Ebay Strategy

Short history of eBay Pierre Omidyar launched the first online auction in 1995 under the name ‘Auctionwatch’ under the domain name of www. eBay. com with the intention of creating a person- ­? to- ­? person trading community based on a democratized, efficient market where everyone could have equal access through the same medium, the Internet. The initial concept was to attract neighbours and other interested in the San Francisco Bay area residents to the site to buy and sell items of mutual interest. From there, the business grew to succession year after year. 1996: Jeffrey Skoll became co- ­? president and director of eBay. 997: Margaret Whitman became CEO of eBay. 2004: eBay acquired a share in Craigslist. 2005: eBay acquired Rent. com and Shopping. com. 2006: Acquisition of Skype. 2007: eBay acquired Stubhub. com. 2008: Margaret Whitman resigned as CEO. John Donahoe was her successor. During the years 2006- ­? 2008, eBay experienced a drop in gross merchandise sales to - ­? 12% and a reduction in number of auctions listed to - ­? 15%. This signalled a downturn in business for eBay, and a need to overcome the challenges which it now faced. Between 2006 and 2008 : eBay’s share of the US e- ­? commerce market had fallen from 19% to 17% (Amazon market hares, same period: from 3,7% to 5,3%). In 2008, John Donahoe took over the firm. Donahoe was a man who liked change. He believed that the firms marketplace sector had reached its maturity and a change in strategy was needed for the firm to move forward. In other words, he believed that the emphasis should no longer be put on the market place sector of eBay but on expanding the business by providing an array of other services. Question 1: Porters’ five forces: When eBay was first set up in 1995, it was the first business in the online auction industry. Since then, the industry has grown significantly. eBays competitors includeAmazon, uBid, Yahoo, and Google. Due to the incre asing interest in the online auction industry, eBay is now facing competition from a number of different rivals, most importantly Amazon. 1. Bargaining Power of buyers: Medium Buyers have the power to negotiate a price which suits them through setting their preferred bid. There is no pressure on buyers to surpass their preferred price limit. However, the number of buyers in the market is vast therefore their power is limited. 2. Bargaining Power of Sellers: Low As a result of endless number of sellers in the market, the bargaining power is low as there are many alternatives which an offer buyers good value and at a low price. Unless dealing with high end items or collectibles, which may be rare, the bargaining power of suppliers is low. 3. Existing Rivalry among competitors: Medium: The online auction industry is oligopolistic in the sense that there are a few large companies who own a large proportion of the market shares (eBay, uBid). However eBay is facing competition from severa l online retailers (Amazon, Overstock). 4. Threat of Substitutes: High Many consumers still prefer to use traditional methods for purchasing and selling items such as in- ­? store purchases. Consumers prefer to use this ype of purchase for many reasons. Firstly for security purposes, there is no risk in giving cash- ­? in- ­? hand to an establishment as opposed to giving credit card details online. Also, buyers have the opportunity to check the value of the good they wish to purchase. Many retail outlets have also extended their market to an online level. 5. Threat of new entrants: Medium The threat from new entrants is medium. As a result of low barriers of entry into the market, it is not difficult for businesses to be created. Businesses find it difficult to generate regular customers, as they must build up a reputation of having a safe nd secure website. In this sense, eBay has a competitive advantage as it has created a strong, trusted environment for its customers. Risin g competition in the market will, in turn, cause improvements in product quality and innovation. Also in order to generate good profits, eBay must focus on the sector of suppliers which regulates the most profits, this being the suppliers of high end items such as collectible products. EBay can differentiate by specialising in the market for collectible goods. Question 2: PEST Analysis:  §? Political: The internet is a tax free environment. EBay is not affected by the governments’ laws on axes. However, eBay is affected by certain policies considering the sale of certain products in different countries. For example, the CNIL in France. Economical: As a result of the economic crisis, consumer behaviour is changing. Consumers have less disposable income to spend caused by problems associated with the economic downturn such as rising unemployment rates, inflation rates etc. Sociological: Consumer behaviour has changed dramatically in recent years. Consumers want a quick and co nvenient way to source their products/services; the internet provides this through online retailers and auctions. The number of internet sers has amplified (insert statistics later? ). Technological: The internet has revolutionised, its range of activities has expanded with time. Along with offering search engines to quickly find products/ services, internet now makes it possible to quickly make transactions between buyers and sellers (PayPal).  §?  §?  §? The combined aspects of political, social, economic and technological will strengthen competition in the industry. In reference to economical, the economic crisis will cause companies to differentiate and work harder to find a competitive advantage over its rivals. In relation to technological, the use of e- ­? ommerce is becoming more and more popular; it has transformed the market place. Changing demographics has meant the internet and e- ­? commerce has become a more prominent force in the lives of consumers. E- ­? commerce is appealing as a more attractive industry as opposed to traditional retail outlets. It is less expensive for companies to create a business online as they can avoid the cost of employing a sales workforce. Also, as technology progresses, there will be the opportunity for firms to globalize, therefore expanding their market reach into different countries, and increasing their consumer base. Online businesses ill be able to target a larger number of consumers worldwide. In the current economic crisis, people need to increase their cash flow. This is an advantage for online auctions such as eBay as people can sell items that they no longer use. It creates a larger market for second- ­? hand items such as worn- ­? once clothing. Question 3: Key Success Factors: Online auctions and retailers †¢ †¢ †¢ †¢ †¢ These key success factors apply to both online retailers and online auctions. However, in the case of the online auctions, a key success factor w ould be the necessity to create a community of trusted buyers and sellers. Online auctions uch as eBay emphasise the importance of good values among their users such as honesty and trustworthiness. A second key success factors for online auctions is the importance of attracting and keeping sellers as without sellers supplying the items, the market would not exist. It is essential that online auctions are made attractable to sellers. This can be done by offering suppliers the option to set a minimal price for their products, further advertisements of their products e. g. eBay will display sellers products on their homepage for a minimal fee. As shown, there are specified key success factors for online auctions. †¢ Necessity to create a community Necessity to attract suppliers Expertise in technology Brand name Generate traffic to the site: by attracting and keeping customers Overcome internet users nervousness about using the internet for e- ­? commerce Security of payment Que stion 4: Our strategic map conveys that this is an oligopolistic market. There are two main competitors who hold strong positions in the market, those being eBay and Amazon. Both businesses have a strong reputation in the market combined with a wide variety of auctions/product categories. EBay is a household name when it comes to online auctions. The map shows hat eBay holds the strongest position in the market. Amazon lacks in number/variety of auctions compared to eBay but it still managed to hold a strong position in the market through its well- ­? established brand name. In comparison with eBay, Yahoo holds a weak position in the market. It lacks in brand recognition as an online business. Yahoo also has a limited variety of auctions paralleled with the market giants eBay and Amazon. Question 5: Swot Analysis  §?  §?  §?  §? Strengths: Global brand for online auctions (Brand awareness). Quality and Quantity of products. Community spirit. Payment security (Paypal). Oppo rtunities:Acquisition of new business. Develop a market in emerging countries (India, Brazil†¦). Increase in online shopping.  §?  §?  §? Weaknesses: Model opened to fraudulent activities. System breakdowns. Increasing customer demands Threats: Substitute products (stores, online shopping web sites†¦). Success attracts competition. Interest and foreign currency exchange rates. Consumers’ fear of fraudulence  §?  §?  §?  §?  §?  §?  §? The SWOT analysis reveals that eBays strengths outweigh its weaknesses. eBays most promising strength is its globally known brand name. EBay has been established as a household name with its continued success in the - ­? commerce industry. It is still possible for eBay to expand and grow in this industry due to the increasing interest in online shopping. A notable weakness of the online commerce industry would be its systems openness to fraudulence. This has been faced by many businesses in the market including eB ay. Even though eBay was subject to controversy over this problem it has still emerged in a strong position nevertheless. Question 6: After computing the current ratio, we found that the company is able to pay its liabilities with its assets. 2005 2006 2007 Current Assets Current Liabilities 3990993 1266792 4970586 2518395 7122505 099579 Current ratio = current 3,15 1,97 2,30 assets /current liabilities It means that in 2007, the company can reimburse its liabilities with its assets 2 times. We noticed that the net income is decreasing (- ­? 70%). In fact, the gross merchandise sales are decreasing (- ­? 20%) and the auction listed too (- ­? 14%). The working capital shows us that eBay has enough cash available for the firm day to day operations. Working capital = current assets- ­? current liabilities 2005 2006 2007 2724201 2452191 4022926 The average collection period in 2007 is about 22 days. That means the company wait just 22 days before receiving the

Free Essays on Creation Myth

Creation Myth In the beginning†¦ There was only water and bare, empty land. In the center of this nothingness was a great mountain. This mountain stood tall and proud and it reached all the way into the heavens. At the very top of this mountain lived a pair of every kind of animal. In the center of this heaven grew a tree. This tree was not just any tree, it was the sacred tree of life, and it was not to be harmed in any way. Among the diverse group of animals was a pair of giraffes. The female giraffe had grown tired of eating the same old leaves and fruits. Being strong-willed and stubborn she decided that she just had to try a fruit from the sacred tree. She convinced her husband to accompany her and to be one of the first ones to taste this great, unknown fruit. Reluctantly her vacillating husband agrees. He tells himself that the consequences couldn’t be that bad, after all its only a tree. The pair reach the tree and begin to devour the delicious fruits. As they ate, they were ob livious to the great winds that had begun to blow. The winds continued to pick up speed and then with one strong gust every pair of animals is blown right off the mountain to the bare lands below. All the Animals are bewildered as they try to figure out what caused this. Finally the giraffes step forward admit to their part in the dilemma and take they blame. The animals are furious, but being sensible put aside their anger and decide to deal with the situation on hand. All the animals agree that they need a leader. The most skillful builders gather together and from the dirt and clay they build a figure with double of everything†¦4 eyes, 2 noses, 2 mouths, 4 legs. Hoping that the Great One will grant them this one request they go to sleep that night. When they Awake in the morning they find that they clay figure has come to life. That day this human proves to be very helpful and creates a wonderful paradise out of the barren land. That night there i... Free Essays on Creation Myth Free Essays on Creation Myth Creation Myth In the beginning†¦ There was only water and bare, empty land. In the center of this nothingness was a great mountain. This mountain stood tall and proud and it reached all the way into the heavens. At the very top of this mountain lived a pair of every kind of animal. In the center of this heaven grew a tree. This tree was not just any tree, it was the sacred tree of life, and it was not to be harmed in any way. Among the diverse group of animals was a pair of giraffes. The female giraffe had grown tired of eating the same old leaves and fruits. Being strong-willed and stubborn she decided that she just had to try a fruit from the sacred tree. She convinced her husband to accompany her and to be one of the first ones to taste this great, unknown fruit. Reluctantly her vacillating husband agrees. He tells himself that the consequences couldn’t be that bad, after all its only a tree. The pair reach the tree and begin to devour the delicious fruits. As they ate, they were ob livious to the great winds that had begun to blow. The winds continued to pick up speed and then with one strong gust every pair of animals is blown right off the mountain to the bare lands below. All the Animals are bewildered as they try to figure out what caused this. Finally the giraffes step forward admit to their part in the dilemma and take they blame. The animals are furious, but being sensible put aside their anger and decide to deal with the situation on hand. All the animals agree that they need a leader. The most skillful builders gather together and from the dirt and clay they build a figure with double of everything†¦4 eyes, 2 noses, 2 mouths, 4 legs. Hoping that the Great One will grant them this one request they go to sleep that night. When they Awake in the morning they find that they clay figure has come to life. That day this human proves to be very helpful and creates a wonderful paradise out of the barren land. That night there i...

Analyzing Banking Profiles Essay Example | Topics and Well Written Essays - 500 words

Analyzing Banking Profiles - Essay Example The core capital has also shown similar pattern, which has increased from 7.47% in 2008 to 8.99% in 2010. The capital ratio stands at 11.39% in 2010 when compared to 8% in 2006. The number of institutions reporting to the FDIC has decreased from 8833 institutions in the year 2005 to 7760 institutions in 2010. The number of problem institutions has increased drastically on a year on year basis from 552 in 2009 to 860 in 2010. The number of failed institutions has also increased to 127 institutions in 2010 from just 3 institutions in the year 2007. Possible reasons for the observed changes in the banking industry Bank’s return on assets which refers to net income as a percentage of total assets, increased which suggests that the banking industry is able to garner more interest income with rise in demand for loans with reducing cost of funds, therefore sustaining revenues and improving asset quality. In relation with the core capital ratio, Tier 1 capital can absorb losses withou t a bank being required to cease its functioning. Therefore increase in core capital ratio indicates the health of the banking industry is improving considerably. The banking industry is giving prime importance to strengthen the Tier 1 level of capital.

Entrepreneurship Essay Example | Topics and Well Written Essays - 1500 words - 1

Entrepreneurship - Essay Example There is also political entrepreneurship which is a discipline involving the application of the entrepreneurial principles by politicians to benefit from the political arena. Intra-prerneurship is another form of entrepreneurship that entails the application of the entrepreneurial principles within the organization in order to transform the whole organization by changing the way things are done in that organization. Within the organization, an entrepreneur acts as an agent of change, seeking to change the status quo of the organization. The entrepreneurial activities involve changing the way the business is done through an introduction of new goods and services or new processes. It also entails the exploration of new sources of material for use in the production process as well as new combinations that gives quality products while minimizing on the costs incurred. Thus, entrepreneurship is about creating business efficiency and effectiveness. It involves the process of creation of new business entities or making the already existing ones more productive (Livingston, 2007 p45). My future ambition is to become an astute entrepreneur, establishing new business and making them more productive and profitable. This is in line with the entrepreneurial characteristics that I posses. The fact that I have discipline is a pathway towards enabling me become an entrepreneur. This characteristic is desirable for any one aspiring to become an entrepreneur, in that it determines the commitment that the individual will have towards the business they seek to establish or run. Even though capital and visionary objectives may count as necessities towards becoming a successful entrepreneur, they do not count as does discipline. Discipline ensures that individuals commit themselves to the business they want to start or the one they are heading, giving it all their efforts. It is this discipline that ensure that the entrepreneur do not give up trying when the business seems not to be performing as expected (Bailetti, 2012 p120). Further, discipline ensures that individuals takes responsibility, and are accountable for each of their activities. Without discipline, an individual would skip some of their duties and opt to indulge elsewhere, when they are not supervised or monitored by other people. It is discipline that guarantees individuals good leadership, which is a necessity for achieving success. To achieve team work, which is a necessity for success in any business undertaking, an individual needs to be disciplined. It allows them respect other members of their team and accept to be led by others without feeling as though they are the best in everything (Howkins, 2005 p11). High risk propensity is the other of my trait that can see me through my ambition of becoming an entrepreneur. This characteristic is desirable since the world of business is very dynamic, and some occurrences are never foreseen or anticipated until they occur (Duening, 2009 p66). It is difficult to adapt to market changes, if an individual lacks this trait in them. Risk taking prop ensity allows an individual to invest in a field that others consider inappropriate to commit their resources. A high risk taking propensity allows individuals to seek for resources to start businesses, when they are in shortage of such resources. If individuals

Cuban Missile Crisis of 1962 Essay Example | Topics and Well Written Essays - 3000 words

Cuban Missile Crisis of 1962 - Essay Example The event is of tremendous strategic importance for it had great impact on shaping international relation, foreign and economic policies and also affected both countries on a sociological front. The essay will analyze the significance and the magnitude of its impact that on global politics. Cuban Missile Crisis I. Background Cuban Missile Crisis was just another outcome of the Cold War that existed between the two superpowers of that time, Unites States and Soviet Union. However, the crises were mainly after the liberation of Cuba by Fidel Castro. 1The United States were already ambivalent about their involvement in Cuban politics and were particularly happy about the coup held by Castro but soon enough, the Cuban leader fell out of favor with the Americans for his alliance with the Soviet Union and the Americans began to fear the formation of one more communist nation. Cuba’s associations with the communist bloc were feared by then president Richard Nixon in confidential memo randums issued for the CIA. Cuba was declared a socialist nation by Fidel Castro on 1st May, 1961 and its affiliation with the communist bloc was further consolidated. ... Therefore, the tension between Cuba and America intensified ever since and the situation became even worse when the American intelligence began intercepting messages and satellite pictures showed establishments of arm bases around the island nation. In 1962, the United States established military bases in Turkey armed with Nuclear Missiles that were clearly meant to keep Soviet activity at bay. 3This move was defended by the United States as precaution against the military bases in Cuba that were quickly becoming a rising threat for the Americans. One of the biggest turning points preceding the main crises were the alleged training of 1300 Cuban exiles by the CIA in order to stage a coup against the Castro regime. However, this particular move by Americans led to a conflict in the Bay of Pigs that ended up in a major fiasco for the American side and subsequently shamed the entire American intelligence and the president in front of the whole world. Therefore, in 14th October 1962 the Soviets granted full arms support to Cuba against any further threats by the United States and so there were satellite images found by American intelligence that showed missile sites around Cuba that had missiles pointing towards every single major town in the United States. President Kennedy was forced to issue a public announcement acknowledging and admitting to the immediate threat that the entire country was now under and therefore, these small conflicts had now eventually been turned into one major crises situation that brought the world to the brink of nuclear annihilation. II. Game Theory and Cuban Missile Crisis Considering the initial premise of the crisis, the entire event has been described by scholars as both sides had completely turned a blind side to

Money Laundering Regulations Essay Example | Topics and Well Written Essays - 3000 words

Money Laundering Regulations - Essay Example Money laundering transactions generate assets that are a result of some illegal act such as drug deals or tax evasion. If a money launderer is able to achieve this goal then the criminal will be able to keep the property obtained from their illegal activity and have an apparent legal source for their newly acquired wealth. The purpose of laundering money is to disguise the assets obtained from the criminal activity as assets obtained through legal sources in an attempt to avoid imprisonment. Money that is laundered starts out as cash or as assets that are already in the banking system. Money is laundered through companies that handle large amounts of cash and investments like banks and other business firms that handle investments. Businesses that deal across international boundaries that handle "high valued goods" are prime targets for money launders. Some examples of businesses relevant to this situation are accountants, tax advisors, estate agents, and antique dealers. Terrorist, t ax evaders, arms dealers, and drug dealers among other criminals involve themselves in money laundering. Overseas accounts and electronic funds transfers can be disguised to look like legitimate company transactions and make money laundering disguise easier for criminals. Money launderers also employ experts to help them launder money. For example, a launderer could simply ask someone for permission to use that person's account for deposits in return for a fee. Another scenario is for the money launderer to approach a business and ask them to set up transactions in which a sum of money is regularly deposited in the company's account. The businesses will then send the money back as a fictitious payment for non-existent goods. Although this method is very popular amongst the criminal underworld, there are other ways of laundering money without a business becoming aware of being involved in a crime. For example, the money launderer could place an order for a robot to be manufactured to a specific standard. The company may ask for a 60% deposit with the understanding that the order won't be put through for three months. Before the three months are up the money launderer cancels the order and gets the deposit refunded minus a penalty. The money launderer will always be willing to pay the penalty because although the criminal will want to get as much back as possible, what the criminal really wants is the money back clean. It is important to bear in mind that money laundering is a process rather than a single act. In an effort to expose and analyze this phenomenon it has become common to use a three-stage model, which encompasses an ideal money-laundering scheme. The three stages are as follows: The Placement Stage, which is when cash is received directly from criminal activity, like from sales of drugs. It is first placed either in a financial institution or used to purchase an asset. At this stage the criminal disposes of the physical cash deposits. The Layering Stage is the stage at which the first attempt at concealment or disguise of the source of the ownership of funds takes place. This stage is called the layering stage because it is where the criminals "layer" financial transactions in an attempt to hid the criminal activity.

The Public And Private Sectors In Bhutan Economics Essay

The Public And Private Sectors In Bhutan Economics Essay The private sector is the part of the economy which runs for private profit and it is not controlled by the government where as public sectors are that part of the economy conserved with providing basic government services. In Bhutan, both public and private sector plays an important role in economic development of the country. Though private sector is considered as an engine of economic growth, which contributes more to government revenue, generates high employment opportunities and contributes more towards countrys GDP (GNI), and increase the economic growth. But at the same time public sectors also plays an important role in reduction of economic inequalities and public sector is an important instrument which the country can employ in preventing of monopolistic tendencies. The point of the public sector can be utilized to promote general welfare of the country. Since Bhutan is landlocked country with low entrepreneurial talent due to very new nature of most sectoral activities, and there are certain difficulties in development of private and public sectors like inefficient human factors, lack of credit facilities, inadequate infrastructural facilities, lack of technology and also lack of resources etc. While Bhutan is on the path to be a middle income country by 2020, with self-reliance economy and private sector to play the lead role and government move as facilitator and promoter and wants to achieve full-employment by 2020 (estimated, 97.5%). Both private and public sector plays an important role in economic development of the country. Though private sector is important for economic growth but public sector is also an important instrument for economic development and social welfare. Both public and private sector have contributed to GDP (current 6.7%) which helped in increasing the government revenue and Gross domestic capital formation in the economy. Private sector is the branch of an economy that is governed by an individual that does not falls under the direct control of government as are designed to earn their own benefits. The private sectors make their own choice of production for their benefits and compete with other private sectors in the economy. Wilson and Clark (1997, p.76) defined private sector as The part of an economy that is owned by individuals and operated for their personal benefit. It is made up of private citizen. This statement means that the private sector is the privately owned business where individual operate for their sole benefit and the private individual has right to determine over their production, allocation and distribution of goods and services. The private sector produces private goods and services that mostly promote the economy welfare of owners of private sectors. It is every individuals views to maximize their cost and benefits through the idea of competition with others. The competition and efficient utilization of resources is the guiding principle behind every private sector. Nevertheless, the private sector produces and generates majority of income in economy development which potentially contributes to the economy growth. Therefore, private sectors are sensible to refer as the engine of economic growth. Public sector on the other is a different sector from private sector as its services are fully regulated by government. The resources in this case are publicly owned. According to Wilson Clark (1997, p.77) states, The public sector is the part of the economy that is owned by the whole society and operated for its benefit. Unlike private sectors, the costs and benefits in case of public sectors are collectively shared by all the consumers in the economy. The components of public sector greatly vary across the country. In Bhutan, public sector includes such services as the police, military, public roads, public transit, primary education and healthcare for the people. So the following paper will be focusing on the roles of private and public sector that play in the economic development of Bhutan, history of these two sectors. It also discusses some of the indicators of economic development in Bhutan followed by the contributions made by these two sectors towards GDP (GNI) and employment in Bhutan and some of the difficulties in development of private and public sector in Bhutan. History of Private and Public sector Bhutan is one of the most isolated countries since 1961, it started its first development plan by opening its door of economy to the rest of the world with the inception of first five year plan with assistance from Government of India. With opening the economy with the rest of the world the private sector activity was only agriculture supplemented by some immature trading facilities. The economy has taken off to a higher growth since 1980 and has registered a long-term average annual growth rate of 7.6% in the 26 years after 1980. The average annual growth rate in the 1980s was 7.4% but de-accelerated to 5.9%, however, accelerated again to 7.9% in the first six years of the present decade. (Economic Development Policy of the kingdom of Bhutan, 2010, p.3). Today, Bhutans private sector is operating in an extensive range of activities in the country at present day. Bhutan had experience the modern system of economy until at the end of self imposed policy of isolation in country since 1961. The wise monarch late king Jigme Dorji Wangchuck ended the age old policy and bought the country into the international mainstream whereby the economic liberalization is the important reform taken by the late king besides other socio-political reforms. The true modern Bhutanese economy started with inception of First Five Year Plan (1st FYP) in 1961.At present Bhutan is in the progress of the 10th FYP and the country has achieved so much within half a century. In modern Bhutan the public sector has contributed so much to the growth of economy since Bhutan is welfare oriented country. The commencement of 1st FYP was the first step towards transforming the rural barter economic system to modern economy. The state undertook ventures in the manufacturing and service sector there was no potential in the private sector during those days. Indicators of economic development of Bhutan There are various indicators by which economics use to see the performance of the economy. In the Bhutanese context, some of the variables which are usually adopted to measure the development are listed below; Gross Domestic Product Literacy Rate Measures of Poverty Life expectancy Balance of payment 1. Gross Domestic Product Gross domestic product (GDP) defined as the total output of goods and services that are produced within the domestic territory of a given country during the fiscal year. Bhutans GDP stands at Nu. 61,223.5 millions with GDP Per Capita of Nu. 89,639.1 in 2010 (Bhutan 2010, Data Sheet).The real GDP grew at an average of 9.6% over the Ninth Plan period between 2003 to 2007, showing the growth of 21.4% in 2007. GDP per capita in 2002 and 2006 estimated US$ 835 and was US$ 1,414.01. (10th Five Year Plan, 2008-2013, p.4). In 2008, the countrys per capita income was US$ 2152. (Economic Development Policy of the Kingdom of Bhutan, 2010, p.1). So it indicates that the economic development is progressing. The gross domestic product for the year between 1996 and 2005 is given in the following graph. Source: Statistical Yearbook of Bhutan 2006 One of the main indicators of economic development is Gross domestic product. It indicates that the gross domestic product in Bhutan has been increasing over the year. So it means that the economic activity in our country is increasing over the years. In the above graph, we can see that the GDP in 1996 was Nu.11405.2million and it had increased to Nu.13971.1 in the fiscal year of 1997. It counts Nu.32.178.3million and Nu.36941.6 in the year 2004 and 2005 respectively. 2. Literacy rate The literacy rate is the percentage of people who are eligible to read and write in their everyday life. Education is one of the most essential and impressive indicators of economy development. The literacy rate in Bhutan is at 59.5% (Bhutan 2010, Data Sheet, Towards supporting evidence based-decision making). It indicates that Bhutan is not economically developed and shows that Bhutan is working hard on education and skilled people in developmental programmes. It is the productive and skilled labors which directly pull up the nation economy. If there is high literacy it also indicates the positive sign of economy were skilled and knowledge of people is considered as driving forces for social and economic development. Therefore, higher the literacy rates better the development condition in the economy. 3. Measures of Poverty The National Statistical Bureau determined the poverty line as Nu.1096.94 to a person a month, of which Nu 867 is for food and the balance considered as non-food expenditure. Food poverty concerns not only the sufficiency in quantity but also the nutritional intake of food. In Bhutan poverty rate has decreased from 31.7 percent to 23.2 percent between 2004 to 2007. (Poverty Analysis, 2007). The poverty reduction is the main objective of the 10th FYP and government aims to reduce poverty to 15% by the end of 10th FYP. The recent Mid-term review reveals significant reduction in the poverty rate. The poverty data helps in planning and decision making process to develop the economy. 4. Life expectancy The life expectancy is another indicator of the economic development which shows that higher the life expectancy, better indicator of economic development. The overall life expectancy was 68.9 were for male was 68.4 and for female 69.4 as of 2010 life expectancy rate. It brings the development in health, education and other social services. So it acts as an instrument that indicates the economic development in a country. (Bhutan 2010, Data Sheet. Towards supporting evidence-based decision making). 5. Balance of Payment; Positive balance of payment shows better economic development as it shows more inflow of capital, more export than the import and better competition in the international market. Bhutans balance of payment shows positive because the negative balance of payment is finance through foreign aids. Contribution of Public and Private Sector towards GDP (GNI) of Bhutan The GDP of a country is defined as the value of final goods and services produced by normal residents of a country during a fiscal year. Private sector contribution to economic growth in Bhutan is very significant. This is due to strict government control over private sector business activities, lack of access to credit, inadequate legal framework for private sector activities, limited entrepreneurial skills, and an inefficient government-controlled financial system that does not meet private sector credit needs. As also Bhutans financial system was heavily burdened with nonperforming loans on average across all financial institutions, were close to 40%. It was therefore imperative to strengthen the financial institutions in many basic ways, to move toward a market-based system as distinct from a centrally administered system, to privatize financial institutions, and to establish an effective banking supervision system. The table below shows the GDP contribution by major private and public sector. Table 1: Gross domestic capital formation in constant price (Million Nu.) In current prices 2000 2003 2004 2005 2006 2007 1. Machinery and equipments 3,031 3,476 5,060 4,432 1,408 1,183 Government 973 619 741 535 893 659 Private 2,058 2,857 4,319 3,898 515 524 2. Construction 6,835 10,661 11,272 9,565 9,242 10,671 Government 2,108 1,607 1,880 2,168 2,865 3,679 Private 4,728 9,055 9,392 7,397 6,377 6,975 3. Gross fixed capital formation 9,866 14,137 16,333 13,997 10,650 11,855 4. Change in stock -354 -204 -44 86 103 53 5. Gross domestic capital Formation 9,512 13,933 16,288 14,083 10,752 11,908 Source: National Accounts Statistics Report 2000-2007 In the table above, the Gross domestic capital formation has continued to increase from 2000 onwards thereafter 2005, there seems a declining trend in the economy. Employment Contribution from both the sectors The employment generation by these sectors of economy is the significant contribution towards economic development .Government has launched a concerted effort to create additional 35,000 to 40,000 jobs from the priority sectors with 40-45% in rural areas. Construction sector has employed close to 35,000 people in the past and additional 10,000 local jobs expected in the construction sector over the next three years. The tourism sector is expected to create around 10,000 additional jobs with tourism sectors aim to increase tourist to 100,000 by 10th FYP. The current formal sector work force is around 60,000 persons (of which about 30,000 are thought to be non-nationals employed mostly in the construction activities) the creation of an additional 90,000 jobs in private sector appears as a formidable challenge. Vibrant private construction sector to create employment opportunities for this increasingly literate workforce has been recognized by the Royal government as a high priority issue and now forms a central tenet of the Ninth Five Year Plan. Table 2. Number of person employed in type enterprise Sector Number of persons employed Government 49,900 Public corporation 10,500 Private corporation 8500 Armed forces 4900 Private Business 66,000 Agriculture farming 180,200 NGO/INGO 1000 Total 320900 (Source: Labor Force Survey Report, 2010) From the above table we can find that private sector offers more economic employment as compared to public sector and private sector is still working for its betterment. However, Bhutan being backed-up by agriculture, many people are engaged in agriculture sector which also symbolized the literacy rate in Bhutan is low and the living standard of people is poor. Vibrant private business and corporations creates more employment opportunities which shows that the development progress is positive that brings better position in the economy. Difficulties in Development of Private and Public Sector in Bhutan 1. Inefficient Human resources 2. Underdeveloped infrastructure 3. Financial inadequacy 4. Lack of market 5. Lack of entrepreneurship skill 1. Inefficient Human resources A lack of skilled Bhutanese workers or manpower and unwillingness of Bhutanese workers to undertake menial or unskilled work. Although Bhutan has made rapid advancement in the field of education and human resource development, much work remains before the nation is equipped with the human resources required to sustain the process of development. The nations skill base is extremely limited and just over one-half of the population is considered literate. As have less number of technically trained professionals. Thus, the lack of adequate human resource has forced our private and public sector to remain technically backward leading to very slow space of progress. 2. Underdeveloped Infrastructures The lack of infrastructure and the insufficient capital equipments are also the main obstracles in the progress of private and public sectors in Bhutan. Moreover Bhutan has poor capital with low saving and low investment. In order to have capital formation large savings are essential and the rate of saving also depends upon the size of income of the people. Even due to inefficient labor and lack of improved technologies hinders the development of private and public sectors in Bhutan. However, the Bhutans young and unstable Himalayan mountain ranges progress very less development with heavy expenditure. 3. Financial inadequacy Financial inadequacy is also one of the most difficulties faced by both sectors. Our private and public sectors are financially constrained. The most government undertaking has to depend on the foreign aid and other donor agencies. The domestically produced revenue is not enough for all economic activities. The profit in private sector is bare minimum as the commodities are primary product dominated. Therefore, it is very difficult to engender enough revenue to upgrade the business. 4. Lack of market Bhutan is landlocked country with mountainous and rugged topography most of the inhabitants are scattered. The lack of strong road network lacks a strong market base which further hinders the capital formation in the country. Moreover, with the landlocked country water transportation is absolutely not possible and most of the public and private sectors will be nearby sea level. More over demand for market shares are also low due to peoples low income and low population. Our goods and services have less competence in world market. Therefore it has been always a problem for both sector of the economy to progress. 5. Lack of entrepreneurship skill The lack of entrepreneurship ability is another factor that backward the economy growth. Though the entrepreneurship is regarded as the corner stone for the growth of economy, most of the public and private sectors lack fundamental key in the development and most of Bhutanese are not risk lovers and they always look for immediate lump-sum reward. The lack of market and private property also pulls back the development. While most of the business individuals lack the business skills that are fundamental in the development of private sectors. The Role of Private Sector in Bhutan The private sector produces goods and services that mostly promote the economy welfare of private sectors owners. It is every individual views to maximize their cost and benefits through the idea of competition with others. However, the private sector produces and generates majority of income in economy development which potentially contributes to the growth of economy. Thereby, private sectors are sensible to refer as the engine of economic growth which plays the major roles as given below; 1. Employment generation The employment generation is the significant contribution from private and public sector of the economy. The development in private sector creates thousands of opportunities which help government to solve the unemployment problems. The private sectors like tourism and construction sector offers huge employment opportunities. The current employment rate is 3.7% as of 2010 (Bhutan 2010, Data sheet). 2. Increase government revenue The private sector is also considered as the basis government revenue generator. The contribution in the form of tax is also the important source of government revenue. As when more and more public sector develops, there is always explosion of country in to better state. The mode of economy transaction increases and thereby the more revenue or taxes can be generated. Therefore contribution in the form of taxes becomes the government revenue. 3. Infrastructure development The growth in private sector is an indicator of improvement in the infrastructural facilities in the economy. The social services like health, education, proper water supply and sanitation facilities, transportation, would come up with increase number of private sectors. Role of Public Sector in Bhutan To accelerate the rate of capital formation Capital formation is one of the most important roles of the public sector in the country. Bhutan still has lack of factors that determines the capital formation mainly due to slow development of public sector. The rate of capital formation depends upon saving and investments were Bhutan has low propensity to save and invest. Redistributing Income The important role of the public sector is redistributing of income, however, in Bhutan there are many individuals who are not able to earn enough income to survive. It is notice that some members of our society who are handicapped and simply they are unable to work at productive position. On other hand, public sector impose the taxes to the income of those who work and result into redistributing certain part of their income to those who are unable to work. So in context to Bhutanese society, the maximum private property we own are the maximum income we have and more opportunities we have of being capable to produce. This condition tends to make the rich become richer. However, by redistributing income, our government is trying to provide equity and justice among Bhutanese people and it try to make many other opportunities to earn equally. Redistributing of income provide public assistance to low income groups and opening many opportunities available for their survival and this help in alleviating poverty in the country. Conclusion The development of public sector started with commencement First Five Year Plan and above all private sector is at emergent stage in our country. However, our economy is young and has a future potential to become the vibrant economy. As our economy is recent phenomenon and it has experienced the achievement of planned economic development. In this paper it reveals that both sectors of the economy challenged by many removable constraints like lack of efficient human capital, market, infrastructure, financial inadequacy and in particular private sector pressured with excessive regulation. So it recommended that government and private individual to invite technical expert to train our human resource and share their views and ideas, to create market for economy. By advancing loans at affordable interest rate. This will help in achieving the role private and public sector in economic development of Bhutan. To increase our private sector, the government must minimize the regulation to make efficient use of available resources in sustainable manner so that it can also help our private individuals to make use of their full potential skills and resources for the development.Therefore, It is also recommended that government must revise the existing system of plans, policies and strategies that government must make encourage labour and taxation policies like tax holiday and incentives for labour for the developemnt of the private sector.