Bank rate

It’s the rate charged by the central bank for lending funds to commercial banks.

Balance of Trade

 It’s the difference between the monetary value of a nation’s exports and imports over a certain time period. It is usually expressed in the unit of currency of a particular country.

Black Market

The buying and selling of goods or foreign money in an illegal way.

Black economy

It’s a section of a country’s economic activity that is derived from sources that don’t follow the country’s rules and regulations regarding commerce and trade. The activities are mostly illegal in nature.

Brown economy

It’s an economy that depends on the economic growth of the petrochemicals such as coal, petroleum and natural gas, which in production, great amounts of carbon dioxide and soot are released into the atmosphere. The economic development depends on restricted resources, the environmental pollution is severe.

Blue Economy

Blue economy is a term in economics related to the exploitation, preservation and regeneration of the marine environment. Its scope of interpretation varies among organizations. According to the World Bank, the blue economy is the “sustainable use of ocean resources for economic growth, improved livelihoods, and jobs while preserving the health of ocean ecosystem.

Capital

It’s typically refers to cash or liquid assets being held or obtained for expenditures.

Cost

In production, research, retail, and accounting, a cost is the value of money that has been used up to produce something or deliver a service, and hence is not available for use anymore. In business, the cost may be one of acquisition, in which case the amount of money expended to acquire it is counted as cost.

Consumer Sovereignty

Consumer sovereignty is the economic concept that the consumer has some controlling power over goods that are produced, and the idea that the consumer is the best judge of their own welfare.

Demand  

Demand is an economic principle referring to a consumer’s desire to purchase goods and services and willingness to pay a price for a specific good or service. 

Economics

It’s the study of how people allocate scarce resources for production, distribution, and consumption, both individually and collectively.

Elasticity of Demand

It’s the responsiveness of the quantity demanded of a commodity to changes in one of the variables on which demand depends. In other words, it is the percentage change in quantity demanded divided by the percentage in one of the variables on which demand depends.

Equilibrium

In economics equilibrium is a condition or state in which economic forces are balanced. In effect, economic variables remain unchanged from their equilibrium values in the absence of external influences.

Economic Benefit

Economic benefits are defined as tangible benefits that can be measured in terms of revenue generated or money saved through the implementation of policies. An economic benefit is a benefit that we can quantify in monetary terms. Profits, net cash flow, net income, or revenue, for example, are economic benefits.

Fiscal policy

Itrefers to a government’s spending and how it affects the economy, particularly if spending levels change. Fiscal policy also refers to the tax policies of a government to influence economic conditions. It drives the policy actions of the Government. Budget, tax, subsidies, expenditure etc. form part of the fiscal policy.

GDP

Gross domestic product (GDP) is the standard measure of the value added created through the production of goods and services.  

Golden Economy

The term describes an ideal state for an economic system. In this perfect state, there is full employment, economic stability, and stable growth. It is also called sunshine economy. Emphasis is laid on energy sector. Sunshine Economy depend on non-fossil energy such as wind energy, solar energy, water, biomass energy, geothermal energy, marine energy etc. as basic energy supply to encourage distribution of facilities, to improve the energy structure.

Government spending

It refers to money spent by the public sector on the acquisition of goods and provision of services such as education, healthcare, social protection; the important areas being social welfare and defence.

Grey Market

It’s an unofficial market in goods that have not been obtained from an official supplier.

Grey Economy

The informal economy is also known to be the grey economy. This is an economy that is a diversified set of economic activities, enterprises, jobs, and workers that are not regulated or protected by the state. The grey economy helps to establish self-employment in small, unregistered enterprises. It has been expanded to include wage employment in unprotected jobs.

Green Economy

It’s a three-dimensional focus in sustaining and advancing economic, environmental and social wellbeing, to increase GDP and reduce poverty. A green economy is an economy that aims at reducing environmental risks and ecological scarcities, and that aims for sustainable development without degrading the environment. It is closely related with ecological economics, but has a more politically applied focus.

Incentives

In economics, incentives are what encourage an individual to act in a certain way. In other words, how consumers and businesses respond to market signals such as prices and financial benefits.

Inflation

Inflation is the rate of increase in prices over a given period of time. Inflation is typically a broad measure, such as the overall increase in prices or the increase in the cost of living in a country.

Law of demand

It states that quantity purchased varies inversely with price. In other words, the higher the price, the lower the quantity demanded.

Market

It’s a place where the exchange of goods and services takes place as a result of buyers and sellers being in contact with one another, either directly or through mediating agents or institutions.

Money

It’s a medium of exchange; it allows people to obtain what they need to live. Bartering was one way that people exchanged goods for other goods before money was created. Money has worth because for most people it represents something valuable. The units of measurement are dollars or another currency, with no time dimension.

Market capitalization

It’s the aggregate valuation of the company based on its current share price and the total number of outstanding stocks. It is calculated by multiplying the current market price of the company’s share with the total outstanding shares of the company.

Marginal utility

It refers to the amount of satisfaction a consumer gets by consuming a good or service. Marginal utility can be used by economists to measure how much of a good or service a consumer would buy in a given period of time.

Macroeconomics

Macroeconomics is a branch of economics dealing with performance, structure, behaviour, and decision-making of an economy as a whole; for example using interest rates, taxes, and government spending to regulate an economy’s growth and stability. This includes regional, national, and global economies.

Microeconomics

It’s a branch of mainstream economics that studies the behaviour of individuals and firms in making decisions regarding the allocation of scarce resources and the interactions among these individuals and firms.

Monopoly

It’s a market situation where there is a single seller in the market. In conventional economic analysis, the monopoly case is taken as the polar opposite of perfect competition. By definition, the demand curve facing the monopolist is the industry demand curve which is downward sloping.

Micro Economics

Microeconomics is the study of decisions made by people and businesses regarding the allocation of resources, and prices.

Macro Economics

Macroeconomics focuses on the performance of economies; changes in economic output, inflation, interest and foreign exchange rates, and the balance of payments. 

Opportunity cost

What a business firm misses out on when selecting one option over another. It’s a way to quantify the benefits and risks of each option, leading to more profitable decision-making overall.

Oligopoly

An oligopoly is a market characterized by a small number of firms who realize they are interdependent in their pricing and output policies. The number of firms is small enough to give each firm some market power.

Optimization

It’s the process of making a trading system more effective by adjusting the variables used for technical analysis. A trading system can be optimized by reducing certain transaction costs or risks, or by targeting assets with greater expected returns.

Purple Economy

Purple Economy takes into account the ethnic, cultural, and sociological aspects of the place they operate in. Concepts such as racial equality, cultural transmission, and economic anthropology are the core tenets of this principle which draws from the ideas of both politics and capitalism. It is about looking beyond the economic value of cultural outputs to include the cultural dimension of any asset or service. Purple economy is part of a wider ethical approach.

Repo Rate

It’s the rate at which the Reserve Bank of India (RBI) lends money to commercial banks or financial institutions in India against government securities. Repo Rate in 2022 is 4.40%

Recession

In economics, a recession is a business cycle contraction when there is a general decline in economic activity. Recessions generally occur when there is a widespread drop in spending.

Red Economy

It’s related to the economy that is ruled by a government with style of communism.

Supply

 In economics, supply is the amount of a resource that firms, producers, labourers, providers of financial assets, or other economic agents are willing and able to provide to the marketplace or to an individual. Supply can be in produced goods, labour time, raw materials, or any other scarce or valuable object.

Scarcity

The gap between limited resources and theoretically limitless wants.

Sovereign bond

It’s a debt security issued by a national government to raise money for financing government programs, paying down old debt, paying interest on current debt, and any other government spending needs. Sovereign bonds can be denominated in a foreign currency or the government’s domestic currency.

Silver Economy

Silver economy is the system and structure of production, distribution and consumption of goods and services aimed at using the purchasing potential of older and ageing people and satisfying their needs, wants and consumption for a well living and health needs. All strategies are driven to face new challenges related to an ageing population (geriatrics), especially regarding technology services for wellbeing and health monitoring such as robotic assistance, electrical mobility, or health sports, including health tourism and green care.

Time value of money

It’s the concept that a sum of money is worth more now than the same sum will be at a future date due to its earnings potential in the short-term.

Unemployment

It’s a term referring to individuals who are employable and actively seeking a job but are unable to find a job. Included in this group are those people in the workforce who are working but do not have an appropriate job.

White economy

Focuses on Digital Economy and how it changed business and trading for start-ups and entrepreneurs via digital.

In 1980 Michael Porter described three generic strategies which a company of any size (small, medium or big) can choose to pursue its competitive advantage. The three generic strategies are lower cost, differentiated or focus. A company can choose one of two types of competitive advantage; either lower costs than its competitors or differentiating itself along dimensions valued by customers to command a higher price. A company also chooses one of two types of scope, either focus by offering its products to selected segments of the market or mass market, offering its product across many market segments. The generic strategy reflects the organization’s strategic power.

Competitive advantage is a distinguishing trait of the business which may include access to natural resources,  firm’s location, supple supply chain, marketing channels, highly skilled personnel, geographic location, high entry barriers, etc. It can also be technological superiority, brand power which can provide competitive advantage, whether as a part of the product itself, as an advantage to the making of the product, or as a competitive aid in the business process.

Porter suggested that a company must choose one of the three strategies at a time; if it makes a wrong decision it may risk losing its precious resources. He says that to accomplish competitive advantage the firm must have the abilities to cope with the five forces in the market; competition between existing players, bargaining power of buyers, bargaining power of suppliers, threat of new entrants and threat of substitution.

Cost Leadership Strategy:

Wal-Mart Stores Inc. has been successful using cost leadership strategy very well for over years. The store has been attracting buyers with low prices; the low prices are offered every day to attract customers. The products are offered at a cheaper rate than competitors consistently, not occasionally. Wal-Mart is able to carry on the gigantic business due to its large scale and efficient supply chain management. They source products from cheap domestic suppliers and from low-wage foreign markets. This allows the company to sell their items at low prices and they earn profits through thin margins gained from high volumes of business.

In cost leadership strategy companies charge a lower price but their volumes are larger. Therefore, volume of business allows a company to maintain its profits and expand its market share. Some consumers shop only at stores that offer the lowest price, which means industries like groceries, fast foods and garments often have price wars. The winner in a price war enjoys protection from rivals because competitors lose out on their profits when they attempt to offer the lowest price. The cost leadership strategy also makes it difficult for new companies to enter the market because of thin profit margins.

Another brilliant example of cost leadership is the Swedish furniture retailer Ikea. This company offers furniture at amazing low price. It’s the best example of innovativeness. Ikea is able to keep its prices low because it sources its products from low-wage countries. It saves on labour cost and it does not assemble or deliver furniture; customers must collect the furniture from  the warehouse and assemble at home themselves. Thought from convenience point of view this is less suitable, customers still buy it from Ikea because of the lowest price tags.

Product Differentiation strategy:

Porter says that an industry has multiple segments that can be targeted by a firm. The breadth of its targeting refers to the aggressive capacity of the business. If a company targets customers in most or all segments based on characteristic or trait (size, shape, uniqueness, service etc) other than price it is opting for product differentiation strategy.

Etsy is an online artisan store and shopping gallery which has used differentiation strategy wisely. Etsy offers its users a platform to showcase their handmade wares and sell them to customers around the world. Hence this store is called as a crafter’s paradise. Etsy has carved a niche for itself through sales of craft supplies as well as homemade items. Through Etsy, the community of crafters has found a home on the internet and the world has been opened to the amateur artisan/crafter those who wish to sell their products. The Etsy business model brings together the artists and the business savvy of investors who are keen to support the ideas and talent of craftsmen. This business model has worked wonders for Etsy.

Differentiation is a marketing term used to describe the process of developing promotional messages that distinguish products from those offered by competitors. The differentiation plank is created in the minds of target customers. Effective differentiation is critical to building a strong business model. Samsung has adopted differentiation strategy by providing its customers large numbers of service centers network, online technical support, entertaining online complaints, live chats with customers and phone support. Each year Samsung invests minimum 9% of its sales revenue in R&D activity. It believes in innovative concepts and innovative marketing strategies. It has mapped out a plan of reaching $ 400 billion revenue and becoming the leader globally in appliances market by 2020.

Differentiation strategy involves making the products or services diverse yet attractive than competitors. How a company does this depends on the nature of the industry. Differentiation involves product features, functionality, durability, support, service quality, time and also brand image which the customers value. To make a success of a Differentiation strategy, organizations need good research and development, innovation and the ability to deliver high-quality product or service. It also requires effective sales and marketing team, so that the market understands the benefits offered by the differentiated offerings.

Large organizations pursuing differentiation strategy need to stay supple with their new product development processes. Otherwise, they risk attack on several fronts by competitors pursuing differentiation strategies in different market segments.

The Customer Focus Strategy (Niche marketing):

Companies that use Focus strategies concentrate on particular niche markets and, by understanding the dynamics of that market and the unique needs of customers within it, by developing uniquely low-cost or well-specified products for the market. By doing so, the company also enjoys deep economies of scale. The company enjoys effective insights because of the smaller size of market. Thus, automatically the company enjoys market power within the niche. The only challenge in using customer focus strategy or niche market strategy is choosing markets where the customers are lesser prices sensitive.

Because of choosing the right markets and serving customers uniquely well, companies enjoy strong brand loyalty amongst their customers. This makes their particular market segment less attractive to competitors.

In the focus strategy, it is still essential to decide whether a company would like to pursue Cost Leadership or Product Differentiation. Focus is not normally enough on its own. But whether the company uses Cost Focus or Differentiation Focus, the key to making a success of a generic focus strategy is to ensure that it offers its customers that ‘something extra’ as a result of serving only that market niche. The “something extra” that the organizations adds can contribute to reducing costs or to increasing differentiation.

As with its suppliers, the organization does not enjoy the bargaining power because of the lower volumes. But, because of practically no other substitutes to compete with, the company can pass on benefits to its customers.

Examples of niche markets are organic foods which are more expensive, but with promise of better quality and enhanced for environment protection. Another example of a niche is of traditional 35mm film cameras and films; these have become rare. The producers no longer enjoy the same economies of scale, but some consumers still like to use it. The internet has amplified the potential for niche markets and niche businesses. Because of it, the startup cost has been reduced and made it easier to reach a small number of niche customers.

The best example I would quote here is of Café Coffee Day in India. This chain of coffee restaurants brought in the concept of cafes to India where the young and the old can sit for a while, chat, discuss, and meet over a steaming cup of coffee. The first one opened in 1996 on Brigade Road in Bangalore. At CCD, people can have leisure meetings. Nobody disturbs or asks you to vacate the table. The concept instantaneously became a hit. It has a target audience of educated, serious people in big cities and metros where meeting places are in shortage.  Another appreciation CCD has capped is that there are also 11,000 small growers in India from whom they source coffee from.

Porter’s advise on choosing the right strategy: Porter says that organizations must spend time and efforts before they make choice of which generic strategy to pursue because it underpins every other strategic decision. He cautions organizations to use not more than one strategy. One of the most important reasons why companies must use only one of the three strategies is because the entire planned feeling revolves around it. Cost Leadership requires a very detailed internal focus on processes. Differentiation, on the other hand, demands an outward-facing, highly creative approach. So, when companies need to choose one out of three strategies they need to take into account their SWOT analysis. Also organizations need to do the five force analysis of the industry. After doing so the following questions need to be answered:

• Whether supplier’s bargaining power can be reduced or managed.
• Whether customer’s bargaining power can be reduced or managed.
• How to face rivalry among the existing players.
• Whether substitution threat can be reduced or managed.
• Whether threat of new entrants can be managed.

Thus, companies must select the generic strategy that gives them the strongest set of options because it is the starting point of strategic decisions making.