Exercise 2.

Maybank: Meeting Customer Needs in a Changing Environment

Menara Maybank, the Head Office of Malaysia's largest financial services group, Maybank, may stand 58 storeys in central Kuala Lumpur, but the corporation's activities are by no means restricted to its home city, or even home country. Of the 14 countries over which more than 450 offices are spread, eight (Malaysia, Indonesia, Brunei, Singapore, Philippines, Vietnam, Myanmar, and Cambodia) are part of the Association of South East Asian Nat ions (ASEAN). Maybank also works closely with 700 foreign banks around the globe.

Now almost 50 years old, Maybank has matured into a corporation offering an extensive range of financial products and services. Its businesses include commercial banking, insurance, finance, asset management, investment banking, and Islamic banking. This Malaysian bank has been able to develop into the success that it is today by analyzing and reacting to various relevant macro-environmental forces that influence its business. The social, economical, regulatory, and technological forces in Asia appear to have directed much of May bank's actions in recent years.

SOCIAL FORCES

The social forces that influence Maybank can be categorized into changes in demographics and changes in values. One of the most obvious recent demographic changes in Asia is the increase in the median age of the general population. This indication of an aging population has brought about substantial growth in savings and retirement plans. Other factors that have caused a surge in savings include increasing number s of both smaller household s and double- income families. The resulting higher gross house hold incomes mean higher discretionary incomes that can be saved or invested. Maybank offers a number of savings and investment account options such as the Gold Savings Passbook Account and Flexi Plan 2. The variety of choices makes it possible for customers to select the most appropriate plan, which can be personalized to best suit themselves. Another noteworthy change in Asian demographics is the increasing level of education and academic qualification of the average person. This leads to a better aware ness and understanding of the importance of saving and investing among the younger generation. To further educate the youth and encourage financial management, Maybank pioneered on line savings accounts for the teen age market by developing the "imteen" account. Teenagers with an imteen account can access banking services over the Internet; they can track their savings balances and pay their bills on line. Additional features include a range of downloadable product s and cash awards.

Large proportions of Asian populations have relocated, from urban to more rural regions, as well as from home to foreign countries. Maybank has responded to the urbanization of previously rural areas by establishing branches throughout the Asian region as well as the world. This helps to support and serve customers regardless of their location.

In general, the reshaping of Asian values stems from changes in the demographics of the people who hold these values. For instance, people with higher educational qualifications place great importance on efficiency and staying up-to-date with current events and situations. To support the busy lifestyles of these customers, Maybank developed the low-maintenance Premier Club account for "individuals who are constantly on the go" Another important demographic change is the increase in the number of double-income couples, resulting in a growing emphasis on the togetherness of a family. As more parents have less time to spend with their children. they have come to place higher value on leisure time spent as a family. In China, an increasingly more educated population , who are more aware and open toward foreign practices, has brought about the implementation of the Jive-day working week. Emphasis on family unity and longer weekends has contributed to increased tourism at home and abroad, while a more open attitude toward foreign influences has resulted in a growth in foreign investments and multinational businesses. The consequent increase in foreign currency use in Asia, propelled by the overall globalization of the world, led Maybank to offer its customers its range of foreign currency accounts.

The most significant advantage of Maybank's foreign currency accounts is the minimized risk of foreign exchange rate fluctuations. Available in over 10 currencies, each account is a comprehensive package with a list of additional features, one of which is discounts on traveler's checks. The targeted segments include Malaysian residents who have an overseas source of regular income because they are employed in foreign countries, and non -Malaysians who are employed in Malaysia.

ECONOMIC AND REGULATORY FORCES

Asia has recently experienced much liberalization in trade and investment, which can be categorized as both an economic and regulatory force. Maybank's range of foreign currency accounts was also a response to this macro-environmental change.

Liberalization in trade and investment is encouraged in Asia in order to facilitate international interactions in the economic and social arenas by diplomatic coordination of regulations and standards. Examples of changes in regulations concerning trade and investment include the reduction of import tariffs, and the abolition of subsidy payments and tax exempt ions granted to exporters. The ASEAN countries Free Trade Agreement (AFTA) is a typical example of regulatory changes that aim to change the economic environment of Asian regions. This trade bloc agreement was first signed in 1992, and today the ten ASEAN countries conform to it. In addition to reducing tariffs, AFTA also eliminates other trade barriers such as the formalities of verification and cross-notification. The result of such trade liberalization is improved economic efficiency, which in turn means increased attractiveness of the countries to foreign direct investment.

TECHNO LOGICAL FORCES

The ever-changing technological scene in Asia, a part of a global development, has prompted Maybank to implement various features and services to better satisfy customer need s and wants. One of the most evident recent technological developments is the declining cost of computers and other electronic devices. Complemented by the development and expansion of the Internet, this has led Maybank to not only create corporate website, but also offer a comprehensive range of services that are accessible online. For example, customers can view and make transact ions, pay bill s, and send questions or feedback from the website. Such services create substantial value for customers, many of whom use the Internet on a daily basis. Maybank also offers a brief yet informative tour of services for those who are less confident about using the Internet-based tool. With the sophistication of the Internet has arisen the issue of cyber security, yet another technological change to which Maybank has had to respond. Its website provides information and advice on safe Internet banking habits, including choosing appropriate usernames and passwords, clearing browser cache, logging out securely, and updating security software. Moreover, Maybank implemented the Transaction Authorization Code (TAC) system in 2004 to create n even more secure Internet environment for its customers. Customers are required to provide a TAC in addition to their username and password; TAC provide s a second layer of security for customers performing online banking transactions. Furthermore, the Maybank website is constantly undergoing expansion and enhancement. Cell phones have become commonplace in Asia, as they have in other parts of the world. Dependence on cell phones is increasing, fueled by an expanding range and network of mobile services. Maybank offers many services accessible by cell phones. For example, customers can send text messages via Short Message Service (SMS) or call to request their TAC. Maybank's mobile financial services enable customers to use their currency via mobile phones. Maybank promotes it as a "secure and convenient" method of conducting electronic cash transfers, downloading and purchasing products and services, paying bill s, as well as topping up prepaid accounts.

Questions

What macro environmental forces affect the banking industry? What implications can be drawn as a result for marketing strategies in the banking industry?

How has Maybank responded to the macro environmental changes? Are the responses appropriate? What other responses would you suggest?

3a.How do you see the similarities and the difference between managing a product vs managing a service?

3b.What are the four characteristics for managing a service industry; and if apply into a banking industry, what are the proposed solutions for each of the unique characteristic. Please kindly elaborate each of the characteristic.

1) The Economy cannot be considered fully employed unless the measured unemployment rate is below 1%. Agree or disagree and explain your answer in a paragraph. What is the current actual u-rate for the US economy as of February Data for 2021?Is this unemployment rate below or above or equal to u-rate at full employment (usually called natural rate of unemployment or NAIRU)? What state of the economy do you consider from this u-rate for Feb 2021 (recession, depression or inflation?) and its sources?

2) A) Why would you expect the inflation rate to accelerate if the actual unemployment rate declined to a level lower than the "full employment" unemployment rate (NAIRU) and remained at that low level for a year or longer?

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Explain your answer in a few sentences.

B) Draw an AS/AD diagram illustrating your answer to part (A) and refer to the current state of the economy of the US to compare in this context. Be sure to label all lines and axes in your diagram clearly.

3) Suppose between Q1, 2020 and Q4, 2020 measured Output in the non- farm business sector increased by 3.6%. During this time period the unemployment rate fell from 4.6% to 3.7% and total hours worked in the nonfarm business sector increased by 3.8%.

What was the % rate of change in labor productivity over this period (Q1 2020 to Q4 2020)? Explain your answer briefly. (Hint: Labor productivity = Y/Labor hours; RGDP growth rate = Labor productivity growth plus and Labor Force Growth rate. No need to use u-rate changes for this question)

4. a. The Federal Government under Biden Administration is about to pass $1.9 Trillion Covid-19 Stimulus Relief Fund to rescue American and plans to distribute by Mar 15, 2021. Under this relief fund, almost 90% all households will receive $1,400 for all individuals filing and $2,800 for all households filing jointly. As part of the package also includes child support allowances for households, small businesses relief fund, covid-19 testing and vaccination roll outs. What would be the overall impact on AD of this third stimulus relief fund to recover the economy from severe recession caused by COVID-19 public health crisis and its effect on change in real GDP? Assume that the Marginal Propensity to Consume (MPC) for all American consumers is 0.8 in February 2021. Estimate the maximum potential increase in real GDP in numerical values based on your knowledge on Keynesian economic model and policy effect, Explain your answer briefly as well in your own. Make sure you use your understanding of the concept of expenditure multiplier in estimating this problem.

4.b. Suppose instead of giving this $1.9 trillion package directly to individuals and small businesses, the legislative branch and the executive branch have decided to provide a tax break of the same amount for all federal tax filers for tax year 2020 that has to be filed by April 15, 2021. In another words, using the same criterion of distribution of $1.9 trillion package described in 4.a above, the government decides to give tax refund during tax filing for year 2020. Given this option, and assuming the same MPC of 0.80, estimate the maximum potential increase in GDP with this option and explain the comparison of your results you have come up with in Q4a above. Hint: Expenditure multiplier versus tax multiplier need to be understood to answer these two questions.

6. Use the following macroeconomic model structure to answer the questions followed from 6.1 to 6.8. Please note that you must show your work of estimations for these numerical multiple-choice questions for gradable credit. Without showing your works of estimation, your answers won't be credible for take-home exam.

C = 300 + 0.8Yd; C = consumption function; Yd (Y-T) = disposable income

I = 200; I = Investment

G = 400; G = Government expenditure

T = 200; T = Tax revenue

Also assume that Yf = Full employment GDP (Potential GDP) = 5,000

6.1. The equilibrium GDP level (income) is _________. Hint: Ye = C+I+G

a. 2,850

b. 3,700

c. 3,145

d. 3,800

6.2. At the equilibrium level of output, the aggregate consumption level is:

a. 3,100

b. 3,250

c. 3,400

d. 3,625

6.3. At the equilibrium level of output, the aggregate saving level is:

a. 550

b. 450

c. 400

d. 350

6.4. The MPC and MPS for the economy is respectively:

a. 0.9 and 0.1

b. 0.85 and 0.15

c. 0.75 and 0.25

d. 0.80 and 0.20

6.5. The expenditure multiplier for the economy is:

a. 10

b. 8

c. 5

d. 4

6.6. The tax multiplier for the economy is:

a. -3

b. -4

c. 4

d. 5

6.7. Given the value of full employment level of GDP above, the GDP gap is ______

a. 1,200

b.1,300

c. 1,400

d. 1,500

Hint: GDP gap is the difference between full employment (potential GDP) and existing equilibrium GDP)

6.8. The government spending needed to bridge the GDP gap you found in statement 8.7 above would be _____________

Hint: It is also called recessionary or inflationary gap depending on whether the economy is in state of recession or inflation.

a. 400

b. 350

c. 260

d. 250

7. Suppose the Payroll tax reduction for middle-income households has been extended in the amount of $500 billion for the remainder of 2021 to recover from COVID-19 crisis. Assuming the MPC for that income group of households is 0.8 and also assuming that other things stay the same, the increase in GDP under this proposed extension of tax break is expected to increase by (?Y) _______

a. $2,500 billion

b. $2,000 billion

c. $1,000 billion

d. $1,500 billion

Hint: Need to use tax multiplier and keep it mind it is a negative tax.

Part 2.

Question 1

Use the Model of Demand and Supply to explain why the price of buffet dinners has decreased recently in Dhaka City. Your answer should include a well-labeled diagram.

Question 2

Two candidates, Mr A and Mr B, are running for presidency in Country Z. The people of Country Z can either vote for Mr A or Mr B.

We are interested to study and analyze the total number of votes received by each of the two candidates.

Discuss in detail how we can apply the model of Production Possibility Frontier (PPF) in this case. Your answer should include a well-labeled diagram.

Discuss how the definition of the PPF needs to be adjusted and modified in this situation.

Question 3

The president of Country Z wants to adopt the free market economic system and has come to you for advice. You are the economic advisor of Country Z.

a) What would be your advice to the president of Country Z? Discuss your point of view in detail.

b) The price of rice has been increasing rapidly in Country Z. Discuss all the possible ways Country Z can tackle (manage) the problem of increasing price of rice. No need to draw diagrams in this answer.

Question 4

You have decided to open a small business in Country Z and you want to hire some employees for your business.

a) Discuss why you will need a rationing device when hiring employees.

b) Discuss in detail about the rationing device you will use when hiring employees.

c) Discuss how your choice of rationing device might affect the society of Country Z.

d) Discuss how you can use the concept of incentives and negatives to get the best out of your employees. Is this situation related to optimization or efficiency? Discuss in detail.

Question 5

Mara and Dona are both consumers and producers of butter and bread. They are both living in a barter economy. The following are the production schedules of Mara and Dona:

Production schedule of Dona Butter (units per day) Bread (units per day) 8 0 4 4 0 8

Using the given situation show that specialization and trade can benefit individuals and societies. Show all steps in your analysis. Explain in detail.

You can assume that the terms of trade are 5 units of bread for 4 units of butter.

Question 6

Discuss in detail how the concept of transaction cost and economic growth may be connected. Try to explain the connection as clearly and precisely as you can. There is no need to draw any diagram.

iii.

1. For each of the following situations, identify the full cost (opportunity cost)' involved: Monique quits her $75,000 per-year job as an accountant to become a full-time volunteer at a women's shelter. O A. The opportunity cost of volunteering at the shelter is the wages she gave up. O B. The opportunity cost of Monique's decision is the value of the next-best alternative not chosen. O C. The opportunity cost of Monique's decision is the time she can spend on other activities. O D. None of the above. O E. All of the above. The Agrizone Corporation invests $10.5 million in a new inventory tracking system. O A. The opportunity cost of Agrizone's decision is the value of the other investments it is pursuing at the same time. O B. The opportunity cost of Agrizone's decision is the value of leaving the money unutilized. O C. The opportunity cost of investing in a new inventory tracking system is any other projects Agrizone could have invested in. O D. All of the above. O E. None of the above. Taylor receives $100 from his grandmother for his birthday and uses it all to buy shares of stock in Harley-Davidson, Inc. O A. The opportunity cost of buying the Harley Davidson shares is the price of the shares that could have been spent on other goods and services O B. The opportunity cost of Taylor's decision is the value of the next-best alternative not chosen. O C. The opportunity cost of buying shares is the value of the time Taylor might have spent researching the stock market. O D. A and B only. O E. All of the above. Hector decides to spend the summer backpacking across Europe after he graduates from Harvard University. O A. The opportunity cost of Hector's decision is the wage he could earn if he decided to get a job. O B. The opportunity cost of backpacking across Europe is the time Hector could have spent on other activities. O C. The opportunity cost of Hector's decision is the next-best alternative to backpacking across Europe6. Use the graphs below to answer the following questions: Graph (a) Graph (b) Graph (c) Y Y Y X B X X 01234 567 8910 01 234 56 7 8 910 01234567 8910 In graph (a), indicate the nature of the slope and the value of the slope at point A. O A. Negative then positive; slope at point A is O) B. Positive then negative; slope at point A is undefined. undefined O C. Positive then negative; slope at point A O D. Negative then positive; slope at point A equals 0. equals 0. In graph (b), indicate the nature of the slope and the value of the slope at point B. O A. Positive then negative; slope at point B O B. Negative then positive; slope at point B equals 0. equals 0. O C. Positive then negative; slope at point B is O) D. Negative then positive; slope at point B is undefined. undefined. In graph (c), the slope is (1) and (2) as X increases. (1) O negative (2) O decreasing positive O increasing