Managing Profitable Customer Relationship Marketing Essay

Managing Profitable Customer Relationship Marketing Essay According to (Kotler, 2006) marketing is Managing profitable customer relationship, the aim of marketing is to create value for the customer and to capture value in return. Marketing is all about dealing with customers and that is what TESCO plc believes in. Marketing strategy indicates the specific target markets and the types of competitive advantages to be developed (Dibb, Simkin, Pride and Ferrell, 1997). Tesco  plc  is a British international grocery and general merchandising retail chain. It is the largest British retailer  by both global sales and domestic market share. Tescos management places an emphasis on customer needs through Tesco values philosophy, expressed as two values -no one tries harder for customers; treat people how we like to be treated. Marketing business is about how one position their business, in order to satisfy your markets needs. Marketing mix is the collaboration of elements that we use to market our product. There are four Ps in marketing mix; they are Product, Price, Place, and Promotion. Tescos management first understands what their local customers want and what their needs are. On the bases of this, they produce and market their products. Management takes proper care in fixing their product prices, during which they mainly consider their customers satisfaction and then their profits. They make sure that their products sold, and are suitable for their local customer needs before they launch their products. Tesco is very skillful in promoting their products. The promotional offers that they give whenever their new products are launched and their advertisings in papers and magazine will prove this. These four Ps are extended to seven Ps in later stages; the extended Ps include People, Process, and Physical evidence. 2.2 TESCO IN INTERNATIONAL MARKET. International marketing is the process of planning and conducting transactions across nation borders to create exchanges that satisfy the objective of individuals and organizations Tesco operates in 18 countries all over the world. Tescos deep understanding of its customers in each market has led to many small changes in way Tesco operates its loyalty programs in each country. This manifests itself in even the simplest way, with the South Korean version named family card and the China program named member card. In such a manner, Tesco is making the local people of different countries feel much closer to them. The main difference between domestic marketing and international marketing will be that, in international marketing process behavioral aspects of marketing, such as mainly culture, societal, and social circumstances that will be re-flecked, so should be taken in to consideration. Where in domestic marketing these above aspects could mostly ignored. Tesco understands the countries culture, social responsibility and other key factors before it enters in to that country. It will make sure that it is capable of taking the necessary changes pre orderly. 2.3 SWOT ANALYSIS OF TESCO. SWOT analysis is a strategic planning method used to evaluate the Strengths, Weaknesses, Opportunities, and Threats involved in a business venture. Strengths Weaknesses Leading market position Customization of products and services on bases of its local market requirements Low quality products produced in during 2009 in Ireland lease towards its loss of brand name Opportunities Threats New stores in different new regions Enter in to Indian market Growing population of tesco.com Recession effects in 2009 Heavy competition in UK grocery market 2.3.1 TOWS MATRIX TOWS matrix analyses the external environment (threats and opportunities), and internal environment (weakness and strengths). An organization can use this technique to think about the strategy of the whole organization. Strengths. Weaknesses Opportunities SO Brand awareness growing globally WO Innovation and alliances Threats ST Strong financial situation WT M table.1 The above matrix is the tows matrix. This tows matrix is helpful to explain the SWOT analysis more clearly. The below described pie diagram will give the details of the top ten food retailers in United Kingdom in year 2003. Country GROUP SALES ACROSS INTERNATIONAL MARKET (2009) in  £ bn UK 41.5 REST OF EUROPE 10.1 ASIA 7.6 US 0.2 GROUP SALES ACROSS INTERNATIONAL MARKET M Pie chart.1 SOURCE: http://www.investis.com/tesco/pdf/review2009.pdf (2010) 2.4 CULTURE IN TESCO. Understanding the culture in a country or region in which you are doing business is a critical skill for the international businessperson or organization. Without this knowledge, a successful outcome of the business venture can be in jeopardy. Gareth Morgan defines an organizational culture as The set of the beliefs, values, and norms, together with a symbol like dramatized events and personalities, which represent the unique character of an organization, and provide the context for action in it and by it. Tesco trusts that every employees job in the company is to help their customers, however they can and wherever they are needed. They treat their employees with trust and respect, and that is the major reason why so many of their employees are with them for more than 25 years. 2.5 COMPLEXITY ICEDRIPS MODEL. ICEDRIPS model will explain few major aspects of an organization. I Innovations: Tesco has being entering in to new markets every year. Tesco had recently interred in to India. It gives a chance to all their employees to give new ideas so that they can service their customers in a better way. C Competitors: Tesco has a heavy competition in its market. Asda, Sainsbury, and Morrison are the top competitors of Tesco. E Economic: Tescos major backup is its strong economic background. Its group sales in 2009 were  £ 59,426m. It has a very efficient money rotation process. D Demographic COUNTRIES POPULATION LANGUAGE GDP TURNOVER (2009) GDP PER CAPITA (PPP) UNITED KINGDOM 61,113,205 ENGLISH $2.224 trillion $38,191 $35,200 USA 307,212,123 ENGLISH $14.43 trillion $206 $46,400 ASIA 3,879,000,000 MANY $18.511 trillion $7,068 $20,800 EUROPE 731,000,000 ENGLISH $16.18 trillion $8,862 $32,500 R Regulatory: Before entering in to a countrys market, Tesco will first understand all its countrys rules and political influences of the country. I Infrastructure: Tescos management makes sure that they have the best infrastructure which will fulfil all their needs. P Partners: Partners of Tesco are Electra Entertainment, HP S Socio culture: Tesco understands that every different region will have a different culture and is trying to change itself to set in to it. 2.6 CORPORATE SOCIAL RESPONSIBILITY OF TESCO. In the World Business council for sustainable development, Lord Holme and Richard Watts (1.1.2000) defined corporate social responsibility, as It is the continuing commitment by business to behave ethically and contribute to economic development while improving the quality of life of the workforce and their families as well as the local community and society at large. Tescos Corporate Social Responsibility policy objective is to earn the trust or their customers by acting responsibly in the community they serve. Their core purpose of business is to create value for customers to earn their lifetime loyalty. Tescos aims: Is to offer value through competitive prices , high quality food Be helpful through customer service , customer communication To be innovative by their new products development, retail service through technology. As Tesco is a customer based company, which means service is heart of its business. It can provide more new services to its customers such as round the clock service, by setting up more new branches, taking proper care of existing branches which includes frequent checking of products availability, and staff availability, providing more offers and marketing the offers available. 2.7 BOSTON CONSULTING GROUP (BCG) MATRIX OF TESCO. The BCG Growth-share matrix is a portfolio-planning model developed by Bruce Henderson of Boston consulting group in the early 1970s. This matrix is based on the companys business unit and will classify into four categories based on combinations of market growth and market share. Tesco had kept its footprint in Ireland in the year 1998. It was hard for Tesco to reach the Irish customers, as they were extremely sensitive in regard to the foreign brands. Tesco strongly believes and understand that international differences will be taking place. So keeping this in mind, they have taking every small step in such a way that their customers are completely satisfied with their service. Let us consider an example: Tesco understands its customers in such a way that, in many Asian counties customers come in bikes and scooters as they prefer shopping in small quantities. So Tesco had taken steps in providing more bike and scooter parking when compared to car parking. They also take care in their prices, as they understand that they have wide range of competitors around them. 2.8 CHANNEL DECISIONS. According to Warren J. Keegan (1989) Channel decisions is defined as The structure of intercompany organization units and extra company agents and dealers, wholesale and retail, through which a commodity, product, or service is marketed. In this there will be two key elements: internal distribution and external distribution. These utilities are the basic source of competitive advantage and production value so should be considered as the key factor of an organization. How these internal distribution and external distribution are implemented in Tesco is explained below: Internal distribution KEY FACTORS IN TESCO Cost Lost cost brand growth. Strong cash flow position. Control Have in place both finance control (profits targets, capital bids and performance appraisal), and strategic control (overall strategic balance, agreed business plan, optional services and infrastructure). Customer service Customer service center open 24 hrs. Customer based company Motivation( employees) Allowance Friendly team leaders Order handling Outsourced transportation Outsourced External distribution KEY FACTORS IN TESCO Customer characteristics Understands customer requirements globally Nature of product Diverse range of products available Nature of demand Local need are understood Competition Wide range of competitors in different locations ( Asda, Sainsbury, and Morrison) Legal regulations It undergoes all the different regulations which are in all the countries 2.8 PROMOTION. According to Edward W. Cundiff and Marye Tharp Hilger (1988) Promotion is the communication function of marketing. Generally, promotion is communication with the public in an attempt to influence then toward buying your products and /or services. Tesco promotes its products in a wide range. It advertises their products through post, news paper, and television. Tesco understands the local customers interests and behavior and does its promotion such that they reach them. Tesco standardizes its product quality where ever it is. It also standardizes its customer service and its employees behavior towards their customers and also their co employees all over the world. Tesco needs to adopt new services and products, such as considering the local customers their requirements and needs. Tesco need to adopt the nature of providing products with high standards. Tesco believes that marketing is a process thought which they can reach their customers in the right direction and to satisfy their need, service is the only way. And Tesco is successful in most of the situations but it is not completely able to reach its international customers. It does not understand what their international customers as they dont supply all the local need to their customers. Tesco as so believes in marketing but fails in their promotion at some times. Tesco supplies its quality products but fails in some situation, because of which it had to withdraw from France and Taiwan.

Wuthering Heights - childs emotions vs. adult emotions :: essays research papers

Child Emotions vs. Adult Emotions All appearances said that Catherine Linton was as grown up as she could be, she was married and quite past the age when one is considered an adult. But, if one would look just a little farther, they could see that in all her rebelliousness she is maintaining a carefully constructed faà §ade, created to look adult while she spends hours of time dreaming about the childhood that she wished would last forever.   Ã‚  Ã‚  Ã‚  Ã‚  When we first see Catherine enter Nelly’s story she selfishly wanted the gift that her father promised her despite the fact that her father had gone out of his was to help a little boy that was all alone in the world. This is the first view of the selfish little girl emotions that eventually make her seem as if she is a little girl trapped in a woman’s body. But of course in this scene she was a child so it is excused individually but as a whole when put together along with the rest of the proof that she was a childish woman it shows just the beginning of the downward spiral that was Catherine Linton’s life.   Ã‚  Ã‚  Ã‚  Ã‚  She soon became very attached to Heathcliff. â€Å"She was much too fond of Heathcliff. The greatest punishment we could invent for her was to keep her separate from him†¦Ã¢â‚¬  (E. Bronte pg67) it was quite clear that Catherine felt very strongly for Heathcliff, maybe even too strongly. An adult knows that it’s good for them to have some time of their own but that is not how a child thinks, they think they can be with their best friend forever without end. This is probably what led to the drastic change in Catherine’s personality after returning from the Grange after her stay as a young girl. Her love for Heathcliff and want to be with him cemented her younger personality but when separated that foundation broke and she found a new self. Both from the perspective of wanting to be with her best friend forever as well as the not knowing her true self, Catherine was still showing signs of not growing up. Sure her body grew and her intelligence t oo as she read a lot but her personality and desires didn’t seem to be growing with the rest of her.   Ã‚  Ã‚  Ã‚  Ã‚  As Catherine continued to grow her relationship with Edgar Linton grew as well, she seemed to all to love him like a teenager would but she was still plagued by emotions that didn’t quite fit her age.

Analyzing Sherman Alexie’s “Superman and me” Essay

Can reading save a man’s way of life? Can reading save an entire culture? Sherman Alexie, an Indian creative writer writes an essay of which he acquaints us of his means in learning how to read, that is, through a Superman comic book. The essay was written in an alternating first person and third person style of telling. The first person way of telling was for his reflection. Those sentences that were written in the first person were Alexie’s own sentiments. The third person style was for his people. Probably it was meant as an insult since people who normally speak in a third person style are often deemed unintelligent since they cannot follow the rules of language. As the essays retells the experience of the author of how he learned how to read, there is one topic of which he focused, and that is how reading (and how it is connected to education) made a different impact in his way of life which can be very significant or relevant to the modern world today whose kids are taking education for granted. Reading and education Reading is a cognitive process of connecting meaning to a group of words, sentences, and letters. Not many can take the time to discipline themselves into liking and having reading as a habit but over the years reading has become a standard of calling a person or treating a person literate. It has become a mean to elevate one’s status. However, based on Sherman Alexie’s essay, knowing how to read downgrades the status of an Indian person. Indians are treated as the Native Americans. They weren’t treated kindly as the natives of the new world as history tells. They were often treated as the group of people who struggles with the advancement of life. People who are not social. If Indians were compared to animals, the Indians were the wild animals. And according to Alexie’s essay, the ones who stays wild, are the ones who’s status are high in the Indian world. In the modern world today, education has been treated as one of the major concerns of nations. More and more, the value and the quality of education have gone low and people in advance nations and culture are taking it for granted. On the other hand, Alexie and his dad are examples of people who defy the norms of their own society. People who counteracts their culture thus forming a kind a heroic act or in times a crime for/to their own people. â€Å"I am trying to save our lives. † (Alexie 2). Alexie expressed his sentiment of saving their lives in two styles. One was personal and the other was towards the children he was teaching. While he defied the accustomed treatment of Indians to non-Indian education (i. e. how he had man arguments with his classmates to shut up his mouth towards the questions of the non-Indian teacher), he was hopeful that his people might change their attitude towards education (the reason why he ought to be a teacher among his people). In some ways, education defines how a person hopes for his worth. It is more than the status, it also creating an opportunity for one’s self and knowing how to use education in helping one feel fulfilled.

Financial plan A case study - Free Essay Example

Sample details Pages: 10 Words: 3083 Downloads: 5 Date added: 2017/06/26 Category Finance Essay Type Analytical essay Level High school Did you like this example? FINANCIAL PLAN FOR DR. MARK TAYLOR To: Dr. Mark Taylor Don’t waste time! Our writers will create an original "Financial plan: A case study" essay for you Create order From: Financial Consultant Date: 16 May 2007 Introduction The purpose of a personal financial plan for Dr. Mark Taylor is to define his individual financial goals and find ways to achieve them. To identify goals for Dr. Taylor, it is essential to first understand what is important to him. But before doing that, Dr. Taylorà ¢Ã¢â€š ¬Ã¢â€ž ¢s current state of affairs are examined (Refer Appendix A for Dr. Taylorà ¢Ã¢â€š ¬Ã¢â€ž ¢s Current State of Affairs) a) Financial Needs of Dr. Taylorà ¢Ã¢â€š ¬Ã¢â€ž ¢s Family Based on Dr. Taylorà ¢Ã¢â€š ¬Ã¢â€ž ¢s personal situation at this point in life, all or just a few of the following may be his goals. Retire comfortably and have a reasonably good lifestyle post- retirement Provide for Davidà ¢Ã¢â€š ¬Ã¢â€ž ¢s college education. Be adequately covered for risk While some of these goals would be desirable, others are essential. Besides, goals can change over time. Deciding how to achieve the goals of Dr. Taylor is the crux of this financial plan. Assumptions: Financial plan is a plan for the future and future is uncertain. Therefore, certain assumptions have been made for defining the financial plan: Both Dr. Taylor and his wife have a life expectancy of 90 years Dr. Taylor will retire at an age of 65 years There is a single digit inflation of 3% Earnings as well as expenses will be affected by the same rate of change. Therefore, the change in income or expenses will be nullified Dr. Taylorà ¢Ã¢â€š ¬Ã¢â€ž ¢s premature death will result in a 20% reduction of annual living expenses Dr. Taylor will be practicing good financial habits such as having a spending plan, investing regularly, and using credit wisely (Source: Garner et al (1999) Defining Timeframe for Goals ((Source: Yamanda Louisa )) Following a discussion with Dr. Taylor, a time frame has been defined for accomplishment of the main goals Short Term ( 2 years or less) Mid Term ( 2-10 years) Long Term ( More than 10 years) Comfortable retirement* 2024 onwards Childà ¢Ã¢â€š ¬Ã¢â€ž ¢s Education 2014 Adequate Insurance 2007-08 *Comfortable retirement will also imply having own assets like a car at the time of retirement which is currently provided by the hospital. Dr Taylor needs to consider whether the time frame for a specific goal is flexible or has a fairly strict schedule. For instance, if he expects David to graduate from high school in 2014, he will want to make sure he has the money at that time to pay his college expenses. On the other hand, some goals like providing insurance coverage may be flexible. On the basis of these assumptions and the time frame, financial needs of Dr. Taylorà ¢Ã¢â€š ¬Ã¢â€ž ¢s family have been worked out. Dr. Taylorà ¢Ã¢â€š ¬Ã¢â€ž ¢s Family Needs To determine the amount that Dr. Taylor will need in the future, it becomes imperative to put a price to Dr. Taylorà ¢Ã¢â€š ¬Ã¢â€ž ¢s goals. Like the goals themselves, the costs too may change over time. This is because some things may grow increasingly expensive while others may become more affordable with the passage of time. Cost of most of the short-term goals can be anticipated by checking current prices. It is reasonable to assume that the cost will not be significantly different from what it is in the current year. (Source: Garner et al 1999) Retirement Planning Looking at Dr. Taylorà ¢Ã¢â€š ¬Ã¢â€ž ¢s present portfolio and the projected inflation, it seems that at present he is able to maintain a good lifestyle. However, this may not be sufficient if he desires a similar lifestyle after retirement. The rule of thumb with retirement planning is that Dr. Taylor will need at least 75% to 85% of what he is currently earning to maintain his lifestyle when he retires. Thus, if he earns  £100,000 (including bonus) today, he will need an income of  £75,000 in the first year of retirement. Dr. Taylor should have accumulated sufficient amount in a retirement account to make it possible to withdraw what he needs when he retires. On an average, assuming the balance is compounding at an average annual rate of 6%, inflation averages 3% (assumed), and Dr. Taylor is planning on a 17-year retirement, at the time he retires he should have about 17 times the amount he expects to need in the first year. That should allow him to withdraw 5% of the total each year. Thus, if he plans to withdraw  £75,000 in the first year, he should have savings of about  £1.27 million. ( £75,000 * 17). This amount can be reduced as the assumption for the financial plan is that when Dr. Taylor retires, his expenses will come down by 20%. (Source: Yamanda Louisa ) Davidà ¢Ã¢â€š ¬Ã¢â€ž ¢s Education Needs College costs for David can be estimated on the basis of average annual increases in the recent past. In the UK education costs seem to increase in line with the inflation. Dr Taylor may take insurance to cover the education costs of David. Alternatively he may invest money in an Education Saving Plan each year. The current cost for four years of university education, including books and additional fee, is approximately  £25000. Davidà ¢Ã¢â€š ¬Ã¢â€ž ¢s college education will begin in 2014. On the basis of the annual increases (in line with an inflation rate of 3%), his requirement each year beginning 2014 can be calculated by providing for the inflation. (Refer appendix A ). However, as David is currently going to a grammar school and Dr. Taylor is affording a fee of  £14,000 per annum and also at the time of Davidà ¢Ã¢â€š ¬Ã¢â€ž ¢s college, Dr. Taylor would not have retired, Davidà ¢Ã¢â€š ¬Ã¢â€ž ¢s education costs seem to be sufficiently covered. Emergency Fund In addition to the estimates based on the current requirements, an emergency fund too may be build up that will help prevent Dr. Taylor from being thrown off track by an unplanned loss of income or unexpected expenses. Dr. Taylor should keep around 6 months salary as emergency fund. Risk / Return Profile of Dr. Taylor Dr. Taylor seems to be a conservative investor. He has put money in a Building Society account which has a low risk. He has a portfolio of shares but these shares have been inherited and not invested by Dr. Taylor. Re-looking at Asset Allocation There is a need to re-look at his asset allocation. Dr. Taylor needs a strategy to help ensure that the money is available when he needs it. We recommend saving or investing or some combination of the two to ensure this. Saving vs. Investing While saving and investing both involve setting aside some of Dr. Taylorà ¢Ã¢â€š ¬Ã¢â€ž ¢s income, saving will help Dr. Taylor preserve the money he has for a later time while earning interest on the principal. However, if he invests, he takes some calculated risks that he believes will make it possible for his investment to grow in value over time or provide long-term income, or both. Saving may prove to be an effective way of managing money to meet short-term needs. However, Dr. Taylor needs investments to achieve his longer-term goals. Invested money has the potential to increase substantially in value over the long term or provide more income than insured savings. The risk, of course, is that returns on investment assets are not guaranteed. Dr. Taylor has 17 years before he retires. ( Source: Jeffrey H Rattiner (2005)) He may benefit by setting aside some sum for long-term goals to equities either individually or through exchange-traded funds (ETFs), mutual funds, or managed accounts that invest in stocks. (Refer Appendix B for features on recommended products) Although the value of an investment portfolio may fluctuate dramatically over periods over 15 or 20 years the earnings have the opportunity to compound. Inflation is another reason Dr. Taylor may want to invest rather than use a savings account to meet his long-term financial goals. This is because the rate of return on savings accounts is generally fairly low, and he may risk falling victim to inflation. à ¢Ã¢â€š ¬Ã‚ For example, if he puts  £10,000 in a money market account earning 2.5% interest, his account would have  £15,676 after 18 years. If inflation averaged 3% per year, his account value would have approximately  £8,500 worth of buying power. Alternatively, if he invests the money in a portfolio of stocks with an average annual return of 8% for 18 years, though not a guaranteed, he could have  £40,000. After accounting for 3% inflation he still would have more than  £21,500 worth of buying power. By keeping a close eye on your portfolio, Dr. Taylor can manage some of the risk that is often associated with investments. He should determine when to sell an investment, either to lock in a profit or prevent a loss.à ¢Ã¢â€š ¬Ã‚ (Source: Yamanda Louisa ) Thus, we would recommend an asset allocation to Dr. Taylor that maximizes return on his portfolio while minimising the risk. Dr. Taylor should move from his current asset allocation as given below to a more balanced allocation and have a diversified portfolio. His portfolio should include investment in equity for growth, building society account for income and balanced returns through balanced stocks and bonds. We would propose an asset allocation as given below: Insurable Risk In addition to all the recommended investments for retirement planning, Dr. Taylor should also invest in life Insurance and disability insurance. Dr. Taylorà ¢Ã¢â€š ¬Ã¢â€ž ¢s family faces some risks which are insurable. These include the following: Dr. Taylor and / or his wife may die or become disabled Risk to the house and its contents, failure to pay mortgage Taxes may be outstanding Childà ¢Ã¢â€š ¬Ã¢â€ž ¢s Education costs need to be met Some of these risks are already covered for Dr. Taylor. For instance, Dr. Taylorà ¢Ã¢â€š ¬Ã¢â€ž ¢s house is insured for  £500,000 and its contents for  £100,000. Besides, Dr. Taylor has a term assurance policy for  £200,000 to cover repayment of the mortgage on his or Julieà ¢Ã¢â€š ¬Ã¢â€ž ¢s death. However, Dr. Taylor requires adequate life insurance, disability insurance, outstanding debt and taxes insurance and maybe insurance for Davidà ¢Ã¢â€š ¬Ã¢â€ž ¢s education. In fact, if Dr. Taylor takes a permanent life insurance, he will also be covered for his childà ¢Ã¢â€š ¬Ã¢â€ž ¢s education, outstanding debt and taxes etc. If Dr. Taylor dies, life insurance will provide an income for survivors, coverage of funeral expenses, capital gains taxes on investments, real estate at death etc. However, Dr. Taylor should only take up the insurance in accordance to his affordability as if he defaults in payment of premium, it will merely wipe out the potential protection. Also the policy has to be adequate as if the policy is too small, his beneficiaries may have to use investment assets earmarked for future goals to pay living expenses. (Source: Hallman et al (2003)) Besides life insurance, Dr. Taylor should also take disability insurance. Disability insurance will offer protection against the possibility of being unable to meet the requirements of the family if Dr. Taylor is rendered disabled due to accident or illness. Most disability policies pay a percentage of salary (50% to 70%) if the insured is rendered disabled. In fact, disability insurance can make a major difference to Dr. Taylorà ¢Ã¢â€š ¬Ã¢â€ž ¢s financial security should the unexpected happen. (Source: Hallman et al (2003)) Adequacy of Pension Based on the 15-year contributions made by Dr. Taylor, the pension balance stands at  £195000 (Refer Annexure A). By the time Dr. Taylor retires, another 17-years contribution would have been made. The impact of inflation on Pension fund has already been provided for and therefore the decline in the value of cash received at a later date is taken care of. It is assumed that when Dr. Taylor retires, there will be a 20% reduction in the expenses. However, it is also given that if something happens to Dr. Taylor, his wife will only be entitled to 50% of the pension. Therefore, Dr. Taylor should increase the amount of pension so that his family is adequately covered even if he dies. This can be done supplementing pension in two ways: Through personal pension Through stakeholders pension on behalf of David There is no maximum amount prescribed for such pension schemes. Personal Pension A personal pension scheme will provide Dr. Taylorà ¢Ã¢â€š ¬Ã¢â€ž ¢s family a pension and a tax-free lump sum, payable if he dies before retirement. Dr. Taylor may get a tax-free lump sum on retirement of up to 25% of the pension fund which has been built up from his contributions and interest and/or bonuses paid by the pension provider. (Refer Appendix B for more details) Stakeholders Pension Dr. Taylor can start contributions to this pension from as little as  £20, and pay weekly, monthly or at less regular intervals. He will get tax relief on contributions of up to 100 per cent of your earnings each year, subject to anannual allowance ( £225,000 for the 2007-2008 tax year). (Refer Appendix B for more details) Recommendations As indicated earlier, Dr. Taylor needs to re-look at the asset allocation and balance his current portfolio. Dr. Taylor is using his cash earnings to meet his current requirements. However, cash earnings will not keep pace with the rate of inflation. Over time, as inflation and taxes erode what Dr. Taylor earns may not be sufficient to maintain his lifestyle. However, one cannot ignore Dr. Taylorà ¢Ã¢â€š ¬Ã¢â€ž ¢s gross estate that form a part of the inheritance and legacy he leaves behind to his wife and child. Thus, He needs to have adequate amount to ensure adequate finances when he retires as well as meet his goals of providing security to his family and education to his son. Dr. Taylor will require at least 17 times his present earnings at the time of retirement. However, if he anticipates a longer retirement period, his rate of return may average less than 6% a year. Similarly, if inflation averages more than 3%, he will either need more savings or will have to withdraw at a lower rate. Dr. Taylor needs to invest in the following in the same order of priority: Equities either individually or through exchange-traded funds (ETFs), mutual funds, or managed accounts that invest in stocks. Life insurance and disability insurance Emergency fund Education Saving Plan Total Words Excluding Appendices = 2362 APPENDICES APPENDIX A Dr. Mark Taylorà ¢Ã¢â€š ¬Ã¢â€ž ¢s Present Position Dr. Taylorà ¢Ã¢â€š ¬Ã¢â€ž ¢s family Member Age Self 48 Remaining work life 17 years Julie 40 Does not work David 7 Major expense in the future will be on education Personal Income and Expense Statement based on Current Requirements Income Annual Amount ( £) Pre-tax salary income including bonus ( average) 100,000 Family Other Income (Yield @2.5% on shares)* 1,875 Income Taxes (Assuming a 40% tax slab)** 40,750 Total Family Income (After Taxes) 61,125 Own Contribution towards Pension*** 4,000 Net Available Income 57,125 Expenses Annual Amount ( £) Mortgage**** 11,400 Food / Clothing (@1200 per month) 14,400 Healthcare (@ 500 per month) 6,000 Utilities @500 per month 6,000 Childà ¢Ã¢â€š ¬Ã¢â€ž ¢s Education 14,000 Entertainment (@200 per month) 2,400 Miscellaneous 800 Total Expenses 55,000 Net Savings 2,125 Contribution to Building Society 2,125 *Refer Working Note 1 below for calculation of yield on shares ** Tax slab on an average is assumed to be 40% for Dr. Taylor *** Refer Working Note 2 below for calculation of contribution towards pension ****Mortgage is assumed to be at a rate of 5% currently (Refer working note 3 below for calculation of mortgage amount) Note: All the expenses stated above are mere estimates. Familyà ¢Ã¢â€š ¬Ã¢â€ž ¢s Present Assets Assets Present Value House bought in 1997 for  £350,000  £500,000 The house is partly financed with a  £200,000 25-year variable interest repayment mortgage from the Northern Rock Equity Shares  £75,000 Joint Building Society Account Deposit  £50,000 Mrs. Taylorà ¢Ã¢â€š ¬Ã¢â€ž ¢s building society account deposit  £15,000 Pension ( Current Value)  £195,000 (Refer Working Note 2 in Appendix B) Risk Coverage Coverage State Post Retirement Pension will be uplifted each year by a maximum of 4% to allow for inflation. Death If Dr. Taylor dies during employment, a lump sum of 2.5 time final salary will be paid to the family No life insurance or long-term disability policies. If Dr. Taylor should die, his wife would be paid half the pension that would have been paid to Dr. Taylor. No additional pension is paid for the children. Childà ¢Ã¢â€š ¬Ã¢â€ž ¢s Education Not covered Working Notes: Calculation of Yield on Shares Yield on shares = 2.5% of  £75,000 Calculation of Pension Contribution to Pension = Own contribution + Employerà ¢Ã¢â€š ¬Ã¢â€ž ¢s contribution = 5% of  £80,000 + 10% of  £80,000=  £13000 15 year contribution =  £13000 x 15 =  £195000 Calculation of present annual repayment mortgage amount Total amount on mortgage in 1997  £200,000 Mortgage Period 25 years Remaining Period left in 2007, 25 years à ¢Ã¢â€š ¬Ã¢â‚¬Å" 10 years (from 1997 to 2007) = 15 years Assumed variable rate of interest =5 % per annum Principal amount due =  £8,000 Total amount due per annum = £11,400 Calculation of Davidà ¢Ã¢â€š ¬Ã¢â€ž ¢s Fee in 2014 Fee required after 7-8 years = 25000 (1+0.03)8 Note: Due to unavailability f data, some calculations use hypothetical data APPENDIX B Recommended Financial Products Equity Investment Equity investment generally involves buying and holding of shares of stock on a stock market. Returns are in the form of income from dividends and capital gain as the value of the stock rises. Exchange Traded Funds Exchange-traded funds are open ended mutual funds that can be traded at any time throughout the course of the day. ETFs try to replicate a stock market index such as the SP 50 Life Insurance Life insurance provides for a payment of a sum of money upon the death of the insured. In addition, life insurance can be used as a means of investment or saving. It is one of the most important investments to provide financial security to the family. Life insurance benefits payable to a designated beneficiary are non-taxable and are not subject to probate fees. Disability Insurance Disability insurance offers protection against the possibility that one may not be able to meet his / her financial obligations due to accident or illness. Long-term disability insurance is provided with coverage equal to about sixty percent (60%) of the gross salary when combined with social security and other benefits. Personal pension Scheme It is a UK tax-privileged individual savings plan, designed to build a capital sum exclusively to provide retirement benefits. The capital sum must be used to provide benefits between age 50 and 75. On vesting a tax-free lump sum of up to 25% of the fund can be taken but the remainder must be used to provide an income either through a drawdown arrangement or through the purchase of an annuity. Stakeholderà ¢Ã¢â€š ¬Ã¢â€ž ¢s Pension Scheme They are a new form of private pension and form an integral part of the governmentà ¢Ã¢â€š ¬Ã¢â€ž ¢s overall pension policy. One gets a tax relief on contributions of up to 100 per cent of your earnings each year, subject to anannual allowance ( £225,000 for the 2007-2008 tax year). If you are a higher rate taxpayer you can claim the extra tax back. Savings above the annual allowance will be subject to a tax charge. References: G. Victor Hallman, Jerry S. Rosenbloom (2003) Personal Financial Planning McGraw-Hill Jeffrey H Rattiner (2005) Financial Planning Answer Book, CCH Publishers Robert J. Garner, Charles L. Ratner, Barbara J. Raasch, Martin Nissenbaum, Robert B. Coplan (1999) 3rd Edition, Ernst and Youngs Personal Financial Planning Guide, John Wiley Sons Yamanda Louisa, Creating a personal Financial Plan, accessed from https://www.pathtoinvesting.org/experts/finanplan/exp_pm_finanplan_071.htm Page 1 of 10