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Extended Reality

  • January 11, 2021
  • Team Kalkine

What is Extended Reality?

Extended Reality (XR) refers to an umbrella terminology used for technology like Virtual Reality, Augmented Reality, Mixed Reality, and future immersive technologies which are yet to develop. Extended Reality incorporates a complete range of real as well as a virtual environment.

© Kalkine Group 2021

Overview of Virtual Reality, Mixed Reality, and Augmented Reality

Virtual Reality

Virtual Reality (VR) provides users with an interactive environment that mimics an entirely different reality than the one surrounding the user. To know more in detail, click here.

Augmented Reality

In Augmented Reality, virtual information, as well as objects, are superimposed on the real world. The experience improves the real world with digital details like images, text, & animation. The user can feel it via screens, smartphones, & tablets. Using AR technology, the users actually do not isolate themselves from the real world and still can interact and see the things going in front of them. Click here to understand the technology in detail.

Mixed Reality

In Mixed Reality, digital & real-world items happen together and can communicate with each other in real-time. Mixed Reality is an immersive technology and is also known as Hybrid Reality. In MR, the user needs an MR headset and more processing than Augmented Reality and Virtual Reality. An example of this is Microsoft’s Hololens. It allows users to place a digital object in a room and interact with the object in all possible manner.

History of Extended Reality

The history of Extended Reality started in 1960 when a computer scientist Ivan Sutherland created the first head-mounted display. With time, Myron Krueger in 1975 developed the video space that did not require headsets and gloves. The video space was created by combining projectors and video cameras to create a virtual environment.

In 1989, VPL Research made efforts to bring this technology to the end-users. With time, several changes were made, and the technology was made more user-friendly.

Real-World Applications of Extended Reality

Experts in the market believe that extended reality technology would grow exponentially. Let us look at five real-world applications of this technology:

Entertainment and Gaming

The entertainment & video games industries are the top users of this technology in the present times.  In this industry, camera tracking and real-time execution are incorporated for creating an immersive virtual environment. Another use of this technology in this industry is in creating multipurpose studio environments. Thus, it helps to save the cost needed to establish an elaborate movie set.

XR provides comprehensive participation effect. Thus, it improves the ability of the video game.

Image Source: MegapixlTM

Employees and Customers

Extended Reality helps in training where employees can be trained in a low-risk, virtual environment. People like medical students, surgeons, firefighters, pilots etc., can be trained using this technology at minimum risk and low expense.

On the other hand, customers can be provided simulating virtual experience brought on by certain diseases, and impairments can support medical practioners and caretakers in empathy training.

Healthcare

XR application can help improve healthcare facilities by streamlining the medical procedures and also improving patient care. Through XR, Surgeons can visualize the complexity of organs in 3D. They can plan their surgery well in advance and perform surgeries in a safe, effective, and precise manner.

Real Estate

Through XR, the real estate agent or managers can provide their customers with a real feel of the property. The layout of the property can be enabled using the XR technology. Thus, in turn, provide them with better and strong business prospects.

Marketing

Marketers can provide their customers with an experience where they can try the product before using it.

Advantage and Disadvantage of Extended Reality

Advantages of Extended Reality

  • XR technology gives businesses a chance to dive into a string of dynamic world and provide several benefits to them.
  • It provides users with a possibility to observe the surrounding in an interactive and engaging manner. Thus, enabling businesses to train their staff in a better fashion.
  • XR removes cyber boundaries and makes the accessibility of data seamless.

Disadvantages of Extended Reality

  • XR allows deleting remoteness. However, in doing so, it increases the threat of compromised privacy. XR is prone to cyber-attack.
  • The gadgets used in XR are quite expensive.
  • Increased usage of XR can lead to headaches, nausea, and even eye disorders.
  • XR provides new ways of amusement. However, its long-term usage can remove the necessity to communicate and lessen social engagement.

What are accounts payable? Accounts payable is the amount of cash a company is liable to pay to its suppliers and clear dues. As current liabilities of the company, accounts payable is required to be settled over the next twelve months.  It also shows the obligations of the business over the next year. Accounts payable is required to be repaid in a short period, depending on the relationship with suppliers. It is essentially a kind of short term debt, which is necessary to honour to prevent default.  As a part of the company’s working capital, it is widely used in analysing the cash flow of the business and cash flow trends over a period. Accounts payable may also depict the bargaining power of the company with its vendor and suppliers.  A vendor or supplier may give the customer longer credit period to settle the cash compared to other customers. The customer here is the company, which will incur accounts payable after buying goods on credit from the vendor.  There could be many reasons why the vendor is providing a more extended credit period to the firm such as long term relationship, bargaining power of the firm, strategic needs of the vendor, the scale of goods or services.  By maintaining a more extended repayment period to supplier and shorter cash realisation period from the customer, the company would be able to improve the working capital cycle and need funds to support the business-as-usual.  However, prudent working capital management calls for not overtly stretching the payable days as it might lead to dissatisfaction of supplier. Also, investors tend to closely watch the payable days cycle to determine the financial health of the business. When the financial conditions of a firm deteriorate, the management tend to delay the payment to their suppliers. What is accounts payable turnover ratio? Accounts payable turnover ratio shows the capability of a firm to pay cash to its customer after credit purchases. It is counted as an essential ratio to analyse the cash management attribute of the firm and its relationship with vendors or suppliers.  It is calculated by dividing purchases by average accounts payable.  Purchases by the company are calculated as the sum of the cost of sales and net inventory in a given period:  Now let’s understand this the help of an example. Let us suppose, Cost of sales of Company XYZ for the period was $60,000, and XYZ began with inventories worth $21000 and ended at $15000. Accounts payable at the beginning was $20000, and $15000 at the end.  Now the purchases will be $66000 (60000+21000-15000). The average accounts payable will be $17500. Therefore, the accounts payable turnover ratio will be 3.77x.  Dividing the number of weeks in a year by the accounts payable turnover ratio will give the number of weeks the company takes on average to settle its payables. In this case, it will be around 13.8 weeks (52/3.77). 

What is imperfect competition? Imperfect competition is a competitive market setup that includes multiple sellers engaged in selling heterogenous goods. Imperfectly competitive markets are a more accurate depiction of the markets in the real world than a perfectly competitive setup. The sellers in an imperfect market have the liberty to influence prices and are thus price makers. The sellers in this market are often protected by barriers to entry. What are the types of imperfect markets? Imperfect competition can be observed in various forms, including: Monopoly: Monopoly is a single producer market, wherein the producer has entire power as it is a price maker. The producer has control over the output, price, and the quality of the product in the market. There are no substitutes in the market, leaving the consumers with only one choice. Besides, there are many barriers to entry of new firms. Thus, the firm continues to hold its monopoly position. Public utilities are generally a monopoly set up as they have a single provider with no substitutes. Since these are government regulated, the prices are not too high to crowd out certain sections of individuals. Oligopoly: The number of players in this set up is more than one, however it is less than the number of sellers in a monopolistic competition. Here there are few barriers to entry and exit. A few producers have control over the market while other firms are small and are price takers. Thus, there exists a high level of interdependency between firms. This can also lead to firms coordinating in some instances to obtain higher profits. This is most frequently seen in the form of cartels. Monopolistic competition: Just like perfect competition, monopolistic competition also comprises of many buyers and sellers. However, both lie on the opposite end of the competitive market spectrum. Products are heterogenous and producers have greater control over the prices of their products as compared to perfect competition. Monopsony: In monopsony there are many sellers but a single buyer. Thus, buyer has greater bargaining power as compared to other market setups. Thus, buyers may ask for lower prices than what sellers want to sell for. Oligopsony: In oligopsony, many sellers serve a few buyers. Thus, buyers have slightly more bargaining power than in other market setups excluding monopsony. What are the characteristics of imperfect competition? The following characteristics define a market with imperfect competition: Number of buyers and sellers: The number of buyers and sellers vary largely, depending on the type of imperfect markets. Under monopolistic competition, firms are usually small in size and each firm is insignificant with respect to any changes in the entire market. Thus, no single firm can affect the sales of another firm. Each firm functions independently of the other. However, in a monopoly there is only one firm and, in an oligopoly, firms are highly interdependent. Heterogeneous Products: Products provided by different sellers may be similar. However, they are differentiated. This means that there are different variations offered in the same type of product across the market. This allows customers to have a variety of goods to choose from, even when the goods perform similar tasks. These variations in the products may come because of the differences in the quality of the product across sellers. For instance, ice creams are offered by different companies selling dairy. Thus, consumers may prefer one brand over the other for their quality or for their range of flavours. However, the product itself serves the same purpose irrespective of which company it belongs to. Free Entry and Exit of Firms: The free entry and exist exists in monopolistic competition under the imperfect market set up. Free entry and exit of firms allow them to produce close substitutes and consequently leads to a greater supply of goods in the market. However, this is not the same for all types of imperfect markets. For instance, in monopoly there are barriers to entry and exit. Imperfect Knowledge About the Market: Both sellers and buyers do not possess perfect knowledge about the market. Under monopolistic competition firms use advertisement to make consumers aware about their products. Thus, advertisements play an important role. However, same is not true for monopoly. Price Makers: Firm in imperfect markets are price makers. Each firm can decide the price for their products. Thus, producers may charge a price that is higher than the marginal price. This is especially true for a monopoly. Kalkine Group Image How did the theory of imperfect vs perfect competition come to light? The theory of perfect competition was given by French mathematician Augustin Cournot in 1838. The theory helped theorise the economic relationships that existed in the market. The theory, however, was too ideal a representation to fit into the real-world scenario. This model of perfect competition was a hypothetical one and was an oversimplification of real-world scenarios. It did not include other aspects like barriers to entry, imperfect knowledge in markets and heterogeneity of products. Despite these shortcomings, the model of perfect competition was widely accepted and is still popular in theory. Theoretical economics still includes the topic of perfect competition as an integral part. Markets like oligopoly, monopolistic competition, monopsony, monopoly, etc are all extensions and variations to the model of perfect competition. Importantly, the theory of imperfect competition was most prominently popularised by Joan Robinson in 1983 in her book “The Economics of Imperfect Competition”. In this book, Robinson gave the model where each firm enjoyed some monopoly power. This was later extended into the idea of monopolistic competition.

What are GAFAM Stocks? GAFAM Stocks are perhaps the most famous and sought-after stocks of the last decade. The dominance of these companies during the 2010s in the stock market will be remembered in the books and adages.  It is the creation of market participants that develop acronyms like GAFAM, which include five large American companies having dominance across most jurisdictions. GAFAM stands for Google, Apple, Facebook, Amazon, and Microsoft.  Over time these companies have gained dominance in their primary business. In addition, GAFAM stocks have been aggressive in expansion and entering new verticals.  Although there have been considerable acquisitions along the way, the investments in research & development and innovation have been at the forefront of the capital expenditure plans.  Google Officially known as Alphabet Inc., ‘Google is not a conventional company’ is a statement made by its founders in their early letters. It has not been a conventional company, indeed. Google has developed significant networking within its products.  As a dominant search engine of the world, Alphabet reaps large revenue through advertisements through its flagship search engine and other products. Over the years, the company has been able to expand in other verticals such as mobile phone operating system – Android, web browser through Google Chrome.  Alphabet has two operating segments. Under Google, the company houses Search engine, YouTube, Search, Google Play, Google Maps, Android, Chrome, hardware, Google Cloud.  In other bets, the company includes businesses that are not material individually. These businesses include Calico, Verily, Waymo, CapitalG, GV, X and more. Almost all revenue of Alphabet is derived by Google segment.  In 2019, Alphabet recorded revenue of $162 billion, and around $161 billion was derived from Google segment. Operating income of the company was $34.2 billion, while net income of the company was $34.3 billion.  Read: Unboxing Revenue Growth Streak of Google and Microsoft Apple  Established in 1977, Apple Inc. is a consumer electronic company engaged in manufacturing of various consumer products. Apple mobile phones are renowned across the world, and it also makes personal computers, wearables, tablets, and accessories.  iPhone is the flagship mobile operates on an in-house developed iOS operating system. Mac is a brand for its personal computers that are also used extensively across the professional domain. iPad is a line of tablets, which run on iPadOS.  Apple also sells other wearables and accessories that include Apple Watch, Apple TV, Beats products, iPod Touch, Airpods. The core strength of the company has been its capability to innovate and launch products continuously.  iCloud is its cloud service, and data of its products can be stored in the cloud. As a consumer business, it markets are focused small individual customers that do not constitute a material portion of revenue individually.  In 2019, Apple recorded revenue of $260.2 billion. Its operating income for the period was $64 billion, while net income was $55.25 billion.  Facebook  Facebook Inc. was established as a social networking website and has grown tremendously due to its strong networking effects. It enables people to connect with each other or in groups. Facebook is used in mobile phones, personal computers, handsets etc. It has been a great place to share opinion, ideas, videos and photos. With its large user base, Facebook and its products are used for advertisements. The traditional modes of advertisements have lost significant market share to companies like Facebook.  Instagram is also a part of Facebook. It is used by people across the world to share photos and videos. It also offers a similar type of services like Facebook and has emerged as a networking platform for digital creators and influencers.  WhatsApp is a messaging mobile phone application. It allows people to connect privately and is extensively used by people. Messenger is another application by Facebook that enables people to connect with family, friends, groups and businesses.  Oculus is the hardware business of Facebook that helps to connect people through its virtual reality products. A major portion of revenue is generated by marketing and advertisement through its products that are used by large scale potential consumers.  Watch: Facebook launching 'Shops' on its social Media Platform | Market Update Amazon Amazon.com, Inc. was established as e-commerce in 1994. The company serves consumers, sellers, developers, enterprises, and content creators. Amazon also provides advertising services to publishers, sellers, vendors, publishers, and authors.  It serves consumers through its online and physical stores. Amazon offers a range of categories and is has a strong online retail presence. It has been engaged in manufacturing consumer electronics such as Kindle, Fire TV, Fire Echo, Alexa, Ring etc.  Amazon Prime is a membership of the company that provides shopping benefits, streaming of entertainment content, including movies, original content. It intends to provide customers with low prices and home delivery of goods.  It also enables sellers to access Amazon marketplace, which includes stores and online website. Amazon earns through a percentage of sales, fixed fee, combinations etc. Amazon Web Services offers cloud service to a range of public and private enterprises to store data.  Kindle allows content creators to publish and sell content/books on Kindle and earn a royalty on sales. In 2019, the company recorded net sales of $280.5 billion. Operating income for the year was $14.54 billion, and net income was $11.59 billion.  Microsoft  Microsoft Corporation is a technology company that develops software, services, devices and solutions. Its products are extensively used by businesses and individual customers to operate personal computers.  Microsoft’s platforms allow improving small-businesses productivity, educational outcomes, driving competitiveness of large businesses. As a platform and tools provider, the company empowers enterprise and organisations of all sizes.  Now it is emphasising on innovation for the next phase of computing stage. Other than its legacy operating system, Microsoft provides cloud-based solutions, services, software, platforms, content, server applications, desktop management tools, software development tools etc.  It also designs and manufactures and sell devices, including gaming consoles, PCs, tablets, entertainment consoles, and related accessories. In 2020, the company recorded revenue of $143 billion. Operating income for the year was $53 billion, and net income was $44.3 billion. 

Bear market is a scenario when the prices of securities are only moving in a downtrend for a prolonged period. Pessimism and fear across the board grips the market which leads to continuous selling pressure from the market participants, leading to downtrend. Apart from stock market, Bearish trends can also be present in other markets such as currency, commodity or bond market.   What Do We Mean by Stock Market? The stock market or financial markets in general, which includes stocks, bonds, commodities etc,  is a virtual marketplace for buyers and sellers willing to make a deal. Every party has his/her own analysis/view or opinion about the underlying security regarding its worth with respect to what it may be worth in the future.   What Drives Stock Price Movement? As the constant buying and selling of securities take place, the prices also fluctuate with respect to each of these transactions. This price fluctuation happens in either of the two directions, up or down based on the demand and supply equation.   In other words, where the price move would depend on whether the demand is higher than supply or is it the other way. If the demand for the security outstrips the supply, i.e. more no. of buyers is willing to buy than the no. of sellers who are willing to sell at that point of time, then the price tends to move up.   Similarly, if the no. of sellers is outnumbering the no. of buyers for the security at the same time, then the price tends to move down. All the price movement works on the universal law of demand and supply.   So, what is a Bear Market? As the prices are ever-changing, often they are not random and tend to move in a particular direction. Sometimes, due to excessive pessimism and fear among the market participants, the supply of securities gets overwhelmingly high, which leads to a fall in the prices for a prolonged period. This continuous fall in the price for a long time, often a few months/ years is referred to as a Bear market.    The secular bear market, which is a part of the stock market cycle, is often witnessed after a period of distribution which succeeds a strong bull market.   Although there is no estimate as to how long a bear market could continue, history tells us that often it lasts for a lesser time than a bull market but can be more erratic and fast during its fall.   What are the Triggers for a bear market? The major bear market which generally comes once in a decade can last up to a few years, although for   individual stocks it may last up to a few months respective bear market because individual stock’s fundamentals may change relatively more quickly than the broader economy.   This extended period of constant supply is not random and need a few reasons to sustain. These reasons are the major fundamental changes taking place behind the scenes. A few of these could be;   Weak corporate earnings Excessive inflation Downgrades by rating agencies Slowing GDP growth Incompetent top management (for Individual stocks)   How is a Bear market different from a normal correction? It is to be noted that the bear markets fall is completely different from the fall witnessed during an up-trending market. The market never moves in a straight line but rather in a wave-like pattern. This simply means even while moving up; it takes corrections or dips in the opposite direction and small rallies on the upside while trending down.   Therefore, a broader direction of the trend needs to be considered while identifying the bull or a bear market.     How to Quantitatively measure a bear market? Sometimes it gets difficult to measure as to when a bear market has started or ended as the price is always moving and fluctuating. But there are some quantitative measures available that can do the job in an objective way.     One of the measures which are generally used for the broader market is to look at the retracement level. A retracement is a move which is opposite to the bigger trend. As discussed above, markets take correction while moving up and shows rallies while going down. These dips in an uptrend and rallies in a downtrend are the retracement move.   A 20% retracement from a significant high point, preferably after the bull market is considered as the start of a bear market. Similarly, after the lowest point in a bear market, if the market retraces up by 20%, the bear market is considered to be over.   Another measure is to use a long-term moving average, like a 200-day. This method is very popular among individual stocks. A 200-day moving average is plotted on the stock’s price chart, and its interpretation is quite simple. If the stock is trading above the long-term moving average, then it is considered to be in a bull market and below the moving average is a bear market zone.     Which Strategies to be used in a bear market? When the market or a stock keeps on falling for a prolonged period, then a few strategies could come in handy to survive bear market or even mark decent profits like;   Selling the rallies As stated earlier, even in a downtrend, the market moves in a wave and shows some small rallies on the upside which ultimately get fizzle out, and the downtrend continues. These rallies are an ideal point for the short-selling as one can get a better price.   Selling after the break of support. Going short just after the support level gets breached is another approach to make money in a bear market. Although selling the support would yield a lower price for selling but if the market is in a true bear run, then expect a lot of support levels to be taken out throughout the downtrend.   Look for base formation to enter long There is something for the long-term investors also. For an investor, a lower price is always a better price, and a bear market offers tons of opportunities to buy stocks dirt cheap. But the question is when to enter. One way is to look for a consolidation phase after a severe fall, also known as the accumulation zone. It is the area where a lot of buyers come in to buy stocks at a low price, hence halts the prices to fall further. These consolidation zones are a good place to accumulate stocks, instead of trying to catch a falling knife.   

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