MBA PROJECT FREE:STUDY OF INDIAN AERATED DRINK INDUSTRY WITH REFERENCE TO COKE INDIA VS PEPSICO INDIA

EXECUTIVE SUMMARY

Coca-Cola and PepsiCo are the two major companies in the world for cola drinks and have a huge world market share. These two companies have captured the market of each and every country they get into and same I the case in India where Coke has a market share of 57.8% while pepsi has a market share of 35.6% and are continuously fighting for a larger market share and continuously attacking each other either by Advertisements, brand ambassadors, products and marketing of their brand.

All this is fine but the main core competency of such products is in the Distribution Process and in the satisfaction of their Retailers thus a strong distribution process and a strong satisfaction level means more number of retailers and more the retailers means more the availability of the product and more the availability of the product means more the market share and thus the curiosity to know who is the better distributor and has a strong distribution led us to the project “A study of Indian Aerated Drink industry with special focus on retailers’ satisfaction level with respect to Coke India vs. PepsiCo India”
We conducted a survey of mainly panwala’s as and other Pepsi and Coke Stockers but the major stockers are the panwala’s of mainly 100 respondents. It was a simple questionnaire and we asked questions on quality of bottles, margins and other attributes.

We got the number of sellers by convenient sampling and analysis and secondary data analysis and the results are given in the project.

INTRODUCTION

There is a huge fight between the two soft drinks giant Coca-Cola (Coke) and PepsiCo (Pepsi) to grab a large part of the Indian markets. The main reason, well the growing Indian middle class and the huge disposable income they have and also the increasing consumption of soft drinks by Indians.

Pepsi and Coke both have brands attacking each other if Coke introduces one brand then Pepsi will bring another brand to fight it and vice a versa. Though Coke is this huge giant and Pepsi might be just a fly in front of it but the fly troubles and is much capable of fighting back and also winning.

The main area where they can capture each others market is in the network of distribution channels they use with restaurant chains, pan walas, hotels and eateries to compete with each other. It is to these sellers where these two giants are vying for in order to capture a larger market share and trounce the other and that is why the project on the satisfaction of these members to see who is winning the competition.

According to industry experts, the market for carbonated drinks in India is worth US$ 1.5 billion while the juice and juice-based drinks market accounts for US$ 0.25 billion. Growing at a rate of 25 per cent, the fruit-drinks category is one of the fastest growing in the beverages market. Sports and energy drinks, which currently have a low penetration in the Indian market, have sufficient potential to grow.

The market for alcoholic beverages has been growing consistently. 'The Future of Wine', a report on the state of the wine industry over 50 years, suggests that the market for wine in India was growing at over 25 per cent per year.

Major investments

Private investment has been one of the key drivers for growth of the Indian food industry. The 'India Food Report 2008', reveals that the total amount of investments in the food processing sector in the pipeline for the next three years is about US$ 23 billion.
The government has received around 40 expressions of interest (EoI) for the setting up of 10 MFPs with an investment of US$ 514.37 million.
Reliance Industries Ltd has invested US$ 1.25 billion in a dairy project.
Focusing on India as a rapidly growing market, US soft drinks giant PepsiCo would pump in an estimated US$ 152.30 million to set up four new food and beverages projects by 2012.
Geneva-based food service chain Global Franchise Architects (GFA) aims to open 250 stores around the world by March 2010, of which 100 will be in India.

Today India is one of the most potential markets with the population of around 1000 million people. There is a growth of 30% in the soft drink industry. These factors are the reason for the entry of two giants in the soft drink industry in the world to enter in the Indian market. The cola giant’s coke and Pepsi, together control almost 96% of entire Indian market while other companies has only share 4%.

In a long span, a culture transforms itself over and over. The map is remade attitude change for better or worse. Processes are invented, hailed as revolutionary and discarded obsolete. So it was one hundred year was a very much different world from what we have today, but at least one sense, not very different at call. Many reasons have been advanced to explain the last century. With over 100 yrs. Of interrupted growth despite war, economic depression and other disturbances there be something that sets soft drink apart from the consumer culture.

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MBA PROJECT FREE:SOCIAL MEDIA ANALYSIS WITH SPECIAL REFERENCE TO TWITTER

Introduction

Corporate social media presence: Many corporate In India now has started up with the social media marketing, In India, Kingfisher was the first airline in India to build a full-fledged formal presence on Twitter and embrace social media. This initiative has added to Kingfisher Airlines’ convenience factor because it allows the airline to send instant updates to its customers. Kingfisher Airlines is also putting the Twitter platform to good use to enhance its service, get feedback and interact with its customers directly without the use of intermediaries.

Emphasis on real-time data: Sites that provide transactional data and news in real time will always be in demand. These include news sites, Google Blog Search for updated blog commentary, Marketwatch.com for US stocks and Moneycontrol.com (Indian stocks), Twitter.com for the latest news, and Twitter commentary.

Twitter in India:
Twitter is witnessing a mind-blowing traffic growth worldwide and India is no exception – the micro blogging site has registered 74% traffic jump (in terms of unique users) in the month of March.(Source: www.com score.com).

Infosys team recently closed a deal successfully using Twitter. The prospective buyer posted a query on Twitter, which Infy team tracked (yeah, a lot of B2B companies track keywords on social media sites). Infy’s sales team got in touch with the buyer and closed the deal, marking their first successful sale in the twitter world.

Literature Review, Identification of Gap
For the purpose of getting more insights about the social media and twitter the researchers have made brief literature review and found out that, Twitter was launched in March 2006 by Jack Dorsey, Noha Glass, Biz Stone and Evan Williams (CEO). Twitters capital consists of founding and venture capital and is valued at around 60 million US dollar (Arrington, 2008). Around 6 million people are signed in to Twitter and 55 million people visit Twitter‘s homepage monthly (Kazeniac, 2009).

Twitter is a messaging service that shares a lot of characteristics with communication tools you already use. It has elements that are similar to email, IM, texting, blogging, RSS, social networks and so forth. But a few factors, particularly in combination, make Twitter unique:

· Really easy to write and read.

· One can readily meet new people on Twitter.

· One gets an opportunity to be interesting for people opting for his/her

   Updates

· Fit with nearly anyone’s workflow.


Twitter for Business:
Recently, Twitter has been adopted by companies of various professions. In the USA companies have been using Twitter earlier than in India. The American carriers Southwest Airlines or JetBlue, the communications company Comcast or the online shoe retailer Zappos have become well known for their Twitter usage(SOURCE:www.twitter.com). Twitter becomes better known in India, too, as companies are discovering this service as well. The way companies use Twitter differs highly.

Identification of Gaps:
The researchers has found out how Twitter could be utilized by companies to extend their customer service approach. Since Twitter has been launched in mid 2006 companies used it for different purposes.

E.g. Dell and Vista Print give out discounts exclusively via Twitter and CNN and the New York Times feed short news and links to their articles via Twitter. Now, some companies start to provide customer service via Twitter (Source: Perez, 2009).

In India however things look differently. Twitter has not yet established very well in India and even unknown by most India. Thus only few companies can be found on Twitter and those using this service are mostly from the field of media, advertising or marketing . To find Indian companies providing customer service in the proactive and communicative way American companies do is very hard. Some of the companies mentioned above do however communicate actively with their followers and use Twitter to exchange information rather than to solely give out information.

Thus, in order to give insights to the various companies in India about the various use of twitter in their branding exercise and also about the twitter users’ profiles in India their preference and expectation from the twitter, the researchers had decided to execute the research. 

 Objectives of the Research Study:

· To evaluate Tweeter as a social media and identify its unique propositions.

· To evaluate Tweeter as corporate strategic tool for brand building.

· To obtain insight in the current twitter behavior of Indian twitters in order to define a set of criterion & rules that gives advice to Indian companies how to use twitter for their customer service approach. 

Research Questions:
As a part of to achieve the objectives of the research the researchers has tried to get the answer of the following research questions.

· What value does twitter have for Indian twitters?

· How Indian companies currently using twitter in respect to their customers?

· How ready are Indian twitters for company approaching them via twitter?

 Need For The Research Study:
The researchers wanted initially to find the gap existing in the Indian market wherein extensive use of Twitter as a marketing tool was still not established. Thus, to justify the existence of this gap and to propose better options to Indian corporate for flourishing, this research study was conducted.

 Scope of the Research Study:
The study of the Twitter users had been done to understand the usage pattern of the users and accordingly suggest Indian corporate to make use of Twitter as a marketing tool. Research for the preference for twitter was carried out randomly online, which includes places around India . Respondents from various cities like Mumbai, Delhi, Masoori, Baroda, Bangalore had submitted their responses online. And from various places within Ahmedabad city personal survey has been conducted.

Twitter users who were focused for the survey are a homogeneous mixture of men and women again of different age groups.
The users comprise of skilled working men and women, businessmen, housewives, students, college goers (youth).
Educational Background of the target audience would be classified into the following categories. College goers (Graduates and Post Graduates) and School goers.

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MBA PROJECT FREE: FUNDAMENTAL AND TECHNICAL ANALYSIS OF THE INDIAN BANKING SECTOR

  Introduction to Indian Banking Sector

Banks are the most significant players in the Indian financial market. They are the biggest purveyors of credit, and they also attract most of the savings from the population. Dominated by public sector, the banking industry has so far acted as an efficient partner in the growth and the development of the country. Driven by the socialist ideologies and the welfare state concept, public sector banks have long been the supporters of agriculture and other priority sectors. They act as crucial channels of the government in its efforts to ensure equitable economic development.

The Indian banking can be broadly categorized into nationalized (government owned), private banks and specialized banking institutions. The Reserve Bank of India acts a centralized body monitoring any discrepancies and shortcoming in the system. Following the nationalization of banks in 1969, the public sector banks or the nationalized banks have acquired a place of prominence and has since then seen tremendous progress. The need to become highly customer focused has forced the slow moving public sector banks to adopt a fast track approach. The unleashing of products and services through the net has galvanized players at all levels of the banking and financial institutions market grid to look a further at their existing portfolio offering. Conservative banking practices allowed Indian banks to be insulated partially from the Asian currency crisis. Indian banks are now quoting at higher valuation when compared to banks in other Asian countries (viz. Hong Kong, Singapore, Philippines etc.) that have major problems linked to huge Non Performing Assets (NPAs) and payment defaults. Co-operative banks are nimble footed in approach and armed with efficient branch networks focusing primarily on the ‘high revenue’ niche retail segments.

The Indian banking has finally worked up to the competitive dynamics of the ‘new’ Indian market and is addressing the relevant issues to take on the varied challenges of globalization. Banks that employ IT solutions are perceived to be ‘futuristic’ and proactive players capable of meeting the varied requirements of the large customer base. Private Banks have been prompt on the uptake and are reorienting their strategies using the internet as a medium. The Internet has emerged as the new and challenging frontier of marketing with the conventional physical world creed being just as applicable like in any other marketing medium.

The Indian banking has come from a long way from being a sleepy business institution to a highly proactive and dynamic entity. This transformation has been largely brought about by the large dose of liberalization and economic reforms that allowed banks to explore new business opportunities rather than generating revenues from conventional streams (i.e. borrowing and lending). The banking in India is highly fragmented with 30 banking units contributing to almost 50% of deposits and 60% of advances. Indian nationalized banks (banks owned by the government) continue to be the major lenders in the economy due to their sheer size and penetrative networks which assures them high deposit mobilization. The Indian banking can be broadly categorized into nationalized, private banks and specialized banking institutions.

The liberalize policy of Government of India permitted entry to private sector in the banking, the industry has witnessed the entry of nine new generation private banks. The major differentiating parameter that distinguishes these banks from all the other banks in the Indian banking is the level of service that is offered to the customer. Their focus has always rested on the customer – understanding his needs, preempting him and consequently delighting him with various configurations of benefits and a wide portfolio of products and services. These banks have generally been established by promoters of repute or by ‘high value’ domestic financial institutions.

The popularity of these banks can be gauged by the fact that in a short span of time, these banks have gained considerable customer confidence and consequently have shown impressive growth rates. Today, the private banks comprise of almost 4% share of the total share of deposits. Most of the banks in this category are concentrated in the high growth urban areas in metros (that account for approximately 70% of the total banking business). With efficiency being the major focus, these banks have leveraged on their strengths and competencies viz. Management, operational efficiency & flexibility, superior product positioning and higher employee productivity skills.

The private banks with their focused business and service portfolio have a reputation of being niche players in the industry, a strategy that has allowed these banks to concentrate on few reliable high net worth companies and individuals rather than cater to the mass market. These well-chalked out integrates strategy plans that have allowed most of these banks to deliver superlative levels of personalized services. With the Reserve Bank of India allowing these banks to operate 70% of their businesses in urban areas, this statutory requirement has translated into lower deposit mobilization costs and higher margins relative to public sector banks.

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MBA PROJECT FREE: ROLE OF SALES PROMOTION IN FMCG SECTOR

Executive Summary


As a part of our study curriculum it is necessary to conduct a grand project. It provides us an opportunity to understand the particular topic in depth and which leads to through to that topic. My topic for the grand project is titled as “Study of consumer oriented sales promotion in FMCG sector” in which emphasis given to the effect of sales promotion on buying habits of consumers.


To start with we will give brief information regarding FMCG sector then moving to the main topic we will explain what is topic is all about. Promotion is one of the pillars of marketing mix and same way sales promotion is also one of the elements of promotion.

                  

With respect to consumer oriented sales promotion there are certain theories narrated as operant conditioning and projective theory. Based on secondary source certain theoretical aspects are also included as a part of study.


Then after concentration is given to the primary research. It includes the analysis and results of survey which was focuses on consumer’s behavior towards sales promotion campaign. The survey was conducted with the help of structured questionnaire.

At last conclusion of report, findings and suggestions was given based on study of secondary source as well as primary research.



Introduction

FMCG Concept and Definition:

The term FMCG (fast moving consumer goods), although popular and frequently used does not have a standard definition and is generally used in India to refer to products of everyday use. Conceptually, however, the term refers to relatively fast moving items that are used directly by the consumer. Thus, a significant gap exists between the general use and the conceptual meaning of the term FMCG.

Further, difficulties crop up when attempts to devise a definition for FMCG. The problem arises because the concept has a retail orientation and distinguishes between consumer products on the basis of how quickly they move at the retailer’s shelves. The moot question therefore, is what industry turnaround threshold should be for the item to qualify as an FMCG. Should the turnaround happen daily, weekly, or monthly?

One of the factors on which the turnaround depends is the purchase cycle. However, the purchase cycle for the same product tend to vary across population segments. Many low-income households are forced to buy certain products more frequently because of lack of liquidity and storage space while relatively high-income households buy the same products more infrequently. Similarly, the purchase cycle also tends to vary because of cultural factors. Most Indians, typically, prefer fresh food articles and therefore to buy relatively small quantities more frequently. This is in sharp contrast with what happens in most western countries, where the practice of buying and socking foods for relatively longer period is more prevalent. Thus, should the inventory turnaround threshold be universal, or should it allow for income, cultural and behavioral nuances?


Characteristics of FMCG Products:

· Individual items are of small value. But all FMCG products put together account for a significant part of the consumer's budget.

· The consumer keeps limited inventory of these products and prefers to purchase them frequently, as and when required. Many of these products are perishable.

· The consumer spends little time on the purchase decision. Rarely does he/she look for technical specifications (in contrast to industrial goods). Brand loyalties or recommendations of reliable retailer/dealer drive purchase decisions.

· Trial of a new product i.e. brand switching is often induced by heavy advertisement, recommendation of the retailer or neighbors/friends.

· These products cater to necessities, comforts as well as luxuries. They meet the demands of the entire cross section of population. Price and income elasticity of demand varies across products and consumers.

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MBA PROJECT FREE:CONSUMER PREFERENCE TOWARDS LPG AND CNG VEHICLES

INTRODUCTION


· Human activities generate three broad sources of air pollution: stationary or point, mobile, and indoor

· In developing countries especially in the rural area, indoor air pollution from using open fires for cooking and heating may be a serious problem

· Industries, power plants etc. are the cause of stationary air pollution. But in urban areas – both developing and developed countries, it is predominantly mobile or vehicular pollution that contributes to overall air quality problem.

· In Delhi, the data shows that of the total 3,000 metric tonnes of pollutants1 belched out everyday, close to two-third (66%) is from vehicles. Similarly, the contribution of vehicles to urban air pollution is 52% in Bombay and close to one-third in Calcutta.2 Katz (1994) has estimated that in Santiago, Chile, wherever pollution concentration exceeds ambient standards, mobile sources or vehicles are the cause. Similarly, in case of Budapest, Hungary, transport is the dominant source of emissions except sulphur dioxide (SO2), contributing 57% of Oxides of Nitrogen (NOx), 80% of lead (Pb), 81% of carbon monoxide (CO) and 75% of hydrocarbon (HC) emissions (Lehoczki, 2000)

· A number of countries have targeted vehicles and associated sectors (such as, fuel) to curb the menace. Notable successful initiatives are: conversion of public transport from diesel to CNG in Delhi, switching of Vikrams (tuk-tuks) from diesel to electricity in Kathmandu valley, shifting from leaded to unleaded gasoline in many countries etc.

· Still the pollution problem in urban cities may continue to loom large due to ever-burgeoning vehicular population, which is outpacing any such measure and road network development.

· Following data gives a glimpse of such skewed growth. Against 1.9 million vehicular population in 1990 in Delhi, it rose to nearly 3.6 million in the year 2001 (i.e., an increase of nearly 87%).

· During the same period, Delhi’s population has increased by only 43% (from 9.5 million to 13.8 million) and road-length by merely 14% (from 22,000 Km to 25,000 Km) respectively. Situation is similar across a number of cities in India and the developing world. This indicates the exigency of controlling vehicular pollution.


· The worst thing about vehicular pollution is that it cannot be avoided as the emissions are emitted at the near-ground level where we breathe. Pollution from vehicles gets reflected in increased mortality and morbidity and is revealed through symptoms like cough, headache, nausea, irritation of eyes, various bronchial problems and visibility.

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MBA PROJECT FREE:MARKET STUDY OF MANGO JUICE IN COCA COLA BEVERAGES PRIVATE LIMITED

INTRODUCTION

  Marketing in simple terms can be said to be “A human activity directed at satisfied needs and wants through an exchange process.” Marketing as a functional area of management is becoming extremely important as compared to other fields. All decisions in modern business organization revolve around information related with marketing decision making situations, which are characterized by Distribution Strategy, Channel members and Product decisions. The Product Decisions, customers assess a product’s value by looking at many factors including those that surround the product.

In a constantly changing business and market scenario, maintaining the channel members  becomes more challenging in such a situation only innovative technology, good product and committed people, accompany can take the lead over its competitors.

 Coca-cola ltd has differentiated itself from its competitors and providing the total “value for money” to its customers. Coca-cola ltd has integrated all the features to offer a value for its products.

Value for the product and services refers to the quality of product and services offered to the customers. Several surrounding features can be directly influenced by channel members, such as customer service, delivery, and availability.  Consequently, a channel partner involves a value analysis in the same way customers make purchase decisions. This area becomes the most important from the company as well as customer point of view. This helps the company to know better their customers and provide them with what they are expecting.

Market:

The set of all actual and potential buyers of a product or service.

Marketing:

A social and managerial process whereby individuals and groups obtain what they need and want through creating and exchanging products and value with others.

Marketing Management:

The art and science of choosing target markets and building profitable relationships with them.

Customer Satisfaction:

The extent to which a product’s performance matches a buyer’s expectations.

Marketing Mix:

The set of controllable tactical marketing tools – product, price, place, and promotion – that the firm blends to produce the response it wants in the target market.

Developing the marketing Mix:

Once the company have decided on its overall competitive marketing strategy,  it is ready to begin planning the details of the marketing mix, one of the major concepts in modern marketing.  The marketing mix is the set of controllable, tactical marketing tools that the firm blends to produce the response it wants in the target market.

SCOPE FOR STUDY

The scope of the study is limited.  The study is a very minor contribution to the company as it is only restricted to the twin cities (Borabanda and Kodapur).  The study would only be a drop in the ocean, Can help the distribution in this area.

The study can be conducted on a national basic too with a large sample size and interviewing many numbers of respondents.

OPERATIONAL DEFINITIONS:

Retailer:

Retailer is a person or business who sells products to the public.

Brand: 

Brand refers to the identification of the product given by the manufacturer.

Brand Loyalty: 

Brand loyalty refers to the continuous and repeated purchase of a particular brand without any wavering purchase pattern.

Respondent: 

Respondent is a person who is being interviewed for the purpose of conducting the study.

Market share: 

The amount that a company sells of its products or services compared with other companies selling the same things

Promotional Activities: 

Promotional activities include advertising, personal selling, sales promotion, and publicity, which have their own characteristics and cost but have common objectives of achieving high sales by creating awareness                                                                                                                                                                

Incentives: 

Offer of an article at frees of cost or less price of the market can be termed as incentives.

Interviewee: 

A person who is answerable to the interviewer of the proposed questions.

Interviewer: 

A person who carries on investigation for the purpose of achieving the objectives of the project.

Sample: 

The selection of set of people from the total population for the purchase of carrying on the investigation.

Survey: 

It refers to the questionnaire administered to the subject who is identified from the population with the help of probability or non-probability sampling.

Questionnaire:  

It refers to the set of questions that are framed to be answered by the respondents for the purpose of achieving the research objectives. In questionnaires there are two types structured and unstructured. There are four types of questions in a questionnaire on open ended questions, closed ended questions, disguised and interrogative questions.

Brand awareness:

Knowing brand; knowing that particular brand exists and is important; being interested in particular brand: brand awareness refers to the consumer awareness of the particular brand.

Brand Name:

The name given to a product by the company that produces it. brand name is nothing but the name and value of the brand.  

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MBA PROJECT FREE:PROJECT REPORT ON HOSPITAL MANAGEMENT

ABSTRACT

‘Assessment about the level of awareness of speciality services offered by Kovai Medical center and hospital in the Coimbatore region’ is a project aimed at studying the awareness about the various speciality services offered by KMCH, the compettive position of KMCH, the perception of people towards KMCH in terms of cost, quality and preference. The speciality services include Open heart surgeries, Kidney transplants, Hip and Knee replacements, Brain Stroke, Infertility, Emergency services and interventional radiology.

Information pertaining to whether one is aware about KMCH’s speciality services or not was collected. KMCH, KG, PSG, GKNM, Ramakrishna are the leading hospitals in Coimbatore. Which hospital is one able to recall when it comes to each of the speciality services, amongst the five major hospitals – data related to this was also collected. In order to assess the perception of the respondants towards KMCH some agree – disagree questions were asked. They were used to assess their liking and preference for KMCH.

The type of research adopted was the Performance monitoring type. The data was collected using a standardized questionnaire, through the interview mode. The target respondant groups were the households of upper middle class category. Non – probability judgmental sampling was the sampling technique used. The sample size was 225.

Descriptive Statistics was used for the analysis of the data collected. From the analysis it was found that KMCH enjoys a good popularity as far as emergency care services are concerned.  Regarding the awareness about the various specialities, only open heart surgeries and Master health check ups are predominantly known to the respondants. For all the other specialities the awareness level is low. KMCH has attracted the highest number of recalls for emergency services, hip/knee replacements, Brain Stroke and Master Health check up. The study also revealed that there are a large proportion of people who feel that the hospital’s charges for the services provided are on the higher side.

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MBA PROJECT FREE:PROJECT REPORT ON DIVIDEND DECISION WITH REFERENCE TO ICICI

Abstract

The Dividend Decision, in corporate finance, is a decision made by the directors of a company. It relates to the amount and timing of any cash payments made to the company's stockholders. The decision is an important one for the firm as it may influence its capital structure and stock price. In addition, the decision may determine the amount of taxation that stockholders pay.

There are three main factors that may influence a firm's dividend decision:

• Free-cash flow
• Dividend clienteles
• Information signaling

The free cash flow theory of dividends

Under this theory, the dividend decision is very simple. The firm simply pays out, as dividends, any cash that is surplus after it invests in all available positive net present value projects.

A key criticism of this theory is that it does not explain the observed dividend policies of real-world companies. Most companies pay relatively consistent dividends from one year to the next and managers tend to prefer to pay a steadily increasing dividend rather than paying a dividend that fluctuates dramatically from one year to the next. These criticisms have led to the development of other models that seek to explain the dividend decision.

Dividend clienteles

A particular pattern of dividend payments may suit one type of stock holder more than another. A retiree may prefer to invest in a firm that provides a consistently high dividend yield, whereas a person with a high income from employment may prefer to avoid dividends due to their high marginal tax rate on income. If clienteles exist for particular patterns of dividend payments, a firm may be able to maximize its stock price and minimize its cost of capital by catering to a particular clientele. This model may help to explain the relatively consistent dividend policies followed by most listed companies.

A key criticism of the idea of dividend clienteles is that investors do not need to rely upon the firm to provide the pattern of cash flows that they desire. An investor who would like to receive some cash from their investment always has the option of selling a portion of their holding. This argument is even more cogent in recent times, with the advent of very low-cost discount stockbrokers. It remains possible that there are taxation-based clienteles for certain types of dividend policies.

Information signaling

A model developed by Merton Miller and Kevin Rock in 1985 suggests that dividend announcements convey information to investors regarding the firm's future prospects. Many earlier studies had shown that stock prices tend to increase when an increase in dividends is announced and tend to decrease when a decrease or omission is announced. Miller and Rock pointed out that this is likely due to the information content of dividends.

When investors have incomplete information about the firm (perhaps due to opaque accounting practices) they will look for other information that may provide a clue as to the firm's future prospects. Managers have more information than investors about the firm, and such information may inform their dividend decisions. When managers lack confidence in the firm's ability to generate cash flows in the future they may keep dividends constant, or possibly even reduce the amount of dividends paid out. Conversely, managers that have access to information that indicates very good future prospects for the firm (eg. a full order book) are more likely to increase dividends.

Investors can use this knowledge about managers' behavior to inform their decision to buy or sell the firm's stock, bidding the price up in the case of a positive dividend surprise, or selling it down when dividends do not meet expectations. This, in turn, may influence the dividend decision as managers know that stock holders closely watch dividend announcements looking for good or bad news. As managers tend to avoid sending a negative signal to the market about the future prospects of their firm, this also tends to lead to a dividend policy of a steady, gradually increasing payment.

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