Inter-Market Arbitrage - Free Essay Example

Sample details Pages: 5 Words: 1420 Downloads: 5 Date added: 2017/06/26 Category Marketing Essay Type Argumentative essay Did you like this example? Finance 1Inter-Market Arbitrage The question posed is to examine whether a trader with $1 million can profit from inter-market arbitrage. The following facts are available: New York Citibank: $ 1.2223/à ¢Ã¢â‚¬Å¡Ã‚ ¬ London Barclays Bank:$ 1.8457/ £ Frankfurt Deutsche Bank:à ¢Ã¢â‚¬Å¡Ã‚ ¬ 1.5100/ £ To resolve the question, the commencement of the process is to begin with calculating the a cross rate, which is arrived at by calculating the ratio of the exchange rate of currency A to the dollar divided by the exchange rate B to the dollar (Copeland 2002, p.7). Using the above information between Citibank and Barclays, we need to calculate the dollar cross rate. Step 1. Citibank$1.2223 / à ¢Ã¢â‚¬Å¡Ã‚ ¬ =0.6622 Barclays$1.8457 /  £ Step 2 Take $1 million to Deutsche and exchange for  £Ãƒ ¢Ã¢â€š ¬Ã¢â€ž ¢s: $1,000,000= £662,252 à ¢Ã¢â‚¬Å¡Ã‚ ¬1.5100/  £ Step 3 Exchange  £Ãƒ ¢Ã¢â€š ¬Ã¢â€ž ¢s for Dollars at Barclays Bank:   £662,250 x 1.8457 =$1,222,318 The Traderà ¢Ã¢â€š ¬Ã¢â€ž ¢s profit therefore is $222,318 The concept of triangular arbitrage is based the ability to be able to capitalise on a discrepancy that exists on the international financial markets between three cross exchange rate (Moosa 2003). The opportunity exists where these rates are different to those one would achieve when calculations are based on spot rates. The art is to use three banks in different locations with differing exchange rates, as in the above case $ to à ¢Ã¢â‚¬Å¡Ã‚ ¬ and  £ to $. By selling the dollar to the expensive à ¢Ã¢â‚¬Å¡Ã‚ ¬ and converting to the  £ where it is cheap, a profit is derived from the transaction. The main attraction of triangular arbitrage is that it allows investors to seek out the most advantageous of the worldà ¢Ã¢â€š ¬Ã¢â€ž ¢s financial markets to achieve a profitable return on their investments even when achieving this within the domestic market may prove difficult. Don’t waste time! Our writers will create an original "Inter-Market Arbitrage" essay for you Create order 2Currency exchange rates In essence, the exchange rate between the currency of one country and that of another is simply a matter of price (Copeland 2003, p.3). For example, if one has  £100 and want to buy products at  £50, two units can be brought for this investment. If the product price falls to  £25 per unit, four can be purchased, therefore meaning that the exchange rate of the unit has depreciated, or the investment value has appreciated. The same scenario is true for currency. For example, if the value of the Japanese Yen against the dollar, there is a appreciation of the Yen and a resultant depreciation of the Dollar. For example, if the Yen exchange rate against the dollar rises from $0.0074079 to $0.00850, there has been an appreciation of the Yen and depreciation of the dollar, which in percentage terms can be defined as follows: Yen Appreciation = 0.001092 x 100 / 0.007408 represents an appreciation of 14.74237% Dollar depreciation = 0.001092 x 100 /0.00850 repre sent a depreciation of 12.84824% 3 Currency forward rates Country Currency symbol US$ equivalent Currency per US$ Japan (yen) 1 month forward 3 month forward 6 month forward JPY JPY JPY JPY 0.009189 0.009215 0.009271 0.009360 108.83 108.52 107.86 106.84 The above table provides an example of a forward exchange rate contract at given points in the future (Copeland 2004, p.8). In this case the first line represents todayà ¢Ã¢â€š ¬Ã¢â€ž ¢s exchange price for the currency and the other represent the contact price at which bank offering these rates is prepared to exchange yen for dollars at the defined forward dates. For example, if the contract is for one month, the bank will guarantee to exchange yen for dollars at a rate of 0.009215. The forward contract is used by organisations as a hedge against an adverse future currency movement (Moosa 2003). For example if a supplier agrees a future price based upon todayà ¢Ã¢â€š ¬Ã¢â€ž ¢s exchange rate and by the date of payment that exchange rate has depreciated, there would be a financial loss. Therefore, the future contract, which guarantees a pre-determined future rate, is used to mitigate these potential losses. However, there will be a need for the contract purchaser, in this case t he Japanese yen, to ascertain whether they are selling at an annualised premium or discount. The equation for calculating a premium or discount is as follows (Mossa 2003): Forward rate spot ratex 12x 100 Spot rateNo. of mths Therefore, based on the above table, the following will be the result. 1 month 3 months 6 months Forward rate 108.5200 107.8600 106.8400 Minus spot rate 108.8300 108.8300 108.8300 -0.3100 -0.9700 -1.9900 Divided by spot rate -0.0028 -0.0089 -0.0183 Times twelve divided by months -0.0342 -0.0357 -0.0366 Times 100 -3.4182 -3.5652 -3.6571 This suggests that the yen is being sold at a discount 4Rates relationship There is a distinct relationship between spot rates, forward rates, inflation rates and interest rates, although they each perform a separate task (Copeland 2004). Spot rates relate to the price at which a currency or stock can be purchased at a given time in the present, for example today (Moosa 2003). Forward rates are those that are anticipated and are expectations based upon the current spot rate. It is the rate at which the parties will agree to exchange different currencies at a set future date, which is usually 30, 60, 90 or 180 days. The formula for calculating the theoretical future forward rate uses the interest rates of the two currencies as a guide. An example of this calculation is as follows: Spot rate = 1.94UK$/Us$ UK Libor= 4.5%90 day US Libor= 3.75%90 day (Note libor is the interest rate at which banks lend to each other (Moosa 2003)). The calculation for the 90 forward rate would be: 1.94 x(1+((90/365)*.045))= 1.9433 (1+((90/360)*.0375)) This formula shows the link and relationship that exists between interest, spot and interest rates. Inflation rates Inflation rates reflect the average percentage increase in the price of goods and services (Cuthbertson Nitzsche 2001). It is usually linked to a nationà ¢Ã¢â€š ¬Ã¢â€ž ¢s retail price index. It is primarily based upon the level of supply and demand that this is in the economy. If demand increases so do prices, thereby leading to an inflationary episode. There is a direct link between inflation rates and interest rates. Governments tend to use interest rates to control inflation, for example raising interest rates to reduce demand and therefore the inflation rate. Interest rates Interest rates are essentially related to the cost of borrowing. In effect they are a charge that is levied by the lender to compensate them a) for the risk they are taking with their capital and b) for the loss of capital growth or income they could have received from that money if invested elsewhere (Elton and Gruber 2002). The other relationship between interest rates and inflation is used when assessing the real rate of interest. This method takes into account the depreciation of the value of money. For example, in the value of the  £ had decreased by 2% in a year the interest rate was 5%, the real rate of interest is 3% (Interest rate 5% inflation rate 2% = real interest rate 3%) There is a mutual connection between all of these rates. For example, we could extend the equation used within forward rates to take account of all the rates as follows: Spot rate = 1.94UK$/Us$ UK Libor= 4.5%90 dayUK Inflation rate 2% US Libor= 3.75%90 dayUS Inflation rate 1 .5% (Note libor is the interest rate at which banks lend to each other (Moosa 2003)). The calculation for the 90 forward rate using this formula would be: 1.94 x_(1+((90/365)*(.045-.02))_= 1.941041 (1+((90/360)*(.0375-.015)) 5 Future exchange rates The expected future value of currency is not something that can be accurately predicted (Pilbeam 2005). Therefore in order to calculate the future exchange rate value, the financial markets have to base their expectations upon known variables. The following example shows how this is equation is carried out in practice, using the following data: Swiss Franc-One year interest rate= 4% US dollar-One year interest rate=13% Current exchange rate-SFR 1 = $0.63 From this, the following equation needs to be resolved: Forward exchange rate = S(1 + rq)n=0.63(1+.04)=0.57982 (1+rb)n (1+.13) If there was a change in expectations resulting from future US inflation which caused the future spot price to rise to US $0.70, this would have the following impact upon the above equation: Forward exchange rate = S(1 + rq)n=0.70(1+.04)=0.6442 (1+rb)n (1+.13) However, it is likely that the US would increase interest rates to address the inflationary pressures. For example, if these were increased to 15%, this would have the following influence upon the previous equation: Forward exchange rate = S(1 + rq)n=0.70(1+.04)=0.6330 (1+rb)n (1+.15) Bibliography Cuthbertson, Keith and Nitzsche (2001). Investments: Spot and Derivatives Markets. John Wiley Sons Ltd. Chichester, UK. Eales, B. A. and M. Choudhry (2003), Derivative Instruments: A guide to Theory and Practice, Butterworth Heinemann Finance. Oxford, UK. Elton, Edwin J and Gruber, Martin J (2002). Modern Portfolio and Investment Analysis. 6th Edition. John Wiley Sons Inc. New York, US. Pilbeam, Keith (2005). Finance and Financial Markets. 2nd Rev. edition. Palgrave Macmillan. London. UK. Copeland, Laurance (2004). Exchange Rates and International Finance. 3rd Edition. Pearson Education, Harlow UK Moosa, Imad A (2003). International Financial Operations: Arbitrage, Hedging, Speculation, Financing and Investment. Palgrave MacMillan, Edinburgh, UK

Corporate Control over Media - 1683 Words

Introduction What percentage of the audience actually trust what they see on television? How many times have you felt that a particular topic is being inclined to a certain political belief? Have you ever come across a situation where you felt that what you were seeing was sort of fabricated to the advantage of the interests of that media? Have you ever felt that you seem to be viewing more hours of advertising than actual media content? These are questions that lingers in the minds of media analysists over and over again. Objective of Analysis In this analysis, we intend to treat media as a commodity that is being sold to the audience and the media content as a psychological influence on them. It is intended to throw light upon†¦show more content†¦The former is owned by the DMK and the latter by ADMK. Whenever DMK is in power, they keep showing images of the entire Tamil Nadu as a happy state with richness and prosperity. While, the ADMK has Miss Jayalalitha sitting and criticising every move by the prevalent government. Neither of these viewpoints are true for that matter! The real truth, lies somewhere in between! But it is never shown! So basically these channels are used as mouthpieces for flattering the political agendas of these owner-political parties! Now coming to advertising! It is said in a recent study by the BBC, that 45% of the ads in the television are misleading and exaggerate the product from its actual performance. Look at the recent ad by the Advertising Council of India. It says that if a viewer ever sees an ad that is misleading, or misrepresents a product, they can file a complaint with the office! This is the worst that it can get! They are actually that means, telling the audience explicitly, that they have no control over what goes on air or on print. They are letting the very audience, who are media illiterate, to judge for themselves, what is wrong and what is right! During my three month internship as assistant director with an ad film maker in Chennai, I was told one thing. The kind of rules that applied to making a script for a client depended upon, whether the ad will go to the theatre or not. If the advertisement is going to be shown in the theatre, then it would go toShow MoreRelatedSocial Media And Corporate Communication1507 Words   |  7 PagesSocial media has driven corporate communications, collaboration, and decision-making. Being able to communicate directly and instantly with company stakeholders and any level employee marks the transition from the traditional one-way output of corporate communication. This thesis paper aims to show the direct relationship between social media and corporate communication, focusing on corporate communication changes that have occurred as a result of social media tools. 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This lead to them underpaying their workers from the desires to become the most powerfulRead MoreMisappropriation Of Assets Essay1360 Words   |  6 PagesIntroduction Over the past two years, corporate America has endured a plethora of fraudulent acts committed by those of high status within their respective corporations, most of which involve internal fraud. Internal fraud has two main aspects, misappropriation of assets and fraudulent financial reporting, with the focus of this discussion lying within the former. Misappropriation of assets is defined as fraud for personal gain. It is the most common type of fraud found among employees and frequentlyRead MoreMisappropriation of Assets1400 Words   |  6 PagesIntroduction Over the past two years, corporate America has endured a plethora of fraudulent acts committed by those of high status within their respective corporations, most of which involve internal fraud. Internal fraud has two main aspects, misappropriation of assets and fraudulent financial reporting, with the focus of this discussion lying within the former. Misappropriation of assets is defined as fraud for personal gain. It is the most common type of fraud found among employees and frequentlyRead MoreMedia s Influence On The Media1637 Words   |  7 Pagesdisplayed in the mass media is conditioned by wealth and power, so as a result of the concentration of power and the official censorship done by the government and corporate sources; the media follows the ideas of the elite. In order to deliver messages that support the elite’s beliefs, the media goes through five different filters that determine the information presented, this are ownership of media, funding, sourcing, flak, and fear. First, when referring to the ownership of media, it is important

Teaching Mathematics and Science in Schools Free Essays

The way teachers go about their teaching; each day in their classrooms is reflected as ‘teaching style’ or ‘approach’. This approach is better understood when the teachers are observed while they teach. Some teachers prefer activities for children associated with the curriculum, allowing students to chose their activity and complete it by themselves. We will write a custom essay sample on Teaching Mathematics and Science in Schools or any similar topic only for you Order Now Some other teachers would want the class to be attentive to them for most of the time. Certain teachers would like students to work in groups. Thus the methods adopted in the teaching-learning process is broadly reflective of the teacher’s viewpoint of what is ‘learning’ and how it should be brought into children. The process of learning is more successful when children are fully involved with the subject or topic of their learning. This is all the more important when teaching science. Life sciences involving plants and animals; and non-living things are real and can be felt. Experiencing the reality through interaction, makes science not only more interesting, but also easier to understand. Mathematics on the other hand involves a bit more abstract level. Yet, the symbols, signs and figures associated with mathematics with which children work, are self-created reality. In their effort to learn science and mathematics, children proceed further into the subjects, than just at the surface or base encounter. They analyze and interpret the object of focus and attempt to understand ‘how it works’, ‘why its required’ etc. Thus the child begins to develop reasoning for the facts it sees or understands. It may be the development of a new concept, or altering a previously thought concept, or even rejecting an assumption held till then. The teacher  who wants to interestingly engage children in learning science and mathematics must personally sense excitement in learning so as to share it with the children. The teacher should approach the topic of learning and the query asking children in a balanced and parallel manner. The teacher must be sensitive to the requirements of the children and help them to see relationships and understand explanations. For teachers to be proficient and confident in their teaching, it is essential that they understand the triple interactions involved in learning. The teacher must be conscious that while the child is interacting with him or her, the child is also simultaneously interacting with the focused subject. The focused subject or subject matter interacts with both the teacher and the child; while the teacher also interacts with the querying children and the focused subject. It is important to know the development of a child’s understanding and ability to reason, with their growth. Such an understanding is absolutely necessary in developing appropriate contents. For instance in the grades K-4, a child associates a comparison, a description, or a manipulation for all objects, it sees around. Although the child doesn’t understand the science of motion while in this grade; activities like pulling, pushing, dropping of objects gives the child an idea of the cause of motion and its control. Similarly sound, heat, light, magnetism, electricity are broadly perceived through learning, observation and experimentation. However, the child would not be able to identify elements of temperature, magnetic forces, static electricity etc. In the grades 5 to 8, the concept of energy is developed through investigations into the properties of light,  sound, electricity and magnetism. In these grades, there is a considerable shift towards quantitative aspects of subjects. In the 9 –12 grades, students are geared up completely to deal with motion, force, energy; being familiar with theoretical observations and laboratory investigations (NJSC). Here they understand the reasoning behind the laws of motion and why energy is conserved. They are also capable of dealing with technological designs and its problems, using the concepts and principles learnt. The association of brain functioning and educational practices is increasingly becoming an important factor in education. Brain-based findings have been closely monitored by specialists involved in education. The findings of cognitive neuroscience research has considerable bearing on the methodology of education. A new approach connecting brain functioning with education was emphasized in 1983. Leslie Hart, in his book ‘Human Brain, Human Learning’ suggested that by ignoring the brain functioning of students, the success of students is not achieved to its fullest potential. The philosophy of the newly developed ‘brain-based’ education is that the brain is used for everything we do; we should therefore know more about it and use it effectively. Contemporary models of brain-based education are multidisciplinary, relying on several disciplines like psychiatry, psychology, cognitive science, sociology etc. Brain plays an important role in the effect of classroom groupings, assessments, physical activity, lunchroom foods etc. Schools’ can affect students’ brain in several ways including through social conditions, stress, nutrition etc. These factors induce brain-based  influences by altering cognition, memory and attention. Neuroscientists Gerd Kempermann and Fred Gage discovered that the new neurons in the brain are intensely associated with memory, mood and learning. The process of neurons can be enhanced through good nutrition, low stress and proper exercise. The brain has the ability to remap itself due to its neuroplasticity (Jenson, 2008). This process can be influenced through reading, meditation, skill-building, career and technical education, and thinking skills, which contribute to student success. The importance of physical education is also emphasized by brain research. Cognitive scientists, physiologists, educational psychologists and physical educators have strongly endorsed this view. Today more and more schools of education are incorporating the knowledge gained from brain research. Harvard University’s Mind, Brain and Education or MBE program produces postgraduates and doctors who eventually get engaged in interdisciplinary positions, both in research and practice. A report by the National Research Council Committee in September 2006, on the state of K-8 science education, has determined that science instructions offered in schools today are outdated. These are predominantly based on research findings of about three to four decades early. The report offers groundwork for the next reforms and is based on the recent understandings of how children learn, and recommends a narrower and better focus on important areas of science. It seeks to improve professionalism among teachers and have each aspect of instruction and  learning, better integrated with each other. The Council’s Committee on Science Learning, responsible for science learning in kindergarten to eighth grade had reviewed both, the reforms undertaken in science education in the last decade and the recent understandings of learning and cognitive science. The committee emphasized that young children are capable of intricate thinking and that each student develops an individual understanding of the nature around him. It also stated that the current debate on the importance of teaching content versus teaching process skills, should be put aside and both be replaced by interweaved aspects of science expertise. The committee has suggested that the curriculum, instruction and assessment should be properly integrated with the focus of fewer, central elements in each discipline, rather than surface level study of a wide topic. It points out that the current science education is based on relatively old assumptions. The current science education underestimates children’s ability of complex thinking and is more attributed to difficulty level in children rather than their ability. For instructions to be successful, teachers need to have a sound understanding of the subject, know how to teach it effectively and also be familiar with the recent research on student learning (AIP, 2006). Proper, effective instructions can clear misunderstandings and bring understanding closer to perfect. The instructions should include student encounters with science in a sequentially designed and strategic way. Students identified as proficient in science must be capable of explaining the scientific perception of the natural world. They need to be capable of introducing andn  analyzing scientific explanations, understand all aspects of scientific knowledge development, and participate in science-based exercises/discussions. The role of philosophy in developing the intellectual skills of children has been widely acknowledged. The induction of philosophy into the high school academic curriculum is gaining momentum, emphasizing not only the importance of the subject among them, but also the capability of the children for philosophical thinking. Dr. Matthew Lipman (1991), a philosophy professor at Montclair State College in New Jersey, emphasized that bringing philosophy into schools would only enhance the educational experience of children. The argument here was, philosophy could contribute to critical thinking, which is vital for all other subjects. Empirical evidence also shows that the cognitive and academic skill of children is vastly improved by teaching them reasoning skills early in life, banking on children’s natural inquisitiveness and sense of wonder. Obviously, such development would also contribute to the understanding of science and maths. It is estimated that about half the secondary teachers in the United States quit teaching within five years. Studies on the selection and services of secondary science and maths teachers reveal their inhibitions of isolated profession, lack of mentoring and dwindled prospects (KSTF, 2005). It is also important to address these issues, for the success of teaching and learning reforms. The new methods of education for school  children, particularly for maths and science should reflect the latest research into children’s ability and brain functioning. Engaging children in philosophical dialogues, also contributes to their ability of sophisticated thinking. REFERENCES American Institute of Physics. (AIP, 2006) NRC Report Finds Much of Current K-8 Science Teaching Outdated.   FYI Number 142: December 20, 2006 [Electronic Version] downloaded on 24th Feb. 2007 from https://www.aip.org/fyi/2006/142.html How to cite Teaching Mathematics and Science in Schools, Essay examples

Entrepreneurial School of Thought free essay sample

The Design school resembles to the entrepreneurial school of thought to some extent. The extent being that it took central leadership as important, making the CEO- the architect of strategy. The difference however lies that it stopped short of working around that leadership and emphasized on conceptual framework and dismissed intuition. Entrepreneurial School of thought has however focused on the leader and the mental processes that the leader goes through such as Intuition, Experience, Insight, wisdom, and judgement. This relates the strategy with a perspective that formulates a vision and a sense of direction (namely vision) and all this is related to the leader himself. Entrepreneurial school states that one leader has the say that makes the mare go. The organization and all the constituents of his business empire are responsive to his dictates. He moves carefully within the environment creating his own territory in the niche segment. The most central concept of this school is the vision that the leader creates. This image is broad and the guiding star in the pursuit of which the leader takes the organization along. This may never be fulfilled and along the pursuit many other rewards are received such as expansion, profits, market share, etc. The Entrepreneur may adapt the strategies according to the changing environment but the overall vision may remain to be unchanged. This makes the strategy both deliberate in the broader sense and the direction and emergent in its details that can be adopted and adapted according to the requirement of the route that the organization is on. Origin in economics The Origin of the entrepreneurial school can be traced back to the neo classical era of economics. The concept of what to produce, how to produce, how to distribute and on what price, was attached to the birth of entrepreneurship. Different economists held different views of the entrepreneurs. Karl Marx praised entrepreneurs as agents of economic and technological change. Joseph Schumpeter on the other hand brought into light other than profit maximization perspective of entrepreneurship. To which he related that it is also about creating new structures, destroying current ones, and solving problems creatively. He introduced the notion of creative destruction which meant that entrepreneurs challenge the current status quo in the search of change for the better. They do things better with creativity and innovation. This he explained as entrepreneurs making good things happen (Better and unique products) by employing current resources in a different way. He went to the extent that entrepreneurship ends where creativity and innovation comes to a halt. Knight (1967) on the other hand related entrepreneurship with bearing of heavy risks and a handling of uncertainty. Peter Drucker explained entrepreneurship in the light of management explaining that central to business enterprise is the activity of entrepreneurship which means economic risk taking. What can be concluded is the fact that an entrepreneur can be, Founder of an organization. The manager of a self owned business. Innovative leader of an organization owned by others. However Cole (1959) who popularized the phrase â€Å"Bold Stroke† to define entrepreneurship mentioned four types of entrepreneurs which are, The Calculating inventor The Inspirational Innovator The Overoptimistic Promoter The Builder of Strong Enterprise Regrettably few of the economists shared the vision as Cole and Schumpeter rest of the economists have related entrepreneurship in terms of the competitive market and the likes of a skeletal manager. Framework Seeing that this school links strategies with visions it concludes that the most important characteristic required here is of entrepreneur is the ability to â€Å"see†. The ability to see of course isn’t the same as everyone else. This requires the leader to be able to see things that are normally missed and from multiple perspectives going back and forth and in many directions. This framework is taken from the work of Nasi (1991). It explains how the leader who makes the strategy must be able to see through multiple dimensions while making the strategy. His ability to see forward into the future creating a mental construct of how things would be done differently creating a discontinuity of the current practices, must come from having a look behind in his past understanding how things have progressed, the trends, capabilities etc. This framework requires also for the leader to be able to see the big picture i. e. seeing above and to do that he needs to be able to spot an idea that leads to that big picture within the current system by inductive thinking i.  e. seeing below. It is also crucial while the entrepreneur is moving through this process he should be creative by looking at things that others missed, challenge the conventional practices and wisdom, unveil capabilities that can bring the required change, this is called seeing beside. However the leader is also required to be able to fit in this newly fo und brilliant idea or capability or creativity into the environment weighing its possible outcomes i. e. It creates the future in other words it constructs the world which would otherwise not be, this is called seeing beyond. The final requirement of this framework is related to the drive to get the job done (strategy) or in other words it means that the leader should to be able to see it through. Literature Review At the start, Entrepreneurship was referred as creation of own business but now it is a personalized, proactive, single-minded leadership, in other words we called it visionary leadership. Now we relate it with the literature review. Entrepreneurs are great leader: Entrepreneur is great leader having personalized and visionary leadership which became the success of business (biweekly, fortune) Personality of Entrepreneur: The second part is related to the personality of entrepreneur, it is not to study the decision, vision of an entrepreneur but to study the traits of successful entrepreneurs (Collins and Moore,1970) states that when a person have strong need for achievement and independence in their early childhood he became an entrepreneur, he proved it by studying his whole life from education till the creation of enterprise. This study gave the attributes of entrepreneurial personality i. e. strong need of achievement, independence, control, authority and also having the ability to take risk. Bauman summarized McClelland’s (1961) states that entrepreneur are not risk taker (speculator) but a value creator to their business. Stevenson and Gumpert say that entrepreneurs and administrators behave differently while making decision. For example administrator asks; what resources do I control? What opportunity is appropriate? While entrepreneur ask, what resources do I need? Where is the opportunity? They also says that entrepreneur constantly change with change in environment and avail opportunity, they are proactive while administer are reactive to change and want to save resource. Entrepreneur are revolutionary and administers are evolutionary. Busenitz and Barney (1997) state those entrepreneurs are overconfident and over generalized. Palich and Baghy (1995) also stated those entrepreneurs are significantly more positive than others. They think only about the strength, opportunity, performance in contrast of weakness, threats, deterioration. What are the chief characteristics of the approach of such personalities to strategy making? Mintzberg suggest four approaches: 1. Enterpreneurial mode: The entrepreneurial organization main strategy is to search /find new opportunity. As Drucker (1970) says entrepreneurship required to hire more employees to search for opportunity instead of hiring employees for problem solving. 2. Entrepreneurial organization: They have centralized power; power is in the hand of chief executive who is committed toward organization goals and takes all decision and action in organization. 3. Strategy making in the entrepreneurial mode is characterized by dramatic leaps forward in the face of uncertainty: Chief executive of an organization should be ready to deal with any uncertainty that comes; moreover, he should also have plans for how to make profits in the times of uncertainty. 4. Growth is the dominant goal of the entrepreneurial organization: An entrepreneur believes in doing something for the good of himself first and then others, i. e. he is driven by the need for achievement. The goals he sets for the organization are an extension of goals he has set for himself. The most important goal would be growth. Entrepreneurship and Planning: Research on 500fast growing companies in the US suggested that entrepreneur spend little effort on business plan. 41% entrepreneur had no planning 26% had little planning 5% works on projection  28% makes full planning Entrepreneur did not spend much effort on planning because they change with the change in trend and demand. Visionary leadership: Every organization needs a vision to understand what it aspires to be in future. A true vision is one which everyone can visualize in their mind. A vision also differentiates an organization from another organization. To choose a direction, a leader needs to develop an image of the actual and desirable future state of the organization. The vision should also work as a bridge between the present state and the future state. When the leader has a clear vision in his head, he operates on the emotional and spiritual assets, on the values, commitment and aspirations. A leader must also be able to pick out an image from all the images in his mind, one which is understood clearly, simple, desirable and energizing. The studies of McGill University on role of vision and where vision comes from: 1. Vision as Drama: Westley and Mintzberg contrasted two views of leadership. First, the vision is formulated and implemented on the employees. This vision is such which motivates the employees to achieve a common goal. Another view presented was of â€Å"vision as a drama†. In a theatre, the drama is the contribution of â€Å"rehearsals† of the performers, the â€Å"performance† of the drama which depends on the â€Å"attendance† of the audience. Similarly, a vision consists of â€Å"Repetition† it means that a person should have deep knowledge and understanding of the problem faced (comes from experience), â€Å"representation† the vision should be translated into actions (leader must able to make others see things from different perspective), and â€Å"assistance†, similar to Attendance, both the leader and the employees support each other. Visionary leadership constitutes of the leaders style along with the strategy, it is drama and leaders are born it and can be made visionary. 2. Entrepreneurial strategy formation in supermarket chain: The company â€Å"Steinberg’s† is a Canadian retail chain. Sam Steinberg joined the company when he was eleven and after two years he made the decision of expansion, and he had managerial control over the crucial decisions of the business. Two major changes in strategy were made, move into the self-service in 1930’s and shopping centre business in 1950’s. in 1933, one store was incurring heavy losses. He closed the store one Friday evening, converted it into self-service store, renamed the store, decreased the prices, printed handbills, and mailed them. He reopened the shop on Monday. He used this one store to create a new vision. He had deep knowledge of the business. The so-called image of leader as â€Å"conventional strategist† was proven wrong in this case. The knowledge of business proves good when the business is simple and focused within one person’s mind so that quick and fast decisions can be made. Another problem is faced when the leader leaves the business, and the new management might not prove good for the company. Three stages model of change (kurt lewin’s 1951) Unfreezing-change-refreezing it is one of the oldest models but it is still effective. Kurt Lewin developed this model and it helps organizations to adapt towards changes by using three steps, they are: 1. Unfreezing In unfreezing stage you break the old mindset of the organization people and reduce the natural resistance and defense mechanism so that they listen to what you are delivering. (Do shock therapy) 2. Change Change is the stage where you develop new entrepreneurial and strategic mindset in the organization so that employees think in a new way to develop the strategic vision. 3. Refreezing Refreezing is the stage where you freeze the new strategic and entrepreneurial mindset. Obsession is ingredient of effective organizations. That certainly seems to be the case in this period of refreezing. Organizations should do exercise of above model so that everyone follows the vision of the organization and to keep on the right track. Usually organizations skip the unfreezing stage and directly jump into the change stage that’s why they face the huge resistance from the organization people and at the end they failed to change the old mindset. Premises of entrepreneurial school Strategy exists in the mind of the leader as a perspective, a vision of the organization’s future. The process of strategy formation is semiconscious at best, rooted in the experience and intuition of the leader. The leader promotes the vision under close personal control in order to be able to reformulate specific aspects if necessary. The strategic vision is thus malleable, and so the entrepreneurial strategy tends to be deliberate and emergent. The organization is likewise malleable, a simple structure responsive to the leader’s directives. Entrepreneurial strategy tends to take a form of a niche, one or more pockets of market position protected from the forces of outright competition. Contribution, critique and context of the entrepreneurial school Contribution It’s highlighted the critical aspects of strategy formation, especially proactive nature and importance role of personalized leadership and strategic vision. This school also define that visionary strategies stand sharp in all common strategies and gives the point of difference which leads the organization toward the creative work. Critique The Stacy critique that one person make the strategy and do not define the actual process of making strategy at the other hand this school focus on visionary leaders instead of when and how we get visionary leader and how we develop leaders. The decisions are centralized and only one person take initiative and entrepreneurship is less glorious as described but also more functional. Harmful consequences of vision The advice to form a vision is neither concrete enough to be useful, nor is it possible when the future is unknowable. Its fix managers too tightly in one direction. Vision places great and unrealistic burden on leader. Organization relies on one or two gifted leaders while others are followers which introduce the culture of dependence. Distracts the attention of the people in which they are expert, towards the unknowable future. According to Collins and Porras Role of charisma in establishing a vision is very much overrated. The role of leader to catalyze a clear shared vision for the organization can be accomplished through wide variety of management styles. Context It is clearly, as already noted, startup is one situation in need of forceful leadership and rich vision, since direction must be set and niches secured. Conclusion The Entrepreneurial school of thought focuses on a single leader who envisions the future and incorporates that into the organization towards which the business strives. The Leaders strategy formulation revolves around his personal attributes and characteristics and the strategy formulated remains deliberate in the broader sense and emergent en route. This requires the entrepreneur to be well equipped with the ability to see things in multiple perspectives as suggested by Nasi (1991), and only then he will be able to make a strategy that will possibly do wonders but this also comes with constraints as it is done by one man only there are probabilities that it might not work. However it is important to note that this school does bring into account that while making strategies the thinkers must use a multiple perspective lens to be able to craft a perfect strategy.