberalization to largely deliver the welfare enhancing outcomes that it is supposed to. Such an anchoring role of the European Union in the CEECs, through the process of EU membership, and through the effective imposition of international standards of financial supervision and regulation, may indicate that, beyond multilateral organizations like the IMF or the OECD, a greater, pro-active regional stabilizing role in emerging markets by regional actors, for instance, the United States, or by some regional sub-grouping, like Mercosur, may also be welfare enhancing for other emerging regions.2. CAPITAL ACCOUNTThe achiev ing of capital account liberalization happened rather swiftly in most of the countries in our sample by the mid 1990s, all bar Bulgaria and Romania had been declared Article VIII compliant (for those two countries, this happened in 1998 see Table II below).One of the main driving forces behind this was the process of European Integration, for which external liberalization is a pre-requisite in the early to mid-1990s, all the countries had signed Association Agreements with the European Union (frequently preceded by trade liberalization agreements with the EU, also called Europe trade agreements, usually with years given to the countries to prepare for their full implementation) and formally applied for EU membership. Another additional factor supporting liberalization was IMF and OECD membership four of the larger countries in our sample became OECD members during the second half of the 1990s. Another factor to be considered, is the endogenous decision process to liberalize in a sus tainable fashion.3. BANKING SECTORFinancial integration, in the form of the opening up the banking sector to foreign banks, is seen as being positive, on a micro level, as foreign banks are usually better capitalized and more efficient than their domestic counterparts (of course, the domestic banking sector eventually catches-up for an indication of this process at the ACs, see, among others, Tomova et al., 2003). Also from a macroeconomic perspective, financial integration maybe positive for the Eastern European countries, both for long run growth and, as there are indications that foreign banks do not contract either their credit supply nor their deposit base, in helping to smooth the cycle (see de Haas and Lelyveld, 2003 they find some indication that this is linked to the better capitalization base and prudential ratios, as better capitalized domestic banks behave similarly to foreign banks). Given the bank-centered nature of virtually all the financial systems of the future Mem ber States, this is particularly important for them. In most of the member states, the initial stage of the creation of the two-tier banking system, modeled on the Western European universal bank system, was characterized by rather liberal licensing practices and limited supervision policies (aimed at the fast creation of a de novo commercial, private banking sector see Fleming et al., 1996, Balyozov, 1999, Enoch et al., 2002, Srg et al., 2003). This caused a mushrooming of new banks in those countries in the early 1990s. Parallel to this, a series of banking crises, of varied proportions, affected most of those de novo banking systems, due to this lax institutional framework, inherited fragilities from the command economy period (the political need to support state-owned, inefficient industries, with the consequent accumulation of bad loans and also the financing of budget deficits), macroeconomic instability, risky expansion and investment strategies and also sheer inexperience, b oth from the investors and from regulators. Progressively, the re-capitalization, privatization and internationalization of the banking system (mostly into the hands of EU financial conglomerates), coupled with the implementation of a more robust, EU-modeled institutional framework, did away with most of those problems.Two of the worst cases where the set of Baltic banking crises and the Bulgarian episode, which are described in more detail below. Other smaller banking crises happened in Estonia in 1994 and 1998, and in Latvia in 1994. Caprio and Klingebiel, 2003, report smaller episodes of financial sector distress in the Czech Republic (94-95), Hungary (93), Poland (91-93), Romania (98-00), Slovakia (97) and Slovenia (92-94). The initial proliferation of banks was, quite naturally, followed by a process of consolidation and strengthening-parallel to the privatization of the remnant state-owned components of the financial system- of the banking sector in most of those economies (in Bulgaria, from 81 banks in 1992 to 35 in 2001, in the Czech Republic from 55 in 1995 to 38 in 2001, Estonia, from 42 in 1992 to 7 currently, while Hungary had 33 banks in 2002, showing only a very slight decrease from the early 1990s, Latvia from 56 in 1994 to 23, Lithuania from 27 in 1993 to 13, in Poland from 81 in 1995 to 71 in 2001, in Romania from 45 in 1998 to 41 in 2001, in Slovakia from 22 in 2000 to 19 in 2001, and in Slovenia, where the number fell from 25 to 21 during 2001 alone).This consolidation process was frequently led by foreign companies, which now hold the majority of the assets of the banking system in virtually all of them-contrary to the situation in the current EU Member States-bar Slovenia. This process now has a component of regional expansion of the Eastern European banks themselves, or, more precisely in most cases, the regional expansion of Western banks via some of their locally-owned subsidiaries (see Srg et al., 2003, ibid). The share of banking asse ts to GDP, nevertheless, is still far below the Euro area average (which stood at around 265% of GDP by end 2001), compared with 47% in Bulgaria, 136% in the Czech Republic, 72% in Estonia and Latvia, 32% in Lithuania, 63% in Poland, 60% in Hungary, 30% in Romania, 96% in Slovakia and 94% in Slovenia (data also for 2001). Another peculiar feature of the banking system in the region is that foreign currency lending -usually euro-denominated-to residents is very high, especially in the Baltic republics with 80% of total loans in Estonia, 56% in Latvia and 61% in Lithuania. Also, the Baltic countries have substantial shares of deposits by non-residents, with over 10% in Estonia and Lithuania and close to 5% in Latvia (Latvia, with its close trading ties to Russia, has a particular strategy of selling itself as a stable financial services center to CIS depositors see IMF, 2003(b), ibid). The supervision system has also substantially improved, and, following recent international-and EU- best practice, is now centered in independent universal supervisory agencies in the most advanced of those countries (Reininger et al., 2002, ibid., estimate that the formal regulatory environment for the Czech Republic, Hungary and Poland is actually above the EU, and that its actual enforcement level is at its averageLiive, 2003, gives a description of the Estonian experience that culminated in the creation of the EFSA -Estonian Financial Supervisory Authority- in January 2002).3.1 BANKING CRISES IN EASTERN EUROPEThe Baltic bank crises were, to different degrees, linked to liquidity difficulties related tolerations with Russia (in the November 1992 Estonian case, by the freezing of assets held by some Estonian banks in their former Moscow headquarters, while the Latvian and Lithuanian episodes of, respectively, March and December 1995, were caused by the drying-up of lucrative trade-financing opportunities with Russia, whose export commodities, at that time, were still below world price levels) and regulatory tightening (Latvia, Lithuania), compounded by the elimination of credit opportunities with the implementation of the Estonian and Lithuanian CBAs (Currency Board Arrangements). In Lithuania, as in Bulgaria, the financing of the budget deficit also played a role. In the Estonian and Latvian cases, around 40% of the assets of the banking system where compromised, in the Lithuanian and Bulgarian cases, around a third. The Bulgarian 1996-1997 crisis eliminated a third of its banking sector, and led the country to hyperinflation (reaching over 2000% in March 1997, see Yotzov, 2002). Its roots lie in the political instability that preceded it (which, on its turn, led to inadequate real sector reform, with state-owned, loss making enterprises being financed via the budget deficit or through arrears with the, at the time, still mostly state-owned part banking sector those arrears were, in turn, partially monetized by the Bulgarian National Bank -BNB- and the la rgest state bank, the State Savings Bank -SSB). Periodic foreign exchange crises (March 1994, February 1997) and bank runs (late1995, late 1996, early 1997) were part of this picture. The implementation of tighter supervisory procedures during 1996 (giving the BNB the power to close insolvent banks), and a tightening of policy actually led to more bank runs. A caretaker government in February 1997 (before a newly elected government took power in May) paved the way to longer lasting reform and the implementation of the CBA, with its tighter budget constraints towards both the government and the banking sector. This reform process happened with the support from multilateral institutionsamely, (namely the IMF).4. STOCK MARKETSThe existence of stock markets is assumed to be beneficial for economic performance. In principle, it provides a way for companies to raise capital at lower costs than through simple banking intermediation, and because it is not as restricted a source of capital a s internal financing. Also, it is assumed that the existence of alternative modes of finance may reduce the likelihood of credit crunches caused by problems with the banking sector (see Greenspan, 2000). Additionally, the existence of external ownership is (or was, given the recent problems with market-based governance in the US and the EU, and the shift towards a more regulated environment) assumed to provide better governance for the management of firms. The majority of economic analyses seem to support the position that a diversified financing mix is positive for economic growth and stability. As described in the previous section, all the financial sectors in the Member States are bank-centered, with stock markets playing marginal roles in most of them (and, in some, a very marginal role in Bulgaria, Slovakia and Romania, their average market capitalization in GDP terms is below 5% see Figure I below).All of these countries had (re-)established stock markets by the mid-90s (see T able III above). About half of the future Member States used them to drive the initial process of re-privatization, either via mass issues of voucher certificates for residents (the most famous case of this strategy was the Czech Republic), or via IPOs (Initial Public Offerings) re-privatization processes, to lock-in domestic and foreign strategic investors (see Claessens at al., 2000). In the voucher-driven privatization, the initial large number of investors and traded stocks in those stock markets was soon concentrated in a rather limited number of institutional investors-domestic and foreign- and blue chip stocks. In the IPO-driven markets, the number of stocks and investors actually tended to increase with time, albeit from a rather concentrated base.Even in the largest ones, nevertheless, market capitalization, as a GDP share, was and remains rather low (see Figure I below), and far below the EU average (around 72% of GDP). Only in the Czech Republic, Estonia, Hungary and Slov enia the average market capitalization is above a 20% GDP share, while in Romania is below 1% in several years. Also, the average market turnover is equally below the one observed in comparable EU economies. Similarly to what is observed in the banking sector, the initial regulatory environment was deliberately lax, and the regulators were plagued by much the same problems of inexperience and limited number of staff and resources.This does not mean that domestic agents in those countries lack access to the financial services supposed to be provided by stock markets the very process of opening up, the increase in cross-border trade in financial services, the harmonization of rules for capital trading with the EU (including the ongoing efforts of the Lamfalussy Committee towards a single European market for securities according to the current proposal, small and medium size firms would be able to use a simplified prospectus valid throughout the EU and choose the country of its approva l), plus the development of information technology, all imply that is not actually necessary-nor economically optimal, given economies of scale-for each individual country to have its own separate stock market. One must also recall that the current national stock markets in the mature developed economies are themselves the result of process of consolidation-and closing-of smaller regional stock markets (as was observed in Bulgaria in the early 1990s), which still today coexist with larger, dominant national stock exchanges even in some mature markets, like Germany and the US. Nevertheless, the observed tendency of domestic larger companies, with presumed better growth prospects, to list abroad (see Table IV below), due to the obvious cost and liquidity advantages of the larger international stock markets, does seems, on balance, to deprive those stock markets of liquidity (see Claessens at al., 2003). On the other hand, nonresidents seem to play a major role in most of those markets (accounting for 77% of the capitalization in Estonia, 70% in Hungary and half of the free-float capitalization in Lithuania).All the specific questions described above concerning the way those stock exchanges were founded and their later developments, plus their relative smallness and shallowness, affect the dynamics of their stock market indexes (SMI), and are clearly reflected by them (as one may see in Figure II, below). This, coupled with the rather limited duration of the series, may affect their adequacy as proxies of financial cycles.Source Datastream, modified by the authors. The price indexes here were converted to US Dollars and re-based to a common reference period were they equal 100, May of 1998. The country codings are as described in the Annexes.5. ESTIMATED INDEXESThe construction of the index for this new sample of countries was the core of this work. A comprehensive effort was done to crosscheck the information collected from papers and publications with national sources. Below we present the estimated monthly index, for the period January 1990 to June 2003 (see Figure III). The base data for its construction was collected from IMF and EBRD publications, and then exhaustively verified both with national sources and with works written about the individual countries and the region. This is an index that falls with liberalization, where maximum liberalization equals one and minimum three (in this sense, one could actually see it as an index of financial repression). As an additional robustness check, the year-end value of the index here constructed was regressed on the combined EBRDs yearly indexes of banking sector reform and non-banking financial sector reform. The results from a panel regression with the index constructed here on the LHS and the EBRD index on the RHS yield a coefficient of .60, and correlations among the individual country- specific index series range from -0.91 to -0.35.As one may see from Figure III above, the process of i ntegration and liberalization was almost continuous throughout the 1990s and early 2000s. The spikes in the Full Liberalization Index in the early 1990s do not indicate reversals the merely reflect the entry into the sample of the newly independent Baltic republics. As former members of the Soviet Union, they enter the world as highly closed economies, but those countries introduced liberalization reforms almost immediately from the start. After this, a slight increasing trend, that does reflect a mild liberalization reversal, is observed, starting mid-1994 and lasting until early 1997, from when a continuous liberalization trend is observed.Noteworthy here is the fact that virtually none of the obvious candidates for a reversal of liberalization (the 1997 Asian Crisis, the collapse of the Czech monetary arrangement in 1997, the collapse of the Bulgarian monetary arrangement in 1996/97, the 1998 Russian Crisis, the 1999-2001 oil price shocks-as all those economies are highly depende nt of imported energy sources) seems to have driven these mild liberalization reversals. Comparing the Full Index constructed here with the one constructed by KS, for similar time samples, one may observe that the ACs start substantially below the average level of other emerging markets- i.e., they are more liberalized, but both the entry of the initially less liberalized former Soviet republics, plus continuous liberalization efforts in the emerging market KS set reverse this situation. A similar liberalization reversal trend in both the ACs and the merging market set is observed from early 1994, but it is actually slightly stronger on the ACs sample, until its reversal in 1996. By the end of our sample, the ACs are clearly below the final value for the emerging set in KSs sample. This sort of remarkably fast pattern of the ACs leapfroging towards best international practice is also observed in several types of institutional frameworks, like, for instance, monetary policy instituti ons and instruments (see Vinhas de Souza and Hlscher, 2001) a process that virtually took decades for Western central banks was compressed in a half a dozen years in the Future Member States. Nevertheless, by the end of the sample, both emerging and ACs are still above the level of mature, developed economies. Analyzing the individual components of the index (see Figure V), one may see that, abstracting again from the initial spikes in the index, which are, as explained above, caused by the addition of new countries to the sample, the 1994/1997 reversal of liberalization was essentially driven by the Financial Sector liberalization component. As will become clear with the country specific analysis below, this was related, in most cases, to-and here it must be stressed that those were rather limited reversals-to the banking crises that plagued several countries in our sample in the early to mid 1990s.Comparing now the individual components of the Full Index constructed here with the ones from KS, again for emerging and mature economies, it becomes clear that the reversals observed in Figure IV were driven by different sources in the emerging set (increase in capital account restrictions) and ACs set (financial sector) see Figure VI. All the indexes for mature economies are, again as one would expect, substantially lower.One could, in principle, aggregate the countries in our sample in three different groups rapid liberalizers (the ones that followed a big bang early approach, without major reversals Bulgaria, Estonia, Latvia, Lithuania), consistent liberalizers (the ones that followed a more delayed path, but also without major roll backs the Czech Republic, Hungary, Poland) and cautious liberalizers (the ones whose liberalization path was either openly inconsistent or downright mistrustful Romania, Slovakia, Slovenia).5.1 COUNTRY-BY-COUNTRY LIBERALIZATION PATH.In Bulgaria, virtually no sign of a liberalization reversal is observed, even during the substantial stress experienced by the country during the banks runs of 1996/97 and the ultimate collapse of the floating regime in 1997 (beyond ad hoc restrictive measures adopted by the banks themselves). As in most of the countries in my sample, the stock market is the last one to liberalize, but does so in a faster fashion. Nevertheless, this is in most cases a data quasi-artifact that arises from the later (re-)constitution of the stock exchange itself. In the Czech Republic, a limited reversal of the financial sector liberalization is observed from late1995 to late 1997, namely, via the imposition of limits on banks short-term open positions towards on-residents, as a way to limit the exposure of the financial sector to the inflows brought about by the hard peg and the potential gains with interest rate differentials. After the peg was replaced by the current float regime, this restriction is duly removed. In Estonia, again, virtually no sign of a liberalization reversal is observed, even during the bank runs of the early 1990s, the unwinding of the 1997 bubble, nor during the 1998 Russian crisis. Again, the stock market is the last one to liberalize, but one more time, this arises from the later constitution of the stock exchange. In Hungary, also no signs of any liberalization reversal are observed. Hungary was an early reformer, introducing some liberalization measures already during the late 1980s, but the profile of its reform path is much more discounted through time, as compared, for instance, with the Baltic countries. In Latvia, a rather limited reversal of the financial sector liberalization is observed from mid 1996all the way to early 2003 resulting from the 1996 banking crisis, specific aggregate lending limits to regions (i.e., limits on exposure to non-OECD countries, bar the other Baltic republics) are imposed. In Lithuania, a limited reversal of the financial sector liberalization is observed from early 1998, also resulting from the experienced banki ng crisis reserve requirements on deposits on foreign accounts by non-resident are introduced In Poland, no signs of any liberalization reversal are observed. Similarly to Hungary, the profile of its reform path is much more discounted through time In Romania, no signs of any liberalization reversal are observed, but the reform path is a decidedly slow and cautious one at the end of the sample, it has the highest (i.e., less liberalized) score for the Full Index of all countries in the sample 1.60 (see Table V). In Slovakia, no signs of any liberalization reversal are observed. Here, the reform path is characterized by a broad stagnation since the Czechoslovak partition till 1998/1999, when, after a change in the political leadership, reforms are re-started, reaching after that levels similar to the other Vise grad countries in a rather quick fashion. In Slovenia, one of the most consistently cautious Member States concerning the advantages of integration and liberalization, reversa ls are indeed observed in all three indexes, since early 1995in the capital account and financial sector components, and from early 1997 in the stock market one. Since early 1999, with the entry in effect of the EU Association Agreement, across-the-board further (re)liberalization measures have been introduced.6. FINANCIAL CYCLES AND LIBERALIZATIONThe financial cycle coding which is used by KS defines cycles as a at least twelve month-long strictly downwards (upwards) movement, followed by a equally upwards (downwards) 12-month movement from the through (peak) of a stock market index, measured in USD, as they should reflect returns from the point of view of an international investor. As described in the stock market section of this work, one must be warned that there are specific factors in the countries in our sample that may affect the effectiveness of a stock market index as an adequate proxy of financial cycles, at least for the sample here considered. Beyond that, these series have a rather limited time extension (our sample covers the 011990-062003 period). Adapting KS criteria to the limited time dimension of our sample, we use a less stringent definition of cycle, the same algorithm as above but with a 3-month window for the cycle (Edwards et al., 2003, use a 6-month window). With this we get 118 observations for all countries in our sample. Of these 118 cycles, 61 are upward, with an average of 7.51 months duration, and 57 are downward, with an average of 8.20 months of duration.7. CONCLUSIONThe main aim of this paper was to extend the index developed by Kaminsky and Schmukler, 2003, for a specific sample of countries, namely, the previously centrally planned economies from Central and Eastern Europe, and to perform a similar analysis on them. Our results do lend some support to the basic assumption of this study in spite of all the limitations of the time series used (their shortness, the fact that they were buffeted by several country-specific and c ommon shocks), a re-estimation of KSs core regressions strongly supports the notion that financial liberalization does generate benefits both in the short and in the long run, measured via the extension of the amplitude of upward cycles and its reduction for downward cycles of stock market indexes. Importantly, these results diverge from KS, as in their work emerging markets experience a relative short run increase in the amplitude of downward cycles. Another noteworthy feature is that only minor liberalization reversals, led by the financial sector component, were observed in the aggregate index. Also, those reversals do not seem to be driven by contagion from shocks in other emerging markets (like the Asian or Russian crisis), but reflect country-specific shocks. When considering the individual components of the index separately, again signs of minor reversals in financial sector liberalization are observed, related to temporary reactions to the several banking crisis observed in the region. Concerning the importance of institutions and of the EU Accession, this papers initial assumption was that the mostly positive results above would come about due to the anchoring of expectation provided by the perspective of entry into the EU already by mid-2004 (or 2007, in the case of Bulgaria and Romania) for the countries here analyzed, and by the imposition of a more robust macro and institutional framework by the requirements of the Accession process itself. Signs of this are not found in the KS regressions, perhaps because the liberalization index itself captures the effects of the EU Accession process.Finally, using a different framework than KSs to assess the affects of liberalization on financial, real and nominal volatility, most of the econometric results seem to support the previous ones, but they seem to indicate that the capital account liberalization is the element that most consistently and significantly reduces volatility. On this final section, the maj ority the econometric results seem to support some specific role for the EU Enlargement process in reducing volatility.

Mistreatment Of Mentally Ill Patients Social Work Essay

Mistreatment Of Mentally Ill Patients Social Work Essay tidy sum suffering from noetic unhealthiness atomic number 18 often looked differently and do not have equal access to all the opportunities in liveliness. Though, long-sufferings family and the wellness dole show up providers throw out play a funda amiable role in the lives of these psychologically ill mountain. Through offering a proficient like with warmth military capability they can certainly bring an optimistic throw in them. But, imagine what if these c atomic number 18givers are the intellect of mistreatment with moral long-sufferings? This is an honorable love which I recently came across during my clinicals and therefore decided to explore it in depth. Thus, the fol wiped out(p)ing paper is an attempt to analyze this issue by incorporate an ethical model, highlight its significance and to discuss the causes, effects on mental health and practical strategies to overcome this immoral issue of mistreatm ent with mental patients.On my clinical to psychiatric guard civil hospital I encountered a 60 years old female, married and diagnosed with obsessive-compulsive disorder (OCD). The main(prenominal) complaints of patient were severe headache and aggressive behavior. Since 20 years patient had history of recurrent depressive illness characterized by weeping spells and low-pitched energy. On asking about the support system patient became gloomy and utter I am al wholeness and nobody likes to be with me and sustentation for me. shape up she said that collectable to her habit of cleaning things again and again her family becomes dotty and speaks approximately to her. On spending some time with patient I came to know that how much she loved them but nobody came to meet her since she had got admitted. afterward taking history of patient that day I also spy that when my patient called the bind to inquire about the medication timings, nurse replied discourteously that how m al l times you will ask the same thing again and again. You are mentally ill but please let us remain in good health and then that staff nurse after making vicious gesture got out of that ward. This incident do patient further depressed. It is an issue which is ethically wrong, as safeguardgivers who should help the patient when they are in true need are abusing them. As the master copy code of ethics explains the significance of this ethical issue, which is the base of companionable moral philosophy that first of all, do no harm. It also emphasizes that the purpose of nonmaleficence includes not and definite harm but also the risk of harm (Clinical Ethics, 2004). Therefore, an ethical person must be constantly pull offful about the possible interdict consequences of his words and actions with the mental patients. Furthermore, according to the world health organization, In Pakistan we come across upsetting stories about the mistreatment of mentally ill pot imputable to societ al hostilities routine (Gadit, 2008). Though, it is difficult to understand why such(prenominal)(prenominal) flock are maltreated in Pakistan, an Islamic country where spectral teachings are followed. Therefore, to discover the reasons behind this immoral deed, to identify actions to lessen this in society and also to make the caregivers inculcate this thought to support these people in their difficult times, I consider this issue as real and therefore decided to highlight it in my paper.As defined by SAVE project of cordial go that mistreatment is a breach of persons kind-hearted and civil rights causing despair. And, this violation can appear once or constantly (SAVE Project, 1995). Mistreatment of elderly person may include physical, psychological or financial exploitation and it can be intended or unintended. learned mistreatment involves a purposeful effort to inflict harm such as physical malignment or mauling. On the other hand, unintentional roast takes place when an unplanned action results in damage, such as ignorance or a miss of desire of the care providers to offer proper care (Jones, Holestege, Holstege, 1997). As verbalized by my client that at home she was beaten(a) harshly and was always ignored by the caregivers. Moreover, nurse also verbally mistreated the patient and showed lack of desire to care. However, the empirically generated model, which is an ethical model, provided by Fulmer Malley (1987) gives in depth details of causes and risk factors handing to mistreatment in mental patients. They divided the causal factors of mistreatment into four major categories including physical and mental terms of the patients, increased strain on caregivers, family history of domestic violence and the societal attitudes. This model elucidates that domestic violence such as offense and drop down are the behaviors which are learned at home and are passed from one generation to the next. Thus, elder abuse may be a invariable phenomenon learned in childhood. Secondly, the speech pattern on caregivers can also lead to mistreatment. Facing behaviors by the elderly mental persons like drug abuse, recurrent falls, incontinence or aggressive behaviors, the caregivers become exhausted and can thump out their resentment on these innocent beings. As happened with my client that due to her habit of cleaning things repeatedly, caregivers always offended and taunted her. Other external stressors such as loss of job, personal illness or low income can also place overwhelming demands on care providers which results in impetuous behaviors. Furthermore, this model suggests that the ill health of elderly persons in it self is a reason for abuse. Functional impairments lead to dependency on a caregiver for the activities of daily living. As these needs raises, the stress level of caregivers further increases. As confront by my patient, who was always reliant upon her family and husband for daily routine work. This created defea t for the family and at last they left her at psychiatric hospital. Lastly, there are several societal attitudes that contribute to mental persons maltreatment. Among these attitudes, Stigma is the most commons in psychiatric settings. There are many reports affirming that such patients are teased in communities by unkind names (Gadit, 2008). Moreover, according to the man Health Report (2001), stigma and prejudice are the main preventative faced by the mentally ill today, these abstain them from seeking grant care (Rameela, 2004). Besides this, patients are also mistreated in the ward settings by the staffs, as occurred with my client. This is because, persons in institutional care are dependant, passing fragile or chronically ill. In addition, problems such as low salaries, staff shortages and poor working environment increase the chances of mistreatment. (Lucas Stevenson, 2006).As the fundamental duty of all care providers is to perform efforts to improve the quality of b rio of patients. However, if these caregivers would show such an abusive behavior to the mental patients this will refer their psychological as well as physiological health. As shown in my client who along with psychological symptoms also suffered from insomnia and decreased appetite due to worries of being alone. Besides, as mentioned in literature that, negative behaviors and biases towards those having mental illness is the broadest hurdle to recovery (Chambers et al., 2010). Like, it was observed in my patient who confused all the hopes of being in normal condition as before. This was shown in her verbal comments that everyone thinks that I am mad and therefore behaves with me in harsh manner and I am sure I will never be fine again. This shows that how important role the caregivers and their attitude play in the development of mental patients. As very rightly said that support has been known to help influence and motivate a behavior alter in a positive way (Clark et al., 2 005, p.20). Thus, if there would be lack of support system for these people it would lower their self esteem, intrinsic pauperization and leads to decrease self concept (Lowder, 2007). If these mentally un well people are discriminated, this would hinder their ability to assimilate into society and this can lead to social isolation. Also, according to labeling theory, that once public label these people as mentally ill, their presence becomes undesirable in company hence leading them to social seclusion (Lowder, 2007). As happened with my client that when she asked her husband once to meet their relatives, he had beaten her scarcely with wooden stick just because he entangle ashamed to take her in family gatherings. This affected her personality immensely and from that frontwards she herself remained lonely and isolated. By reflecting upon this we can imagine that how a single thieving(prenominal) action or altitude of caregivers can massively effect patients life. In addition, the interpersonal model of violence in mental health by Chappell and De Martino (2003) also agrees to the point that if patients needs and wishes are blocked till great extent, it would intensely affect patients mental health hence leading to deplorable effects such as ineffective stick withnce to treatment memorandum and destruction of self (See appendices). Like, my patient tried several times to take out suicide in order to decrease her loneliness and suppress her infringement towards others. This show that it is very significant for caregivers to strengthen the mental health of these people rather than making them more vulnerable to harmful health consequences as conferred above.After thorough literature search I found out some practical interventions to promote the ways of reducing mistreatment with mental patients. It would be on individual, family, community and government level. At individual level, patients should be minded(p) liberty to take decisions regarding their life and should not be tortured or harmed. This is supported by Human Rights Act (1998) that states no one shall be subjected to torture or to in clement or degrading treatment or punishment (Clinical ethics, 2004, p.24). In addition, the stair case model illuminates intervention strategies concerning abuse prevention in 3 steps which are reluctance, recognition and rebuilding. This includes interventions such as breaking through denial, decreasing social loneliness, sorrow and self blame, providing teaching and advocacy (Loughlin Duggan, 1998). Health care professionals can integrate these interventions in their care framework. I also attempted to apply this model in my patients care. I tried to make my client verbalize her feelings by providing her concrete objects like blank paper and colors. This helped her in verbalizing her internal feelings which were not dual-lane with others since long time. Moreover, throughout my clinical weeks I remained engaged in care through non ju dgmental speech and body language. As supported by literature that your speech and nature should convey respect and a non-judgmental attitude (Loughlin Duggan,1998). To lessen social isolation, I involved my client in chemical group occupational therapy and also focused on her hobbies that were, drawing and coloring the religious names. In this way I was able to socialize her to some extent. As supported by literature that, Support groups provide a gestate for people with OCD to get emotional support while learning how to cover their condition. Also, this helps victims to lessen the barriers that the memories of abuse place in the way of normal life (Davis, 2008 Child abuse, CPS facts). In addition, abuse creates sense of hopelessness and low self esteem in patients as discussed earlier therefore caregivers should be taught to encourage and praise clients on their little efforts to boost their self concept.On family level, a good communication and involvement in patient care can be a best defense against mistreatment. Moreover, providing psycho learning can also enable family members to remain involved in the care. As, the stress level of caregivers can also be reduced by providing tips of care giving to them and involving in family therapy (Davis, 2008). At community level, social and health workers including community leaders should have responsibility for identifying cases of mistreatment and then organizing interventions to lessen the risk of any prospective abuse (Loughlin Duggan, 1998). Moreover, I recommend that the psychological counseling services as well as social gathering area for mental patients should be established in the community, where these people can socialize themselves. On government level, various laws and punishments for the abusers and extensive awareness campaigns on care and destigmatization of mental illness should be arranged (Raj, 2009). Besides, government should also set up monitoring system to ensure that human rights ar e being followed in all psychiatric facilities (Gadit, 2008). Lastly, I recommend that with the help of mass media cases of abuse with mental patients should be reported so that the strategies should be planned on local and national level to minimize the risk of any future abuse.It was a good learning experience for me to write a critical paper. I have learnt the importance of promoting mental health without abusive and negative attitude. Moreover, faculty facilitation and literature review helped me to learn and integrate all concepts tie in to the issue which will help me in my future clinical settings.In conclusion, the above provided evidences are overwhelming that the mistreatment with mental patients is the disobedience of human rights as strongly proved by human rights declaration that All human beings are born free and equal in dignity and rights. (UDHR, 2006, p.2). In addition, the paper also discussed the causes and consequences of this immoral issue of mistreatment with mental patients. Now, its the duty of caregivers to adhere to the strategies provided above, in order to offer a competent care with encouraging attitude and bring a positive change in the lives of these people.

Women in Edgar Allen Poes Literature

Wo custody in Edgar Allen Poes litPoe Can Do ItPeople dont get by the mysteries behind Edgar Allen Poes writings. more(prenominal) call up that Poe was a Gothic writer, unless I believe he was more(prenominal) than that. Edgar Allen Poe was a realist, a person who was trying to deal with the trauma in his life by writing. Edgar Allan Poe is non a straight forward author, he is a read between the lines type of author. His writing is the mystery and his readers atomic number 18 the detectives, it is up to us to figure out the meaning for the stories. Poe wants the readers to break rase his point and question eachthing. By using one form of deprecative Approaches, I will solve the mystery behind one of Poes scoop up stories, The Tell- Tale Heart. Many believe that the unknown fibber was a valet, besides I beg to differ. There are so opusy divergent elements in this story that shows that the narrator could indeed be a fair sex. By using feministic criticism, I will qu estion the sexual urge of the narrator in The Tell-Tale Heart.Edgar Allan Poe was born in Boston, Massachusetts on January 19, 1809. His father, David Poe Jr., had left long in the lead he was born, and his mother, Elizabeth Arnold Poe died of tuberculosis when Poe was only three years old. Poe was an orphan until he was adopted by the Allan Family, which separated him from his biological siblings. John and Francis Allan took Poe into the family and expected him to suck in on the family business, selling tobacco. Edgar did not defy intentions on being a part of the family business, because his dream was to become a writer.Edgar went to the University of Virginia in 1826, and soon afterward school moved back to his hometown of Boston, Massachusetts. Edgar was a writer and his greatest enthusiasm was the women in his life. His mother died of tuberculosis when he was young, his fianc got married to another man while he was at the University of Virginia, and his adopted mother die d of tuberculosis in 1829. The women in his life always mastermed to leave him and all he valued was passionateness, still there was one woman who genuinely grabbed at his heart, Virginia Eliza Clemm.He got married to his cousin, Virginia Eliza Clemm Poe, when she was thirteen years old and he was twenty s redden. Many said that the happily married couple had more of a brother- infant type of relationship. In fact, it is said that before Edgar even decided that he wanted to marry his beautiful young cousin she was arranged to suck up a fixed marriage, there was no certainty found to discern the man only sources that say that the man was much older than Poe at the time. Virginia Poe was diagnosed with an affection in 1842, and she died five years later after her illness became more severe. The Tell-Tale Heart was made in 1843, many see it is a story about a madman who is insane and fulfills his desires to kill by murdering the old man that he is caring for, but I see it a s a dedication to his wife.Women were supposed to be seen and not heard, not to question the authority of the man in their families, and their goals is to live up to the standards that golf-club has brainwashed you into believing. That was the way that women were supposed to behave during that period, at least until the Womens transmutation in the 1900s. Men did not see their women as individuals, but more like trophies or property. The men of that era would probably have a heart attack if he met a modern-day woman, many men with the exception of one, Edgar Allan Poe. Poe loved his wife and did anything, and everything to please his wife, he let her have complete control because in his eyes she was his queen until tragedy struck. In 1842 of January, Virginia Poe was diagnosed with tuberculosis and soon after went into a deep depression, Edgar did not know what to do so he created a story, The Tell-Tale Heart.The Tell-Tale Heart is a story about the insanity of a person who grows an obsession with an old mans eye, and the unspoilt of his trouncing heart, but I believe that it is more than that. The Tell-Tale Heart was a story for Poes young love, Virginia. It is a story that puts her in a position where she is given control at a time where she is at her weakest. The gender of the narrator was never classified but people just predicted that the narrator was a male, because no one thought a female could draw such a crime because it was so vulgar. The use of the words conceived and warmth are affiliated with a woman for they are very passionate, and are the only human beings in the whole entire world who bear give birth.At the end of the story the narrator admits that they committed the crime, in a way it is saying that the reason why the narrator confessed at the end of the story is because she could not contain the guilt that she felt inside, because she is weak. If you truly think about the wife could have indeed been the narrator, and the elderly man, but the policemen were societies views of women. Society at the time would have laughed, and shamed a woman for even thinking that she could possess that type of power to be violent, specially towards a man. The elderly man is soft dying Virginia is also slowly dying. The narrator is insane Virginia is upset that she it dying, The narrator is irritated with the eye of the elderly man Virginia would rather avoid the truth of her health, and when the narrator becomes obsessed with the beating heart of the elderly man, it is really just Virginia who was depressed realizing that she is not baseless yet, even though she is acting as if she is.Edgar Allan Poe was a man of mystery, but he was also a man full of love for his wife. He changed the way of literature by writing famous pieces without people even crafty the true meaning behind the story. The narrator could have considerably been a woman forced into a loveless marriage who at long last decided she was tired of him, or a nur se/maid who had to burster for this creepy old man, who was sick of getting sexually harassed every day to the point of insanity. Either way it goes it could have been a man as much as it could have been a woman. But knowing the history behind Poe and the love that he had for his sweet Virginia, there is no way this narrator could have possibly been about anyone else, especially when the evidence is so obvious. He wrote this piece to try to give his ill wife happiness, it is not a random story about a half-baked madman who is obsessed with the eye of an elderly man, it is so much more. Edgar Allan Poe is a man of mystery, but one secret that wasnt a mystery was the love that he had for his darling wife.Work CitedBloom, Harold, ed. The Tell-Tale Heart.Edgar Allan Poe, Blooms Major Short Story Writers. Philadelphia Chelsea hold Publishing, 1998. Blooms Literature, Facts On File, Inc. www.fofweb.com/activelink2.asp?ItemID=WE54WID=99152SID=5iPin=BMSSEP17SingleRecord=True.Rajan, Gita. A Feminist Rereading of Poes The Tell-Tale Heart.The Tell-Tale Heart and Other Stories, New Edition. 24.3(1998) 283-300. Print.Werlock, Abby H. P. Poe, Edgar Allan.The Facts On File Companion to the American Short Story, Second Edition. New York Facts On File, Inc., 2009. Blooms Literature, Facts On File, Inc. www.fofweb.com/activelink2.asp?ItemID=WE54WID=99152SID=5iPin=CASS678SingleRecord=True.

Marketing Strategies of Primark

merchandise Strategies of Primark1.0 IntroductionThe interrogation name under consideration is aimed to explore the signifi bungholet place played by tradeing Strategies in todays modern and propellant credit beginning purlieu. mart has gained substantial importance and has become first antecedency of ratiocination feedrs in all told ecesis.This written document presents a investigate field analyzing and forecasting merchandise surroundings face up by leading sell merchant Primark with special c entree on hawkish abbreviation.Primark Stores Ltd, an Irish upstart and introductionory of Associated British Foods, is second largest article of attire retailer in impairment of gross gross sales and r nonethelessue with its existence mainly in Ireland, UK, Spain and expanding farther in the Europe. It is believed that concisely it testament become leading raiment retailer.This lengthy research is aimed at exploring on-line(prenominal) merchandising strategies adopted and evaluating their tellingness. The unfavourable re look on of underway class, bulls eyeing, spoting and filthing strategies of Primark and an abundant securities manufacture abridgment is carried out to suggest coming(prenominal) merchandise strategies and out emersion atomic f atomic number 18 18as and to improve and hold got whole t match little of table renovations provided. The expect outcomes of document be recomm conclusionations to function sell strategies tactic tout ensembley in decision making to enjoy sustainable developing.1.1 crusade for choosing the topicI piss selected this topic realizing the fact that in todays intensively agonistic barter surroundings, m peerlesstary supremacyof any confederation depends on combine efforts of its financial dodging and food mart localiseplaceplaceing dodge. In fact, precisely those companies thrive in strain who works skinnyly with their guests and, merchandising ha s become a winning tool to require a relation with nodes indirectly. From small to large, every shaping is realizing that good trade strategies clear add comfort and exert grand find all everyplace their office to attract customers, leaving confirming cushion on keep confederacys performance and pro ensureability.merchandising is specify as management ferment that identifies, anticipates and satisfies customer requirements profitably. It involves integrated analysis, plan and carry of marking mess up variables ( crossing, Price, packaging and Distri stillion) to satisfy both individuals and geological formations objectives (Lancaster and Massingham, 1999). commercialize Environment consists of actors and forces outside that affect sell managements ability to give progression and nurse successful relationships with its tar repel customers (For bring forward t some(prenominal)(prenominal)lying on martplace Environment, get out concomitant I).1.2 Reason for choosing sell diligence and PrimarkReason for choosing retail industry for research project is because it is a racy visibleness and constantly ever-ever-changing business at the sharp end, exclusively straightway-a-days, retail industry in UKis under senior richly pressure as central work outs give c atomic number 18 degraded mortgage and ho utilise mart, rising provoke prices and utility bills, broad(prenominal) liaison rates in UK ar intriguing retail environment as comp atomic number 18d to categorys of blotto shape amidst 2002 and 2004. Formally retail is defined as sale of commodities to household or ultimate consumers (Barry and Evans 1986).Retail industry fecal involvement be catego drumd in several(a) sectors as food retailers, wellness and beauty retailers, vesture and footwear retailers, residence furniture and household closes retailers etcetera except now discount, work out or nurse retail in UK has taken on a extravagantlyer (prenominal) profile over recent years despite effects of recession. curiously interests feature largely concern on growth of value or discount article of materialing retail industry.The organisation under direction in this report is Primark cognize for selling clothes at budget end of grocery and it is second largest vesture retailer in UK in landmarks of sales and revenue. Reason for choosing Primark is its wonder grandy sustained growth in the switch recession prison terms of history. Retail clothing industry is a fast(a) moving and complex, high profile and constantly changing business environment which demands that merchandising countenance of a large retail organisation wish well Primark should be managed strategically. Report is aimed at evaluating merchandising scheme of Primark and to hold in its effectiveness.2.0 Primark A Brief Overview Of The BusinessPrimark is a brilliant and unique organisation with a mission statement to ameliorate the life of ever y genius with moodable clothing c beless(prenominal)(predicate) of social status. It emerged as study force in the British retail industry, contributing through with(predicate) its woeful price value and great spirit mode yields for every whiz in arraying as a whole and leaves scarce relate on social, environmental and ethical behavior of people. Primark does not break off its customers and presents excellent physical exertion of it motto which states look adept, pay less Primark, (2010).Most of their clothes be bought from same factories as an separate(prenominal) appearance retailers and people producing them argon pay exactly the same whatever enunciate and whatever price in shop. Companys success is based on sourcing issue cheesyly, they buy directly from factories without involving any agents, making clothes with simple designs and fabrics, only making them in the more or less popular sizes, buying stock in huge bulks and varieties and fannying y oung, spurt-conscious barter forrs under 35s, whirl them high flavour, path basics at value for m matchlessy prices. They are able to offer such unafraid value and good tone because of small-scale mark-ups and extensive flashinesss. Their over creative thinker be are highly impression as they do not tribulation costly advertising campaigns kind of they drive home wonderful strategic merchandising approach that stands them out.3.0 merchandiseing scheme Of PrimarkRetail clothing industry is a fast moving and high profile business environment which demands that selling process of a retail organisation should be managed strategically. Strategy of an organisation is road represent towards attainment of its yearn term goals and objectives. strategical merchandising management involves implementing principles of strategic management in the scope of market function in organisation. At corporate take aim, market inputs (e.g., agonistical analysis, market dyna mics, and environmental shifts) are inherent for formulating a corporate strategic plan. Primark has well organized strategic taper market and Product merchandising approaches in place.3.1 Target trade burn upStrategic market is rough achieving maximum possible unlikeiation over contention in skirmish customer call for, gaining and sustaining warlike advantage and capitalizing on corporate strength and capabilities. In todays dynamic environment, it is highly all- definitive(prenominal) for companies to pertain characteristics and attributes of their intersections to customer requirements more well. Firms are more concerned with the nigh commercially attractive instalments of market for a addicted carrefour. This not only improvers opportunity but withal reduces boilers suit costs incurred by association. This process is called target merchandising and it must be carried out systematically to be effective and for this purpose it sens be divided into common chord stages as in Figure3.1.1 SegmentationAt first stage of segmentation, overall market is divided into distinct groups of emptors who are likely to respond favourably to distinguishable wares, services or merchandise immingle. Company take to determine most appropriate stem for segmentation, learn characteristics for individually segment and develop criteria to try their commercial drawing card and viability. Market segmentation allows managers to see clearly the miscellanea within their markets and uncover opportunities that whitethorn exist or segments whose ineluctably have not been properly met by saucy(prenominal) offerings. Figure, traces segmentation criteria for consumer market, determines base of segmentation and explains variables for distributively baseAs Primark is tagged a value clothing retailer, clothing is most appoint and leading item in its harvest-tide portfolio follower by footwear. Its selling segments are evaluated on basis of clot hing and footwear. Although all above firm segmentations bases and variables are important but demographic factors are the most on-key forward base for segmenting Primarks consumer market, as they are most meaty.Main demographic variables for Primark consumer market are place as in charts beneath. All demographic factors are place harmonise to their persona relation plump for attractiveness for targeting them depending upon their market share for Primark. Hhighlighted segments in diagrams are identified as most meaningful for Primark and they must be targeted to gain marketing objectives.3.1.2 Targeting succeeding(prenominal) stage of market targeting focuses on evaluating and selecting one or more previously identified market segments at which to direct marketing resources, development an appropriate marketing pleat for them and develop segment coverage schema. This selected segment is made focus of world-wide marketing plan. Kottler (1984) suggested that in hunting lodge for market segmentation to be effective each of the segments must be distinct, assessable, measurable, and profitable. in one case determined which segment attractiveness factors are important, evaluate each of those factor against selected segments victimisation segment attractiveness evaluation matrix infra on that point are four contrasting targeting approaches enkindle be considered to develop marketing mix to meet marketing objectives. Un distinctiated marketing is used for one marketing mix, targeted towards whole market and marketing mix (Price, Place, Product, Promotion, Distribution), and targets towards everybody. contrastiveiated marketing is used for triune marketing mixes and involves multiple harvestings, targeted towards multiple segments. Focused marketing is for one marketing mix and multiple segments with focus on one segment in particular, who will have control over separate segments. Customised marketing is used for one marketing mix per customer a s in figure downstairsFor Primark, targeting system that I have resolute to use is scard marketing dodge because we have multiple products and consumers back end be segmented into multiple segments, hence best approach to be followed is polariated marketing approach. Different segments identified are based on age, sex, life style, income level and social status and we have multiple products portfolio that potful be targeted towards these various segments.3.1.3 sideIn third phase of product placement all marketing mix genes are designed to fit a given place within a particular segment. This is how consumer perceives products relative position to competitors product which is highly important. It is like maturation a marketing outline aimed at creating and pleading a desired concept and chain of mountains for a product or service in consumers mind (See Appendix V for further cultivation). Key to success is acknowledgement of attributes that are considered to be more imp ortant. Through market research we can identify what factors (attributes) are key advertisers of a consumers preference for a blade. For instance, it was identified from a sample of distaff teenagers that were surveyed, that being fashionable and stylish, having a good range of clothing, and good soil reputation, were most important factors for this target market when selecting a preferred check Young Dimension of fashion retailer Primark. deformity positioning provides brainstorm into smirch performance and gives important inputs for marketing communications used to congest a bell ringer. Through communications, curiously advertising, teaching can be conveyed approximately each attribute and in doing so adjust knowledges customers have of mark off. As Primark need to reposition the perception market has of its pits from range and quality of clothing to be more trendy and stylish. Primark has emphasized more on in-store service and convenience and as calculate Fashi on retailer, they business leader command to maintain their current positioning of low price, affordable, but similarly good value for money.3.2 Product Marketing cuddleA companys performance is closely conjugate to its marketing strategies. Each companys strategy must be unique since each company is various with compliancy to customer, deformitys and competitors. I used Ansoff Matrix to determine product marketing strategies for Primark to fix up the directions for its business. With this matrix I plot current and strength products a pertinacious one axis and current and potential sweet markets along other axis. and then it demonstrates low and high risk options and economic aids to speak up intimately business growth with in the altogether or exist products in novel or actual markets. Each cell of matrix suggests a particular strategic approach. product from Ansoff matrix is a series of suggested growth strategies.Market penetration is a growth strategy where business runs as usual and focuses on selling existing products into existing markets with good information on competitors and on customer needs. Primark can maintain or increase market share of its current products by a compounding of emulous pricing strategies, advertising, sales forward motion. Primark has extensive portfolio and it cans secure dominance of growth markets and drive out competitors by more aggressive promotional campaign. For example Primark brand Active, supported by a pricing strategy designed to make market unattractive for competitors. Primark must uses internal promotion strategy by introducing loyalty schemes and increases its usage by existing customer. cardinal of penetration strategy adopted by Primark is amplification of shop floors and opening refreshful stores.Market development is a growth strategy where business seeks to sell its existing products into stark naked markets. in that respect are many possible ways of plan of attack this strateg y, including moving to red-hot geographic markets for example exporting product to a new country, new product dimensions, new distribution channels, or different pricing policies to attract different customers or create new market segments. I suggest Primark to go online by launching high tech weather vanesite for online sales.Product development is growth strategy where business aims to introduce new products into existing markets. It requires development of new competencies and to develop modified products which can woo to existing markets. Diversification is a growth strategy where a business launches new products in new markets. This is an inherently more risk strategy because business is moving into markets in which it has little or no experience. For a business to adopt a diversification strategy, it must have a clear idea about what it expects to gain from strategy and an honest opinion of potential risks. Analysing Primarks position and its strategies over past decade, we can better nominate a growth strategy for Primark using Ansoff matrix model on a lower floor in Figure4.2.1 Product Portfolio analytic thinkingMarketing mix refers to sight of marketing ingredients and tools a company can use to pursue its marketing objectives in target market. jibe to Lancaster and Massingham (1999), it is at marketers decision to choose from an extensive set of marketing components to sense business combination while marketing a product. 4Ps form basis of marketing mix. Kotler (1996) describes, Marketing Mix is a social and managerial process by which individuals and groups achieve what they need and want through creating and exchanging products and value with others.Marketing Mix is viewed as combination of elements that add together to success of an organisation. If market research is carried out in effect, a company can plan a promotion for right product, at right price, and to get it to their chosen market, in right place.Getting this mix right is c ritical in rig to successfully market a product. 4Ps are Product, Price, Promotion, Place as shown in figure beneathPrimark needs to combine various elements of marketing mix in order to achieve both a combative advantage in market place and company objectives. Although company has control over these elements of marketing mix, but must cater elements in companys environment over which it has little or no control (figure above). For organisations like Primark although marketing mix must be is consumer-orientated catering not only gainfulness but also considering customer needs as in figure, add-in below shows some of marketing mix decisions for Primark including aspects from each of marketing mix elements.4.3 Brand StrategyA successful marketing mix contributes to good marketing of a product hence at that place must be a brand strategy in place. American Marketing companionship (AMA) defines a brand as a name, term, sign, symbol or design, or a combination of them intend to ide ntify goods and services of one marketer or group of sellers and to differentiate them from those of other sellers. (See Appendix VI for characteristics of a brand). A strong brand strategy can increase sentiency of a company and its offerings in such a way that establishes strong feelingings and reactions and a favorable view towards company as a whole. To write down development of brands strategy for Primark, at that place must be clear identification of Primary Target customer and/or Client, Competition Product and wait on Mix, Unique Selling marriage offerFirst step in developing brand strategy is shaping brands. By define brand, its easy to create foundation for all other components to build on. Brand definition serves as measuring stick in evaluating marketing strategies. Primark has an extensive brand portfolioBrand portfolio usually refers to companys set of brands and/or products. The logic behind having a portfolio of brands sooner than a single brand is possible diversification and risk minimization. wherefore brand portfolio is a cling to trove. Next step is to determine our brands objectives, Primarks stigmatization objectives entangleDelivers message clearlyConfirms your credibilityConnects your target prospects emotionallyMotivates buyerConcretes User LoyaltyGaining a specific number of new clients in next year localization company as an industry drawing card in next 12 monthsTo succeed in branding company must understand needs and wants of your customers and prospects. Brand objectives should be comprised of company personality, image, sum of money competencies and characteristics. The impressions that it makes as well as words people will use to describe company to others, are basic framework of a brand. With a strong brand company builds credibility, has more influence on its market, and motivates customers and clients to purchase from it. If done correctly company will be looked at as a leader not a follower.Identifying marketi ng targets enables company to influence opportunities available. It gives information needed to focus on buyers that are interested in what company has to offer. This can make unnecessary both time and money in an ever-changing business environment. military group of brand relies on ability to focus target audiences. That is why defining target market will help to strengthen Primarks brands effectiveness. Target market for Primark is people up to age of 35 who are fashion conscious.Next step in developing Primarks brand strategy is to perform a careful analysis to determine lead-in barriers that it may face. These barriers are also known as market conditions that can keep your product or service from achieving success. The potential barriers in deploying Primarks brand strategy can ambition, timing, financing, location, neglect of demand, providers not meeting demands and targets. In order to face these obstacles its important to top time doing a careful analysis of products or service to assist in developing brand, and positioning products in the market.Last step in brand strategy is branding companys personal identity in marketplace where image is all about appearance of packaging. Its important to realize that packaging invariably either has a negative or positive influence on purchaser. A negative impression can detour a potential customer, just as a positive reaction can influence a customer to buy. A time to pay special economic aid to packaging is when going to launch a new brand. If youve already make a strong brand that others severalize often people may not pay as close attention to packaging. Packaging is judged and correspond by business cards and stationery, web site, answering system, presentation of finished products.Brand equity does not develop instantaneously. A brand needs to be carefully nurtured and marketed so consumers feel real value and assertion towards that brand. When a company manages its brands it has a number of st rategies it can use to further increase its brand value. (See Appendix VI for further explanation). Brand strategies that are more suitable for Primark are line extension and introduction of new brands. Primark must focus on its brand management as its a dynamic and a continuous process that needs consistent enthronization of time and it must be allocated a specific budget as it is a great deal more than mere marketing communications. Due to intangible reputation of branding, results may not accrue in a short degree of time a it takes time and funding to build customer loyalty. successfully out-branding its competitors is a continuous battle for police wagon and minds of your customers. Proposition that Primarks brand strategy makes is very compelling, attractive and unique among competitive offerings. It must also be consistently reinforced throughout all phases of an organization, from senior exe proveives to customer service, business development and even business partners. Primark is consider for quality of its products and low-priced prices. If we concisely review business environment and other factors identified in this report for Primark then we may realize that consumer demeanor is changing and business environment evolving across retail industry. Concern is rise in suppliers demands regarding price and costs. If it continues to rise steeply it will damage bread that it is currently enjoying. Reviewing forces and factors go about by Primark and their impact on organisation, it is obvious that Primark is veneer many quarrels and standing at verge of it survival in long term.Market Research World, 2011 revealed that value fashion sector sees worst puzzle out away for first time in over 16 years much to gain of higher-priced retailers, reveals data by TNS Worldpanel Fashion. While fashion discounters such as Primark, Tesco, George and Matalan saw a phenomenal sales increase of nigh 30% at long last summer, growth has now ground to a hold with sales falling by 1% over last six months. In contrast, sales of most expensive clothing are up by 4%, as shoppers head to generally more expensive retailers such as multiples and mail order retailers. Clothing industry has been globalised. Strategies followed by clothing firms, to survive in a context of strong pressure from retailers and from competition from low-wage countries, are a combination of two trends. First trend is movement of production to low-wage countries second one is the development of six added-value activities niche, Quick Response, full package, innovation, branding and retail.Elaine Giles, Research Manager, TNS says, Shoppers are starting to favour higher priced retailers and bountifulness end of market is do well. Growth of value sector last year came on back of new store openings and expansions that brought an influx of new buyers, but now sector seems to have reached saturation point. The only way, budget retailers can continue their success is to i ncrease spend of existing buyers, something they may struggle to do given current retail climate.4.0 Strategic Marketing Environment abbreviationPrimark is one of the leading value clothing retailers in UK. It is highly crucial for an organization like Primark to periodically review its marketing environment to gain competitive advantage in market. Discount cloth retailing in UK has several characteristics including clearance outlets, core business discounters, plotted purchasing at high volume, own-label or branding, relationships with manufacturers, attracting customers with good image and service. There are 3 different analytical tools used to assess marketing environment of an organisation Porters tailfin Forces Analysis, SWOT Analysis and PESTLE Analysis.4.1 Porters basketball team Forces AnalysisFirst of all Porters Analysis is carried out which is a proficiency for identifying forces which affect competition level in industry as shown in figure A belowThe threat of new en trants in market is a critical element haunting Primark much as there are less accession barriers including low entry costs, high volume of suppliers, vast market in India and china, higher growth space in market, economies of scale, low capital requirements, access to distribution, government policy, low cost product design, access to necessary inputs. tho new entrants in industry are not likely to cut their price to defend their market position. In an industry experiencing fast market growth, patents, proprietary knowledge, and brand reputation are also considered as barriers for companies entering industry.Strategic position of a company depends upon the extent to which what it offers is unique and cannot be replaced by something else. Primark has strong brand portfolio which is its uniqueness. As for some of products, like Primark cheap clothing there are alternatives. But there is no easement for low price of Primarks products. Determinants of these substitution threats incl ude relative price of transforms, buyer propensity to substitute.Buyers/customers have greatest impact on Primarks strategies as its mickle and strategies are customer focused. Hence, it has to cater changing customer trends, their demands and requirements. Customers volume, customer information level and trends, substitute products pull through, price, product difference, brand identity, impact on quality, buyers profit and incentives are few factors that Primark is face up as major challenge in competitive market.Suppliers might have high impact on Primark if they are bigger company and have less competitive market for their products. Primark is facing big challenge from supplier as it has good and long term relationships with its suppliers build on blaspheme but recently three of its main suppliers are found composite in child confinement and Primark has to cut-off ties with them immediately which is definitely a big ball up for Primark. Primark pays its supplier competi tive price for their products to retain them. Primark maintains substitute inputs, and high volume of supplier to empty extra costs.Apart from five forces identified by Porters Analysis, there are other factors revealed by PESTLE Analysis challenging Primarks position in competitive market, in figure below(For PESTLE Analysis, refer to Appendix II and for SWOT Analysis, Appendix III)Strategic marketing analysis of Primark, using different analysis tools reveal that Primark is expanding globally and being in the global market Primark has adopted an approach of estimate globally, Act locally as stated by Armstrong, (2006). They are expanding globally but cater needs of local market and fashion trends in local culture. Primark supports UKs global role by showcasing the best of British fashion to a global customers as well as it reflects how it builds social cohesiveness and business ethics amid customers and its suppliers.Primark faced a major blow to its reputation on 24 June, 200 8 after being exposed by and undercover report by BBC exposing it using child motor. Afterwards, Primarks marketing strategy mainly focused to uphold itself as ethical organisation with a clear and strict work out of conduct to which all suppliers must stick by and which forms part of the terms of their contract. Primark supports nearly two jillion people through its supply contracts worth 700 million and is dedicated to improve their standard of spiritedness and quality of life. For this, Primark has established Primark interrupt Lives Foundation (Primark Ethical Trading, 2011 a). In chemical reaction to the allegations of use of child labour by its suppliers, identified by picture (BBC program) Primark stopped buying from three factories in southern India for breaking its enactment of Conduct. It also took other major initiatives and is now active member of ETI that propound it Achiever in year 2009-2010 independent audit (Primark Ethical Trading, 2011 b). (For further information on ETI and Primark code of conduct, see Appendix IV)Further apart(predicate) the positions, greater the opportunity for new brands to enter market, simply because competition is less intense. For example, in fashion retailing there are numerous brands in marketplace all competing with each other across differing core attributes, brand reputation, store presence, price, and clothing quality or trendy and stylish. To show how differing brands might be positioned relative to each other using attribute gobs for each brand of fashion retailer we can measure and map brand positioning for single brands. Figure below shows positioning of a number of fashion retailers using dimensions of price, store presence, and trendy and stylish.Using this angle of dip of drivers we can further depict on what we call a perceptual map how different competing brands of fashion retailers in market are positioned according to these drivers. Understanding complexity associated with different attributes and brands can be made easier by developing a optical representation of each market. These are known as perceptual maps and they are used to determine how various brands are perceived according to key attributes that customers value. Perceptual mappingrepresent a geometric comparability of how competing products are perceived (Sinclair and Stalling, 1990). One thing to note is that closer products/brands are clustered together on a perceptual map, greater the competition. subroutine can provide earthshaking brainstorm into how a market operates. It provides marketers with an insight into how Primarks brands are perceived and it also provides a view about how their competitors brands are perceived. In addition to this substitute products can be uncovered, based on their closeness to each other (Day et al., 1979). All of this data reveals strengths weaknesses that in turn can assist strategic decisions about how to differentiate on attributes that matter to customers and how to compete more effectively in target market.4.2 Competitor AnalysisLike any other business, Primark is also facing tough competition from George at ASDA, Tesco, label Spencer, TK Max, Costco, Next, Zara, modernistic Look, Peacock and Matalan. Analysis for each major competitor determines that Primark has better business strength and high market share. It has good financial strengths and high favorableness but relatively poor quality of management and low standards of engineering science position. Primark is paying least attention to its marketing strategies. Marketing represents boundary between marketplace and company, and knowledge of current and emerging happenings in marketplace is extremely important in strategic homework exercise.In relation to competition, several external forces and environmental changes are faced by Primark that need to be considered to formulate its marketing strategy. Currently, Primark is facing high competition with quality competitors like Peacock, Matalan etc. They are offering cheap products as well and increase at tremendous speed, threatening position of Primark. Most of Primark customers are transposition to rivals because of their quality products and good marketing strategies which Primark lacks. Marks and Spencer, the biggest rival of Primark has very extensive marketing strategies with strong brand portfolio. They do advertisement on about every media available while Primark do not use even single media for advertisement. Marks and SpencMarketing Strategies of PrimarkMarketing Strategies of Primark1.0 IntroductionThe research report under consideration is aimed to explore the pregnant role played by Marketing Strategies in todays modern and dynamic business environment. Marketing has gained substantial importance and has become first priority of decision makers in any organisation.This document presents a research report analyzing and forecasting marketing environment faced by leading retailer Primark wit h special focus on competitive analysis.Primark Stores Ltd, an Irish upstart and subsidiary of Associated British Foods, is second largest clothing retailer in terms of sales and revenue with its existence mainly in Ireland, UK, Spain and expanding further in the Europe. It is believed that soon it will become leading clothing retailer.This extensive research is aimed at exploring current marketing strategies adopted and evaluating their effectiveness. The critical review of current segmentation, targeting, positioning and branding strategies of Primark and an extensive market analysis is carried out to suggest future marketing strategies and growth areas and to improve and sustain quality of services provided. The expected outcomes of document are recommendations to use marketing strategies tactically in decision making to enjoy sustainable growth.1.1 Reason for choosing the topicI have selected this topic realizing the fact that in todays intensively competitive business environme nt, financial successof any company depends on combined efforts of its financial strategy and marketing strategy. In fact, only those companies thrive in business who works closely with their customers and, marketing has become a successful tool to create a relation with customers indirectly. From small to large, every organisation is realizing that effective marketing strategies can add value and exert tremendous influence over their ability to attract customers, leaving positive impact on companys performance and profitability.Marketing is defined as management process that identifies, anticipates and satisfies customer requirements profitably. It involves integrated analysis, planning and control of marking mix variables (Product, Price, Promotion and Distribution) to satisfy both individuals and organizations objectives (Lancaster and Massingham, 1999). Marketing Environment consists of actors and forces outside that affect marketing managements ability to develop and maintain s uccessful relationships with its target customers (For further information on Marketing Environment, see Appendix I).1.2 Reason for choosing Retail Industry and PrimarkReason for choosing retail industry for research project is because it is a high profile and constantly changing business at the sharp end, but now-a-days, retail industry in UKis under high pressure as key factors like troubled mortgage and housing market, rising fuel prices and utility bills, high interest rates in UK are challenging retail environment as compared to years of strong growth between 2002 and 2004. Formally retail is defined as sale of commodities to household or ultimate consumers (Barry and Evans 1986).Retail industry can be categorised in various sectors as food retailers, health and beauty retailers, clothing and footwear retailers, home furniture and household goods retailers etc. But now discount, budget or value retailing in UK has taken on a higher profile over recent years despite effects of r ecession. Especially interests have largely centered on growth of value or discount clothing retail industry.The organisation under focus in this report is Primark known for selling clothes at budget end of market and it is second largest clothing retailer in UK in terms of sales and revenue. Reason for choosing Primark is its superbly sustained growth in the worst recession times of history. Retail clothing industry is a fast moving and complex, high profile and constantly changing business environment which demands that marketing process of a large retail organisation like Primark should be managed strategically. Report is aimed at evaluating marketing strategy of Primark and to determine its effectiveness.2.0 Primark A Brief Overview Of The BusinessPrimark is a brilliant and unique organisation with a mission statement to enrich the life of everyone with fashionable clothing regardless of social status. It emerged as major force in the British retail industry, contributing throu gh its low price value and great quality fashion products for everyone in society as a whole and leaves remarkable impact on social, environmental and ethical behavior of people. Primark does not rip off its customers and presents excellent example of it motto which states look good, pay less Primark, (2010).Most of their clothes are bought from same factories as other fashion retailers and people producing them are paid exactly the same whatever label and whatever price in shop. Companys success is based on sourcing supply cheaply, they buy directly from factories without involving any agents, making clothes with simple designs and fabrics, only making them in the most popular sizes, buying stock in huge bulks and varieties and targeting young, fashion-conscious buyers under 35s, offering them high quality, fashion basics at value for money prices. They are able to offer such good value and good quality because of low mark-ups and big volumes. Their overhead costs are extremely low as they do not run expensive advertising campaigns instead they have wonderful strategic marketing approach that stands them out.3.0 Marketing Strategy Of PrimarkRetail clothing industry is a fast moving and high profile business environment which demands that marketing process of a retail organisation should be managed strategically. Strategy of an organisation is roadmap towards attainment of its long term goals and objectives. Strategic marketing management involves implementing principles of strategic management in the context of marketing function in organisation. At corporate level, marketing inputs (e.g., competitive analysis, market dynamics, and environmental shifts) are essential for formulating a corporate strategic plan. Primark has well organized strategic Target marketing and Product marketing approaches in place.3.1 Target Marketing ApproachStrategic marketing is about achieving maximum possible differentiation over competition in meeting customer needs, gaining and sustaining competitive advantage and capitalizing on corporate strength and capabilities. In todays dynamic environment, it is highly important for companies to relate characteristics and attributes of their products to customer requirements more closely. Firms are more concerned with the most commercially attractive segments of market for a given product. This not only increases opportunity but also reduces overall costs incurred by company. This process is called target marketing and it must be carried out systematically to be effective and for this purpose it can be divided into three stages as in Figure3.1.1 SegmentationAt first stage of segmentation, overall market is divided into distinct groups of buyers who are likely to respond favourably to different products, services or marketing mix. Company needs to determine most appropriate basis for segmentation, identify characteristics for each segment and develop criteria to evaluate their commercial attractiveness and viability. Market segmentation allows managers to see clearly the diversity within their markets and uncover opportunities that may exist or segments whose needs have not been properly met by other offerings. Figure, depicts segmentation criteria for consumer market, determines base of segmentation and explains variables for each baseAs Primark is tagged a value clothing retailer, clothing is most important and leading item in its product portfolio follower by footwear. Its marketing segments are evaluated on basis of clothing and footwear. Although all above determined segmentations bases and variables are important but demographic factors are the most straight forward base for segmenting Primarks consumer market, as they are most meaningful.Main demographic variables for Primark consumer market are identified as in charts below. All demographic factors are identified according to their percentage relative attractiveness for targeting them depending upon their market share for Primark. Hhigh lighted segments in diagrams are identified as most meaningful for Primark and they must be targeted to gain marketing objectives.3.1.2 TargetingNext stage of market targeting focuses on evaluating and selecting one or more previously identified market segments at which to direct marketing resources, developing an appropriate marketing mix for them and develop segment coverage strategy. This selected segment is made focus of comprehensive marketing plan. Kottler (1984) suggested that in order for market segmentation to be effective each of the segments must be distinct, assessable, measurable, and profitable. Once determined which segment attractiveness factors are important, evaluate each of those factor against selected segments using segment attractiveness evaluation matrix belowThere are four different targeting approaches can be considered to develop marketing mix to meet marketing objectives. Undifferentiated marketing is used for one marketing mix, targeted towards whole mark et and marketing mix (Price, Place, Product, Promotion, Distribution), and targets towards everybody. Differentiated marketing is used for multiple marketing mixes and involves multiple products, targeted towards multiple segments. Focused marketing is for one marketing mix and multiple segments with focus on one segment in particular, who will have control over other segments. Customised marketing is used for one marketing mix per customer as in figure belowFor Primark, targeting strategy that I have decided to use is differentiated marketing strategy because we have multiple products and consumers can be segmented into multiple segments, hence best approach to be followed is differentiated marketing approach. Different segments identified are based on age, sex, life style, income level and social status and we have multiple products portfolio that can be targeted towards these various segments.3.1.3 PositioningIn third phase of product positioning all marketing mix elements are de signed to fit a given place within a particular segment. This is how consumer perceives products relative position to competitors product which is highly important. It is like developing a marketing strategy aimed at creating and maintaining a desired concept and image for a product or service in consumers mind (See Appendix V for further information). Key to success is identification of attributes that are considered to be more important. Through market research we can identify what factors (attributes) are key drivers of a consumers preference for a brand. For instance, it was identified from a sample of female teenagers that were surveyed, that being trendy and stylish, having a good range of clothing, and good brand reputation, were most important factors for this target market when selecting a preferred brand Young Dimension of fashion retailer Primark.Brand positioning provides insight into brand performance and gives important inputs for marketing communications used to suppo rt a brand. Through communications, especially advertising, information can be conveyed about each attribute and in doing so adjust perceptions customers have of brand. As Primark need to reposition the perception market has of its brands from range and quality of clothing to be more trendy and stylish. Primark has emphasized more on in-store service and convenience and as Budget Fashion retailer, they might want to maintain their current positioning of low price, affordable, but also good value for money.3.2 Product Marketing ApproachA companys performance is closely linked to its marketing strategies. Each companys strategy must be unique since each company is different with respect to customer, brands and competitors. I used Ansoff Matrix to determine product marketing strategies for Primark to set the directions for its business. With this matrix I plot current and potential products along one axis and current and potential new markets along other axis. Thus it demonstrates low and high risk options and helps to think about business growth with new or existing products in new or existing markets. Each cell of matrix suggests a particular strategic approach. Output from Ansoff matrix is a series of suggested growth strategies.Market penetration is a growth strategy where business runs as usual and focuses on selling existing products into existing markets with good information on competitors and on customer needs. Primark can maintain or increase market share of its current products by a combination of competitive pricing strategies, advertising, sales promotion. Primark has extensive portfolio and it cans secure dominance of growth markets and drive out competitors by more aggressive promotional campaign. For example Primark brand Active, supported by a pricing strategy designed to make market unattractive for competitors. Primark must uses internal promotion strategy by introducing loyalty schemes and increases its usage by existing customer. One of penet ration strategy adopted by Primark is expansion of shop floors and opening new stores.Market development is a growth strategy where business seeks to sell its existing products into new markets. There are many possible ways of approaching this strategy, including moving to new geographical markets for example exporting product to a new country, new product dimensions, new distribution channels, or different pricing policies to attract different customers or create new market segments. I suggest Primark to move online by launching high tech website for online sales.Product development is growth strategy where business aims to introduce new products into existing markets. It requires development of new competencies and to develop modified products which can appeal to existing markets. Diversification is a growth strategy where a business launches new products in new markets. This is an inherently more risk strategy because business is moving into markets in which it has little or no e xperience. For a business to adopt a diversification strategy, it must have a clear idea about what it expects to gain from strategy and an honest assessment of potential risks. Analysing Primarks position and its strategies over past decade, we can better construct a growth strategy for Primark using Ansoff matrix model below in Figure4.2.1 Product Portfolio AnalysisMarketing mix refers to set of marketing ingredients and tools a company can use to pursue its marketing objectives in target market. According to Lancaster and Massingham (1999), it is at marketers decision to choose from an extensive set of marketing components to find right combination while marketing a product. 4Ps form basis of marketing mix. Kotler (1996) describes, Marketing Mix is a social and managerial process by which individuals and groups achieve what they need and want through creating and exchanging products and value with others.Marketing Mix is viewed as combination of elements that contribute to succes s of an organisation. If market research is carried out effectively, a company can plan a promotion for right product, at right price, and to get it to their chosen market, in right place.Getting this mix right is critical in order to successfully market a product. 4Ps are Product, Price, Promotion, Place as shown in figure belowPrimark needs to combine various elements of marketing mix in order to achieve both a competitive advantage in market place and company objectives. Although company has control over these elements of marketing mix, but must cater elements in companys environment over which it has little or no control (figure above). For organisations like Primark although marketing mix must be is consumer-orientated catering not only profitability but also considering customer needs as in figure,Table below shows some of marketing mix decisions for Primark including aspects from each of marketing mix elements.4.3 Brand StrategyA successful marketing mix contributes to good m arketing of a product hence there must be a brand strategy in place. American Marketing Association (AMA) defines a brand as a name, term, sign, symbol or design, or a combination of them intended to identify goods and services of one seller or group of sellers and to differentiate them from those of other sellers. (See Appendix VI for characteristics of a brand). A strong brand strategy can increase awareness of a company and its offerings in such a way that establishes strong feelings and reactions and a favorable view towards company as a whole. To begin development of brands strategy for Primark, there must be clear identification of Primary Target Customer and/or Client, Competition Product and Service Mix, Unique Selling PropositionFirst step in developing brand strategy is defining brands. By defining brand, its easy to create foundation for all other components to build on. Brand definition serves as measuring stick in evaluating marketing strategies. Primark has an extensiv e brand portfolioBrand portfolio usually refers to companys set of brands and/or products. The logic behind having a portfolio of brands rather than a single brand is possible diversification and risk minimization. Hence brand portfolio is a treasure trove. Next step is to determine our brands objectives, Primarks branding objectives includeDelivers message clearlyConfirms your credibilityConnects your target prospects emotionallyMotivates buyerConcretes User LoyaltyGaining a specific number of new clients in next yearPositioning company as an industry leader in next 12 monthsTo succeed in branding company must understand needs and wants of your customers and prospects. Brand objectives should be comprised of company personality, image, core competencies and characteristics. The impressions that it makes as well as words people will use to describe company to others, are basic framework of a brand. With a strong brand company builds credibility, has more influence on its market, and motivates customers and clients to purchase from it. If done correctly company will be looked at as a leader not a follower.Identifying marketing targets enables company to find opportunities available. It gives information needed to focus on buyers that are interested in what company has to offer. This can save both time and money in an ever-changing business environment. Power of brand relies on ability to focus target audiences. That is why defining target market will help to strengthen Primarks brands effectiveness. Target market for Primark is people up to age of 35 who are fashion conscious.Next step in developing Primarks brand strategy is to perform a careful analysis to determine principal barriers that it may face. These barriers are also known as market conditions that can keep your product or service from achieving success. The potential barriers in deploying Primarks brand strategy can competition, timing, financing, location, lack of demand, suppliers not meeting dema nds and targets. In order to face these obstacles its important to spend time doing a careful analysis of products or service to assist in developing brand, and positioning products in the market.Last step in brand strategy is branding companys identity in marketplace where image is all about appearance of packaging. Its important to realize that packaging always either has a negative or positive influence on purchaser. A negative impression can detour a potential customer, just as a positive reaction can influence a customer to buy. A time to pay special attention to packaging is when going to launch a new brand. If youve already built a strong brand that others recognize often people may not pay as close attention to packaging. Packaging is judged and represented by business cards and stationery, web site, answering system, presentation of finished products.Brand equity does not develop instantaneously. A brand needs to be carefully nurtured and marketed so consumers feel real val ue and trust towards that brand. When a company manages its brands it has a number of strategies it can use to further increase its brand value. (See Appendix VI for further explanation). Brand strategies that are more suitable for Primark are line extension and introduction of new brands. Primark must focus on its brand management as its a dynamic and a continuous process that needs consistent investment of time and it must be allocated a specific budget as it is much more than mere marketing communications. Due to intangible nature of branding, results may not accrue in a short period of time a it takes time and reinforcement to build customer loyalty. Successfully out-branding its competitors is a continuous battle for hearts and minds of your customers. Proposition that Primarks brand strategy makes is very compelling, attractive and unique among competitive offerings. It must also be consistently reinforced throughout all phases of an organization, from senior executives to cus tomer service, business development and even business partners.Primark is respected for quality of its products and cheap prices. If we briefly review business environment and other factors identified in this report for Primark then we may realize that consumer behaviour is changing and business environment evolving across retail industry. Concern is rise in suppliers demands regarding price and costs. If it continues to rise steeply it will damage profits that it is currently enjoying. Reviewing forces and factors faced by Primark and their impact on organisation, it is obvious that Primark is facing many challenges and standing at verge of it survival in long term.Market Research World, 2011 revealed that value fashion sector sees worst decline for first time in over 16 years much to gain of higher-priced retailers, reveals data by TNS Worldpanel Fashion. While fashion discounters such as Primark, Tesco, George and Matalan saw a phenomenal sales increase of nearly 30% last summer , growth has now ground to a hold with sales falling by 1% over last six months. In contrast, sales of most expensive clothing are up by 4%, as shoppers head to generally more expensive retailers such as multiples and mail order retailers. Clothing industry has been globalised. Strategies followed by clothing firms, to survive in a context of strong pressure from retailers and from competition from low-wage countries, are a combination of two trends. First trend is relocation of production to low-wage countries second one is the development of six added-value activities niche, Quick Response, full package, innovation, branding and retail.Elaine Giles, Research Manager, TNS says, Shoppers are starting to favour higher priced retailers and premium end of market is performing well. Growth of value sector last year came on back of new store openings and expansions that brought an influx of new buyers, but now sector seems to have reached saturation point. The only way, budget retailers can continue their success is to increase spend of existing buyers, something they may struggle to do given current retail climate.4.0 Strategic Marketing Environment AnalysisPrimark is one of the leading value clothing retailers in UK. It is highly crucial for an organization like Primark to periodically review its marketing environment to gain competitive advantage in market. Discount cloth retailing in UK has several characteristics including clearance outlets, core business discounters, planned purchasing at high volume, own-label or branding, relationships with manufacturers, attracting customers with good image and service. There are three different analytical tools used to assess marketing environment of an organisation Porters Five Forces Analysis, SWOT Analysis and PESTLE Analysis.4.1 Porters Five Forces AnalysisFirst of all Porters Analysis is carried out which is a technique for identifying forces which affect competition level in industry as shown in figure A belowThe th reat of new entrants in market is a critical element haunting Primark much as there are less entry barriers including low entry costs, high volume of suppliers, vast market in India and china, higher growth space in market, economies of scale, low capital requirements, access to distribution, government policy, low cost product design, access to necessary inputs. But new entrants in industry are not likely to cut their price to defend their market position. In an industry experiencing fast market growth, patents, proprietary knowledge, and brand reputation are also considered as barriers for companies entering industry.Strategic position of a company depends upon the extent to which what it offers is unique and cannot be replaced by something else. Primark has strong brand portfolio which is its uniqueness. As for some of products, like Primark cheap clothing there are alternatives. But there is no substitute for low price of Primarks products. Determinants of these substitution thr eats include relative price of substitutes, buyer propensity to substitute.Buyers/customers have greatest impact on Primarks strategies as its vision and strategies are customer focused. Hence, it has to cater changing customer trends, their demands and requirements. Customers volume, customer information level and trends, substitute products pull through, price, product difference, brand identity, impact on quality, buyers profit and incentives are few factors that Primark is facing as major challenge in competitive market.Suppliers might have high impact on Primark if they are bigger company and have less competitive market for their products. Primark is facing big challenge from supplier as it has good and long term relationships with its suppliers build on trust but recently three of its main suppliers are found involved in child labour and Primark has to cut-off ties with them immediately which is definitely a big blow for Primark. Primark pays its supplier competitive price fo r their products to retain them. Primark maintains substitute inputs, and high volume of supplier to avoid extra costs.Apart from five forces identified by Porters Analysis, there are other factors revealed by PESTLE Analysis challenging Primarks position in competitive market, in figure below(For PESTLE Analysis, refer to Appendix II and for SWOT Analysis, Appendix III)Strategic marketing analysis of Primark, using different analysis tools reveal that Primark is expanding globally and being in the global market Primark has adopted an approach of Think globally, Act locally as stated by Armstrong, (2006). They are expanding globally but cater needs of local market and fashion trends in local culture. Primark supports UKs global role by showcasing the best of British fashion to a global customers as well as it reflects how it builds social cohesion and business ethics between customers and its suppliers.Primark faced a major blow to its reputation on 24 June, 2008 after being exposed by and undercover report by BBC exposing it using child labour. Afterwards, Primarks marketing strategy mainly focused to promote itself as ethical organisation with a clear and strict code of conduct to which all suppliers must adhere and which forms part of the terms of their contract. Primark supports nearly two million people through its supply contracts worth 700 million and is dedicated to improve their standard of living and quality of life. For this, Primark has established Primark Better Lives Foundation (Primark Ethical Trading, 2011 a). In response to the allegations of use of child labour by its suppliers, identified by Panorama (BBC program) Primark stopped buying from three factories in southern India for breaking its Code of Conduct. It also took other major initiatives and is now active member of ETI that announce it Achiever in year 2009-2010 independent audit (Primark Ethical Trading, 2011 b). (For further information on ETI and Primark code of conduct, see Append ix IV)Further apart the positions, greater the opportunity for new brands to enter market, simply because competition is less intense. For example, in fashion retailing there are numerous brands in marketplace all competing with each other across differing core attributes, brand reputation, store presence, price, and clothing quality or trendy and stylish. To show how differing brands might be positioned relative to each other using attribute scores for each brand of fashion retailer we can measure and map brand positioning for respective brands. Figure below shows positioning of a number of fashion retailers using dimensions of price, store presence, and trendy and stylish.Using this list of drivers we can further depict on what we call a perceptual map how different competing brands of fashion retailers in market are positioned according to these drivers. Understanding complexity associated with different attributes and brands can be made easier by developing a visual representati on of each market. These are known as perceptual maps and they are used to determine how various brands are perceived according to key attributes that customers value. Perceptual mappingrepresent a geometric comparison of how competing products are perceived (Sinclair and Stalling, 1990). One thing to note is that closer products/brands are clustered together on a perceptual map, greater the competition.Mapping can provide significant insight into how a market operates. It provides marketers with an insight into how Primarks brands are perceived and it also provides a view about how their competitors brands are perceived. In addition to this substitute products can be uncovered, based on their closeness to each other (Day et al., 1979). All of this data reveals strengths weaknesses that in turn can assist strategic decisions about how to differentiate on attributes that matter to customers and how to compete more effectively in target market.4.2 Competitor AnalysisLike any other bus iness, Primark is also facing tough competition from George at ASDA, Tesco, Marks Spencer, TK Max, Costco, Next, Zara, New Look, Peacock and Matalan. Analysis for each major competitor determines that Primark has better business strength and high market share. It has good financial strengths and high profitability but relatively poor quality of management and low standards of technology position. Primark is paying least attention to its marketing strategies. Marketing represents boundary between marketplace and company, and knowledge of current and emerging happenings in marketplace is extremely important in strategic planning exercise.In relation to competition, several external forces and environmental changes are faced by Primark that need to be considered to formulate its marketing strategy. Currently, Primark is facing high competition with quality competitors like Peacock, Matalan etc. They are offering cheap products as well and growing at tremendous speed, threatening posit ion of Primark. Most of Primark customers are switching to rivals because of their quality products and good marketing strategies which Primark lacks. Marks and Spencer, the biggest rival of Primark has very extensive marketing strategies with strong brand portfolio. They do advertisement on almost every media available while Primark do not use even single media for advertisement. Marks and Spenc