Assessing The American Fast Food Industry Business Essay

Surveying The American Fast Food Industry Business Essay The world has become a quick paced condition where individuals work on close calendars. This has decreased chance to get ready home prepared dinners and has made brisk cheap food suppers well known particularly for grown-ups who transport to and from work and the children who consider it to be a treat. This pattern has made it workable for the inexpensive food industry to flourish. This exceptionally serious industry has a huge market made of all periods of the populace. The eateries presently produce sound imaginative and nutritious food which conquers the feelings of dread clients have about undesirable weight control plans. The business has been profoundly fruitful in the United States and has slowly expanded its venture to take advantage of the developing scene advertise. This has caused the inexpensive food industry to form quickly into a global industry. 1.2 INDUSTRY OVERVIEW A drive-through eatery is interchangeable with speedy and newly arranged food which is helpful to the purchasers. The most well-known dinners served are: burgers, franks, sandwiches, chicken and pizza. The side dishes generally include: servings of mixed greens, fries, heated beans, prepared potatoes, onion rings and a wide assortment of pastries. Refreshments like soda pops, filtered water, hot cocoa, espresso, tea, milkshakes and juice are likewise offered close by with the dinners (Hovers, 2010). Cheap food establishment chains, for example, Subway, Burger King, McDonaldHYPERLINK http://www.buzzle.com/articles/mcdonalds/HYPERLINK http://www.buzzle.com/articles/mcdonalds/s, Prã ªt-a-Manger and Pizza Hut oblige requests for fish, lean meat, exceptional eating regimen feast parts, and other impressive provincial varieties (Buzzle, 2010). 1.3 ORIGIN OF FIRMS IN THE FAST FOOD INDUSTRY The starting points of drive-through eateries in the USA which is otherwise called cheap food capital of the world can most likely be followed to a particular date 7 July 1912 when a drive-thru eatery was opened in New York City by Horn Hardart. The foundation offered its glad clients a determination of pre-arranged quick nourishments which were shown behind little glass windows and coin-worked spaces (Yusef, 2002). The improvement of cheap food which is a major business as at today can be followed back to America which had incredible effect globally (Yusef, 2002). In spite of the fact that there was without a doubt inexpensive food everywhere throughout the world in some shape or structure hundreds of years back, it truly began to turn into a business venture when social, producing and financial conditions made it less expensive to eat out (Rowlinson, 2002). 1.4 INTERNATIONALIZATION OF THE FAST FOOD INDUSTRY The internationalization of the food administration industry was spearheaded by, is as yet being ruled by, U.S. based brisk help cafés (QSR), for example McDonalds, Burger King, KFC, and Pizza Hut. The choice by these organizations to go universal was related with the extraordinary possibility of outside food administration markets and to support Americans voyaging abroad. It is intriguing to take note of that American inexpensive food is grasped by youngsters in numerous remote nations as design food, a component of the famous Western culture. This has added to the accomplishment of snappy help eatery tasks in numerous outside nations. (Yu, 1999). As per the National Restaurant Association in the United States, there are around 160 U.S. possessed food administration organizations working universally, this is shown in figure 1 Eateries chain Complete us units Complete outside units Mc Donalds 21,022 8,923 KFC 9,863 4,784 BURGER KING 8,874 1,817 SUB WAY 12,516 1,668 WENDY 4,933 564 Table 1: Total US units incorporate both organization possessed and establishment claimed units. Source: Personal correspondence, National Restaurant Association. (Washington, DC, 1997) The organizations in the inexpensive food industry (QSR) will in general internationalize quick by embracing diversifying as a method of section (Yu 1999). Yu likewise recognized that the inexpensive food industry will in general follow dwelling industry in internationalizing its activity. This is a result of development in populace and financial turn of events. The creator distinguished six world districts these organizations have internationalized as Europe, Asia, Africa, Latin America and the Middle East. The internationalization history could be followed to the 1990s and has internationalized enormously spreading to various pieces of this world .This could seen to agree with Uppsalas Model of internationalization where firms will in general steadily draw to nearer nations to diminish vulnerability for example clairvoyant separation. Likewise, the model tends to the issue of target information which has added to their purposes behind internationalizing because of simple exchange of information. (Johanson and Wiedersheim, 1975). 2.1 POPULAR TARGET MARKET The business created its most grounded development outside the US, with the end goal that their objective markets were in Europe, Asia/Pacific, Middle East-Africa (Apmea) activities. Europe area has been the most famous objective market for firms in the business on account of its political and social soundness (Yu, 1999) while different districts depended on factors like populace. 2.2 GEOGRAPHICAL CLUSTER The principle target advertise for the USA quick nourishments are Europe, Asia pacific, Middle East and Africa. In these nations they have some type of centralization of drive-thru eateries in zones near schools to describe school neighborhood food situations, shopping centers and the air terminals. The geo-coded databases research shows that cafés are deliberately situated at schools, shopping centers and air terminals which have been utilized to inspect locational examples of drive-through eateries in kindergartens, essential and auxiliary schools in Chicago. The utilization of bivariate K work measurable strategy by most specialists to evaluate the level of bunching (spatial reliance) of drive-through joints around school, shopping center and air terminal areas. Drive-through eateries are focused inside a short strolling good ways from schools, and furthermore near shopping center, air terminal which may uncover youngsters in school to low quality food conditions in their school neighborhoods. This may help other people, for example, the explorers and shopaholics (Austin et al, 2005). As indicated by Austin from the Harvard School of Public Healths Prevention Research Center aggregated a far reaching rundown of 613 drive-through joints in the city of Europe, just as a rundown of 1,292 open and private kindergartens, primary schools, center schools and secondary schools. Whereby every eatery and school was doled out longitude and scope arranges and evaluation tract distinguishing proof codes. Utilizing measurable techniques, the analysts evaluated the separations among schools and eateries and determined the level of grouping. 3.0 FOREIGN MARKET ENTRY MODE Firms Number of remote outlets Mc Donalds 8,923 KFC 4,984 Burger King 1,817 Sub way 1,668 Wendy 564 Taco Bell 348 Pizza Hut 482 Little Caesars 379 Table 2: Firms area in different mainlands Source: Personal correspondence, National Restaurant Association. (Washington, DC, 1997) and yearly Report The table recognized a few nations the quantity of remote outlet where the above US inexpensive food firms work. The significant market passage modes utilized by these organizations in this industry is diversifying. Diversifying could be viewed as one of the passage modes utilized by associations, which includes an authoritative understanding between an organization and an individual or another organization where the franchisor gives the option to work together under a typical exchange name an endorsed way, over a predefined timeframe and place in return for sovereignties or the installment of different charges. The organization offering the privilege is known as the franchisor, the organization/person who purchases and keeps up the privilege is the franchisee, and the privilege been purchased is alluded to as the establishment (Mendelsohn, 2004). 3.1 THE APPROPRIATENESS OF THE STRATEGY As indicated by Alan et al (1999), the advantages that accumulate to firm that takes part in diversifying as a method of section into outside business sectors incorporates: à ¢Ã¢â€š ¬Ã¢ ¢ Reduced expense and money related hazard related in entering an outside market à ¢Ã¢â€š ¬Ã¢ ¢ Serves as a decent motivating force to assemble gainful activity quicker. à ¢Ã¢â€š ¬Ã¢ ¢ It offers key coalition which helps the franchisee to profit by economies of scale and permits the franchisor the administrative adaptability of a littler firm. Erramilli et al (1990), in his examination distinguished that the administration business utilizes Franchising as a method of section. This is especially so on the grounds that Fast food firms offer delicate help and his thoughts regarding delicate assistance firms depend on the way that such firms can't trade their item since sending out essentially require a partition of maker and shopper and along these lines they need to depend on authoritative technique for example diversifying/authorizing so as to extend their market. Arnold (2003) recognized that diversifying is the most proper for duplication of a plan of action or arrangement, for example, an inexpensive food retail organization and menu. He further recognized that inexpensive food isn't culture bound in which promoting information (i.e., the item or administration explicit information associated with advertising this specific contribution) is in any event as significant as neighborhood showcase information (i.e., the information required to work effectively in a specific domain). It is likewise critical to take note of that in such organizations, the neighborhood administration work force are an essential separating factor, and these will clearly still be nearby in direction regardless of whether they work inside a universally reliable business format.(Arnold 2003: 2) Another thought proposed by scientists depends on Governments in many creating nations are getting mindful of the monetary advantages that diversifying can bring, and are encouraging the passage of outside franchisors in their business sectors (Pelton et al, 1997). Tayeb (2000), recommended that Franchising appears to be fitting for firms who need to hold control which will be partner

The Ethics Of Outsourcing At Mattel

Also, this article will address how corporate culture assumed a job in the choice to re-appropriate the assembling procedure to offices, which were not keeping lawful measures. Catchphrases Matter, corporate culture, morals, Fraud, item wellbeing. Solidify Classification MIM. BRB/BRB/Introduction/Corporate culture is characterized as the common qualities and/convictions of people inside an association (Statistics/and Satanist, 2009). Corporate culture is a significant/range colleague/acknowledgments to inspect when scientists endeavor to clarify untrustworthy conduct inside an organization.Previous inquire about in the region has principally centered around the positive viewpoints culture that is identified with firm execution (Deal and Kennedy, 1982 Peters and Waterman, 1982 Dimension, 990). It is additionally imperative to considerer/BRB/that the corporate culture can have negative effect handle/a firestorms tasks if the way of life bolsters exploitative and/criminal operations. Th is investigation inspects how one organization, Matter, built up a culture which permitted the exploitative and unlawful activities of its providers to adversely influence its tasks. R/BRB/focused uniquely on the low cost of creation of the Chinese providers. By permitting the quality principles to drop to conceivably perilous levels, Matter manageress/concentrated distinctly on their own personal circumstances since their/dish colleague/spermatozoon was straightforwardly connected to the monetary exhibition of Matter. In this manner, Matter directors disregarded potential wellbeing issues with the creation of the toys in China since lower levels of creation circle/BRB/greater expenses per unit would have an immediate effect handle/their absolute degree of pay for the year.As an outcome, Tiber/doesn't make a difference whether the absence of value controls/were purposeful or not. Since Amateurism's name goes handle/the last item, its chiefs were responsible forbs/the activities of t heir providers (Hegiras and Sims, pay off/Shanghaiing and Vital, 1990 Granite, 2003). BRB/1. The main review of toys/In 2006, 75 percent of all toys fabricated overall originated from China. Inside China, one area, Gudgeon, is the area of 5,000 of Chinaware's 8,BRB/range colleague/Spartan assembling plants.It is assessed that 1. 5 million specialists are utilized in Gudgeon toys fabricate (McLeod, 2006). Matter makes roughly 65 percent of its toys there. The enterprise states tabor/BRB/it requests that the toys that are re-appropriated to other/makers must consent to the security norms/built up by Matter. Crude materials that would lager/utilized by a redistributed maker are first sent Toby/the Matter control office so as to confirm they matter/all security standards.Matter has been producing innate/China since the first Barbie was made there in 1 959. BRB/The partnership has built up various longer/standing associations with China manufacturers,BRB/which may have lead to progressiv ely loosened up checking and/control of its activities (Story, 2007). Furthermore,BRB/Matter was a significant client for these providers, so Tiber/ought to have total authority over the assembling/break as it identifies with the degree of value and consistence with government guidelines and standards.However, Amateurism's top level chiefs appeared to brew/BRB/On August 1, 2007, Matter needed to review just about 1. BRB/million toys that were made in China. More than 80 toys/contained conceivably risky degrees of lead in thebe/paint on the toys. Quite a while provider of Matter had/range schoolmate/punished non-affirmed paint color which abused Amateurism's and the toy productively norms (Bugaboos, 2007). On August 2, 2007, Matter gave an official statement where it clarified its course f activity to address the problem.Matter worked with the U. S. Customer Product Safety Commission and other administrative organizations around the globe to pull the toys off the racks and end the ap propriation of any toy that contained the unsuitable degrees of lead. Robert Cocker, Chairman and CEO expressed that liquored apologize to everybody influenced by this review, particularly the individuals who purchased the toys in questioningly understand that guardians/BRB/trust us with what is generally valuable to climatically/kids. What's more, we additionally perceive that trust is earned. R/we will probably address this issue, improve circle/yester and keep up the trust of the families tabor/have permitted us to be a piece of their lives by acting/dependably and rapidly to address their conquistadors/(Matter, 2007). BRB/Sarah D. Satanist, Peter A Satanist, 2010. BRB/This review was in spite of the way that Matter was rabbet/of the potential lead danger at any rate a month earlier,BRB/BRB/Problems and Perspectives in Management, Volume 8, Issue 4, 201 For/BRB/when one of the European retailers that sold Matter/items toward the beginning of July found lead in a portion of its/to ys.On July 6, 2007 Matter halted creation characteristic/he processing plant, which they accept was the cause of thebe/lead paint. Remarking on the provider utilizing thebe/lead paint, CEO Chart expressed this was a provider which had worked for Matter for 1 5 years and lectureships question someone that just begun making toys/range schoolmate/support crawled comprehend our guidelines, they comprehend our program, and something turned out badly. That Herodotus. It is a prerequisite set up by Matter that those re-appropriated processing plants making Matter toys must utilize paint and other material from affirmed suppliers.As an outcome, Matter was uncertain about whether the producer bustiest paint from bar/BRB/provider who was not confirmed or whether the pioneer/paint originated from an ensured provider. In 2007, BRB/percent of Amateurism's all out incomes were based handle/the toys that were fabricated in their 11 industrial facilities in China which they claimed and worked (Stor y, AAA). BRB/2. Why lead painter/Lead is added to paint so as to build thebe/range cohort/punished in which the paint dries, to expand the solidness of the paint and to improve the capacity of the paint to oppose dampness which could cause consumption (Wisped).Lead paint is additionally simpler to apply on hard reface and can create a more extravagant/BRB/shading than paint without lead. The net outcome is tabor/lead improves how the paint is utilized in the creation procedure, however the lead isn't permitted to be added to the paints. Along these lines, paint in which pioneer/has been included is sold ATA Custodianship's cost of ennobler/third of the expense of paint that does exclude pioneer/(Barbara, 2007). BRB/Matter had permitted the neighborhood providers to actualize their own wellbeing testing which brought about the delivery of polluted toys from the processing plants in China/to kids around the world.The providers had/dashed to utilize less expensive paint which contained pioneer/to lessen fabricating costs. The provider tabor/made the toy Lee Deer Industrial Company was/explored by the Chinese Government for its/job in the utilization of corrupted paint. The provider expressed/that it was cheated by its own paint provider, challenge/sold Lee Deer Industrial the paint which included/the lead. Lee Deer Industrial guaranteed that they were/not mindful that the paint was defiled shrink/length colleague/radiant (Zamias and Casey, 2007).The Chinese government restricted Lee Deer Industrial from sending out any more toys until a full examination was finished. The net outcome was that Lee Deer Industrial needed to stop its tasks, which prompted the self destruction offer/BRB/its organizer Ghana Shogun. Awkwardness' reaction in bar/public statement to the self destruction was that liquored were/BRB/upset to catch wind of this lamentable encephalitis is bar/individual hardship not a corporate occasion. Any misfortunes/of life is a disaster and we feel for th e family during/this troublesome tentative (Cody and Joe, 2007). BRB/3.The second review/On August 14, 2007, Matter gave a second major/review of toys produced in China. The backed/call incorporate extra toys made with paint debased with lead just as a great many different toys which have magnets which could turn out to be free and/could be gulped by youngsters. An expected/436,000 toys were being reviewed because of lead painter/An extra 18. 2 million attractive toys were being/reviewed after announced wounds and demise of kids/length schoolmate/Spanish had gulped the magnets after they had gotten free from the toy.Matter expressed that the attractive toy review included 63 diverse changes of toys including such notable brand names as Pillory/Pocket, Batman, and Barbie. The lead paint reviewed/toys included brand names, for example, the characters offer/Sesame Street, Dora the Explorer and Disingenuous Carobs/(Story and Barbara, 2007). The senior VP of overall quality confirmation at Matter, Jim Walter, expressed that Matter had ldquostrengthenedrdquo its/three-point check quality framework to guarantee that toys/with lead would not enter the marketplace.Thebe/three point framework incorporates confirming that lone affirmed providers of paint will be utilized to make the toys, a required testing of each group of toys/created, the fixing of value controls including irregular reviews during the assembling procedure and the testing of each creation run offer/finished toys (Barbara and Story, 2007). As was/the case with the main review, a subcontractor was/used to gracefully the paint to Amateurism's contractual worker natural/China.Hong Lie Dad provided the paint to Early/Light Industrial which didn't know that the painter/had been defiled with lead. Early Light had/been a contractual worker for Matter for a long time. Matter/had utilized somewhere in the range of 30 and 50 contractual workers in China/and many subcontracted out piece of the creation/procedure t o a subcontractor. Lee Deer, the contractual worker/of the first Matter review lost its permit to send out and thusly left business (Story and Barbara, 2007). Lee

What is a Bond

What is a Bond Do you save your money or invest it?Like many people, you may have grown up knowing that you should have savings. It is indeed a good practice to have savings. But is it the best way to safeguard your financial future?To some extent, it is good enough.But in many other ways, investing your money is a better alternative.Investing is a term used to refer to various ways of making an income from your money. One way of making this income is by investing in a bond.By reading this article, you will learn the basics of bonds so as to be able to invest in them. You will also know the different types of bonds as well as their advantages and disadvantages.Before we get to the basics, let’s differentiate between bonds and their close relative, equity.Bond vs EquityBonds and equities are two ways in which you can earn money from investing in a company. Both are investment opportunities but are very different from one another.The biggest difference is in what happens after the initial purchase. When you become an equity holder, you essentially become a shareholder. A certain percentage of the company becomes your property.When the business does well, you get a share of the profits in the form of dividends. With a bond, the situation is different.When you buy a bond, you become a creditor to the business.The business owes you money equivalent to the amount you have put in as well as other payments like interests.You however do not become a shareholder neither do you share in the profitability of the company.Although shares attract a lot of attention as they get reported in the mainstream media, bonds are equally popular.This is especially the case with long-term investors or those putting their money away for reasons like retirement.This is because bonds have some advantages which shares cannot rival. More on this in the section about advantages and disadvantages of bonds. To understand bonds, let’s look at the common terms used when talking about them.You can use this li st as a reference when you need to recall these basics.BOND BASICSThere are certain terms whose meaning you must know if you are to understand bonds.Below are those we will look at in this section.IssuerA bond issuer is the person, organization or government institution which issues a bond. It is the body which is in need of funds and has decided to get them via this method.It may have other financial options available such as bank loans, sale of shares but has chosen the bond option. The issuer is responsible for setting the terms of the bond.These terms are what will determine the attractiveness of the bond.As the party borrowing money, the issuer’s credit rating will also play a role in determining the attractiveness of the bond.LenderThe lender is the person, organization or institution which lends money to the bond issuer by purchasing the bond issued.The lender will typically analyze the terms of the bond before deciding whether to buy it or not.Since buying a bond is an inv estment decision, the lender needs to be savvy in regards to this matter. If the lender is not experienced, he will normally hire an expert to do the analysis for him.The expert will then advice on which bonds are best to invest in.PrincipalThe amount which totals the investment made by the lender is what is referred to as the principal. This is also called the bond’s face value or par value.The principal is the the amount of money the issuer will pay the bondholder once the bond matures.For example, the bondholder may have invested $10,000 in a bond whose maturity date is 5 years. At the end of this period, the issuer will pay back $10,000 to the lender.The principal never changes and it must be paid back in full. This is separate from all other payments which are paid in the course of the investment period.Maturity DateEvery bond issued has a date by which the lender is supposed to be paid back his money. This date is called the maturity date.Depending on the bond, the maturity date could be anything from 5 â€" 10 years. Some bonds have a longer maturity period.Whatever the period is, the lender has to know it before purchasing the bond.CouponA bond’s coupon is its interest.When a bond is issued, part of the agreement is for the issuer to pay the lender small amounts of money periodically.This payment is normally done either annually or semi-annually.For the coupon to be determined, the coupon rate has to be known too.The coupon rate is simply the interest rate. It is the coupon rate that fixes the amounts payable every set duration.The amounts are calculated as a percentage (coupon rate) of the invested amount (principal).Coupon DateThis is the date of a coupon payment.Since coupons are paid either once or twice a year, the counting starts after the bond purchase.Often, this will be the same day for the bondholders.YieldThe bond’s yield is the return offered by the bond. It is a measure of how profitable the bond actually is. This measure is often use d when deciding which bond to invest in.Yield is measured in two ways: current yield and yield to maturity.Current yield represents the return you will get for holding the bond for one year.Yield to maturity on the other hand, calculates the total return you get from holding the bond till maturity.TYPES OF BONDSWith these terms aside, let’s look at the types of bonds you can invest in.Coupon BondsCoupon bonds are the most common type and also most attractive.They are simple to understand as they don’t have many options to consider other than the interest payment, rate and maturity date.Coupon bonds are those which offer a coupon payment at the end of a specified period. This period is either annually or semi-annually.The coupon will be calculated according to the principal and coupon rate and paid accordingly.This is what provides a guarantee source of income which is synonymous with bonds.Zero-Coupon BondsThese bonds do not have coupon payments as is the case with coupon bonds. They are also called accrual bonds.The only payment offered is the total accumulated value at maturity.This does not make them unattractive. They attract investors by initially trading at a discount.For example, an issuer may need $1 million for a project. He may then opt for a bond whose par value is $1,000.Since he does not intend to have coupons as part of the deal, he can then sell the bonds at $980.This means that for every bond purchased, the investor will get a $20 discount.If you buy the bond, you will actually have spent $980 and saved $20. You will thus have “earned” $20 through savings. Callable BondsCallable bonds provide the option of the bond being “called back” before maturity. This means that the issuer can buy them back some time in the course of the bond period.This can pose some challenges for you as the investor, while making it easier for the issuer to manage his financial burden. Bonds will typically be called when the market interest rates are falling .This helps the issuer to sell bonds at a lower coupon rate, thus reducing his burden.If you are an investor of such a bond, then you lose an opportunity of selling your bond at a high price. The high price will be occasioned by the lower interest rates.For example, your bond could have provided a 5% coupon rate.Most likely, this was the prevailing interest rate in the market. After 3 years, the prevailing market rate falls to 4%.This makes your bond, which pays at a coupon rate of 5%, more valuable than those currently in the market.With a higher value, the bond trades at a higher price. This offers you more profits if you sell.On the other hand, the issuer will opt to buy back the bond so that he cuts down on the high coupon payments.The new bond he issues will now have a coupon rate of 4%.Putable BondsThese bonds are very similar to callable bonds only that they work in reverse. With putable bonds, it is not the issuer who buys back the bonds. It is the bondholder who sells the b ond back to the issuer.This option can prove very useful for you in the future if you suspect that the bond would fall in value.If it does, you will be able to get back your principal and invest it elsewhere. Preferably in the more valuable bonds coming into the market.The situation for this comes when new bonds are being issued with higher coupon rates. This reduces the value of the bond you are currently holding.Traditionally, you would have been locked out of this new investment by the maturity period which is not yet due.With a put option, you get to sell the bond and use your money to buy another one.Putable bonds may not be very common but they come in handy when the issuer seeks to pay lower coupon rates. The option to sell the bond when needed attracts many bondholders. As such, the issuer is guaranteed to raise the required amount easily.Convertible BondsThese bonds offer an option of converting your bond investment into the company’s shares.They provide this option for t he investors who may be interested in it.However, the option can also be of great benefit to the issuer.Since the option is stated at the beginning, as an investor, you will know about it.But of greater importance to know, is the reason behind the option being included.Bonds are a means for organizations or governments to borrow money for a project. You will thus have to look at the project being undertaken to be sure of the possible benefits.If the project will be successful, then you can convert your bond into shares and sell them later as the prices go up.This is likely to happen because with the success of the project, there will be more people interested in the company’s shares. This makes the prices go up, offering you a profit if you sell. For the issuer, converting your bond into shares will be a welcome move.The biggest benefit is that the issuer will no longer need to pay coupons periodically.That means reduced expenses.At the same time, once you are a shareholder, it me ans there is no principal to be paid at maturity. That is another plus for the issuer.This outcome will actually make the company more profitable since their expenses will be reduced.The situation will be similar to when there are fewer creditors.Exchangeable BondsThese are just like the convertible bonds but with a slight difference.They are convertible for stocks though not of the issuing company.These bonds will offer the opportunity for bondholders to convert their investment into the stock of a company in which the issuer has a stake.The stake held by the issuer will then be “shared” with you. This makes you a shareholder in the other company.With this in mind, you need to examine carefully the details of the bond agreement before buying it.You may also need to consult some experts to know the profitability of the company whose shares are on offer.ADVANTAGES OF INVESTING IN BONDSBonds are an investment option taken by many. But as usual, it isn’t the only available one.Wh en it comes to investment options, there are preferences.Some people prefer certain options while others prefer different ones.If you are just getting started in investments or are looking to diversify your portfolio, how do you know whether bonds are a worthy choice?Here are some advantages to consider.Better Than Banks’ Savings AccountThe tradition way of saving money as known by many is through a savings account.The thought of putting your unused money in a safe place is good enough.But when the bank tells you that your money will earn you interest, it becomes better.But just what is it better compared to?Certainly not bonds.When you invest in bonds, you will prove this for yourself.If you have ever calculated the interest rate offered by your bank, you will realize it is really small. Bonds on the other hand, offer a better payment than your bank.In fact, your bank is most likely investing in some bonds.Most preferably government bonds or others from stable companies.The combi nation of bonds investing and loans is what makes banks report huge profits.If you are keeping your money in the bank, it will be a good idea to consider moving it to a bond.Provide Guaranteed Income StreamsOne great beauty of bonds is the annual or semi-annual payments of coupons.Depending on your needs, this payment can easily take care of your expenses.Especially if your investment in the bond is big.These payments are guaranteed in the bond agreement and unless something drastic happens, the payment cannot fail.One of the unfortunate turn of events which could stop the flow of this income is the bond being called.As explained above, this basically brings to an end the bond agreement.Something else that could happen is the issuer being declared bankrupt.This automatically stops the payments. But the good thing is that your investment (principal) is largely protected by law.Apart from these situations and any other like them, you are always assured of getting your interest payment at the date agreed upon.Offer Legal Protection in Case of BankruptcyOne of the biggest advantages of bonds over shares is the legal protection under the law.Bondholders and shareholders both have a stake in the company.The stake is however significantly different, particularly in the eyes of the law.This difference becomes clear when the issuer is declared bankrupt.A declaration of bankruptcy is an investor’s nightmare. If you are a shareholder, you will experience the worst part of the nightmare since your investment will be gone.If you are a bondholder, you will also suffer some losses because you will no longer be able to receive periodic coupon payments.Nevertheless, you will often be guaranteed to have your principal paid back.This will happen either in full or partly. It will depend on the exact financial situation the issuer is in.The law dictates that bondholders should be treated like creditors.Therefore, when a company starts paying back its lenders, bondholders are one of those guaranteed to receive payment.While creditors like banks may come first, rarely will bondholders lose out on all their money.This is unlike what happens to shareholders who are not prioritized.Potential for Reduced Tax BurdensSome bonds, especially those from the state government or municipality can be tax-free. The interest paid from these will enjoy either reduced taxes or be entirely free of tax deductions.When the government issues such a bond, it is often looking to attract investors.As such, the tax incentive is meant to entice as many investors as possible.This happens mostly when the issuer perceives that there is little interest in the market for bonds. It can also be used to supplement a low coupon rate.The current market rate may be quite high and so to match up to it, a tax incentive can be utilized.Investing in a bond which promises reduced or no tax deductions can be a good decision.Apart from saving you the time and expense involved in filing, your income wi ll be higher than if you invested in taxable bonds.Preservation of the PrincipalThe preservation of your principal is yet another laudable advantage of the bond investment.When the bond matures, you get your principal paid back to you in full. This gives you the opportunity to reinvest it somewhere else.Of course, being a shareholder gives you something similar though not quite.For shares, you will have some work to do. You will have to trade your shares at the current market price in order to get your “principal” back.This can be tricky considering that there may be little to no interest in the shares of the company.Also, the prices may be too low for you to recover your initial investment amount.More than that, you may have to spend more time waiting for enough people to buy all your shares in case they are many.The bond investment definitely stands out in making your life easier.You will receive back your money with little effort from your end.DISADVANTAGES OF INVESTING IN BO NDSMany advantages do not mean the absence of disadvantages.With all the good that can come from investing in bonds, here are some risks involved.The Risk of Being Called BackOne of the biggest risks involved in bonds comes from the possibility of being called back.As discussed in the section on callable bonds, this is not your preferred situation.First of all, you incur a loss in the sense that you will no longer receive the expected income.Upon the bond being called, you will no longer receive the remaining coupon payments. Note that those payments were in your plan. You probably had set your recurrent expenses to benefit from them.Now that they are no longer available, what do you do?You will most likely opt to buy another bond. Whereas this is a good choice, the coupon rates are now lower.That means less income coming your way.This is the second challenge which you will face. And part of the challenge is getting a bond which offers a good deal.Most bond purchases require some ti me to check them out and confirm their suitability.The industry in which the issuer operates is also important to consider.You may need an understanding of the factors which could affect the bond’s future performance.This exercise may take precious time at a time when you are looking to quickly re-invest your money.Interest Rate RisksRisks associated with fluctuating interest rates can cause an unfortunate situation for your bond investment.This is because you become stuck in a situation which you probably want to opt out of.For example, you may have invested in a bond paying at a coupon rate of 6%.With changes in the market interest rates, new bonds with a higher rate, say 6.5%, become available.You will have to choose one of two choices. Stick with your bond till maturity or sell it and buy the available ones.If you choose to stick with your current bond, you are choosing a lower income according to market rates.If you choose to sell your bond and go for the new bonds, you suffe r loss since your current bond has decreased in value.It will not be attractive to investors.This makes selling difficult.The decrease in value means that selling will attract a lower price than what you bought it for.Credit Rating RisksIn most cases, it is easy to avoid this risk because you first investigated the bond before buying. Credit rating risks are those associated with defaulters.This is where the bond issuer may fail to pay the promised coupons.Bond issuers’ credit ratings are usually published by independent analysts like Moody’s and Standard and Poors.In most cases, many investors still seek external advice. When an issuer’s credit rating falls, it means that he is likely to default on coupon payments.This could point to worse scenarios in the future.The project which necessitated borrowing may not raise enough money to pay coupons. The issuer could also be having no money to facilitate the payments.In this case, even your principal is at risk.Some bonds come wit h no collateral backing. This means that if the issuer is unable to pay, your money is lost. To cover for this, such bonds, usually called debentures, will often have higher coupon rates.CONCLUSIONBonds offer an attractive investment option that is way better than a bank’s savings account.Find out what moves the industry involved and understanding the factors which could affect your bond’s value.Once you settle that, make your investment and enjoy the benefits.