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IBM UNIT 2 -Technological Environment
Technological Environment J K Galbraith defines technology as a systematic application of scientific or other
organised knowledge to practical tasks.# Technology is the usage and knowledge oftools, techniques, crafts, systems or methods
of organization in order to solve a problem or serve some purpose.
Classification of TechnologyTechnology can be classified according to any of the
following categories :-
State-of-the-art-technologies : Technologies that equal or surpass the competitors.
Proprietary technologies : Technologies protected by patents or secrecy agreements that
provide a measurable competitive advantage. Known technologies : Technologies that may be common to many organisations but are
used in unique ways.
Core technologies : Technologies that are essential to maintain a competitive position.
Leveraging technologies : Technologies that support several products, product lines, or
classes of products.
Supporting technologies : Technologies that support the core technologies.
Pacing technologies : Technologies whose rate of development controls the rate of
product process development.
Emerging(influence) technologies : Technologies that are currently under consideration
for future products or processes. Scouting (jasoos) technologies : Formal tracking of potential product & process
technologies for future study or application.
Idealized unknown basic technologies : Technologies that, if available, would provide a
significant benefit in some aspect of life.
The Technology CycleFollowing classification, technology management
involves carefully implementing five stages :-
1. Awareness phase
2. Acquisition Phase3. Adaptation Phase4. Advancement Phase5. Abandonment Phase
(See Fig. Below)
http://en.wikipedia.org/wiki/Toolhttp://en.wikipedia.org/wiki/Crafthttp://en.wikipedia.org/wiki/Systemhttp://en.wikipedia.org/wiki/Toolhttp://en.wikipedia.org/wiki/Crafthttp://en.wikipedia.org/wiki/System7/28/2019 Ibm Unit 2-Detail
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Technology Awareness
of marketable invention
Technology
Acquisition
by self-generation
or transfer
Technology
Adaptation
Minor modifications
of acquired technologyfor specific needs
Technology
Advancement
Innovation involving
major modifications
of acquired technology
Technological
Abandonment
obsolescencing
External & internal
Environment
Factors affecting
the technology user
Promotion
Need
driven
expect
ations
Justificatio
n
Installation
1
2
3
4
5
6Demolition
Time
The Technology Cycle, showing the five basic elements of technologymanagement at any given level (product,service, function, work centre,
plant/division, corporation, industry, national or international) applicable todeal with an existing or new technology.
The dashed lines represent analysis.1. Awareness phase
This is the first phase of the technology cycle in which a company has a formalmechanism to become aware of emerging technologies
Some companies from think tank with engineers & scientists, who research from
around the world & put in short internal report form for the benefit ofcorporate strategic planners & technology policy markers.2. Acquisition Phase
To go from the awareness phase from acquisition phase, the companys technology
group, in collaboration with the industrial engineering group,would conduct technical feasibility, & economic feasibility studies before justifying &
acquiring a new technology.
3. Adaptation Phase
Virtually every enterprise ends up adapting an acquired technology for its particular
needs
If the homework done correctly, the transition from acquisition to adaptation becomes
much smoother & less expensive
Conversely, this not only frustrates the people acquiring the technology but also slows
down the assimilation rate, causes major productivity losses, & results in severe qualityproblems.
4. Advancement Phase
When capital is limited one cannot indiscriminately purchase & abandon technologieswith scarce money
It becomes imperative to improvise the acquired technologies for ones home needs.
5. Abandonment Phase
This last phase of the technology is the most critical
Bad timing in prematurely abandoning a product could result in lost revenues, & on the
other hand,waiting too long to abandon might also result in lost revenues because acustomer may find a better alternative in competition.
Impact of Technology We propose to discuss the impact of technology in general, under three heads :-
a) Technology & social change
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b) Economic effects of technology, &c) Technology & plant level changes
(See Fig. Below)
Technology
A. Social implications C. Plant level changesB. Economics implications
High expectation
of consumers
Systems complexity
Social systems
Social changes
Organisation structure
Resistance to change
Increased regulation &stiff opposition
Problems of techno-
structure
Jobs become intellectual
Need to spend on R&D
Increased productivity
Fear of risk
e-Commerce
Telecommuting
Rise & decline of
products & organisations
Boundaries redefined
Transportation
Markets
Technology transfers
Impact of Technology
A. Social Implications
Perhaps the most striking influence of technology is found on society as every area of
social life & the life of every individual has been, in some sense or the other,changed by the developments in technology.
A1. High Expectations of Consumers
Technology has contributed to the emergence of affluent societies, who want more of
many things than more of same things, like varieties of products, superior in quality, freefrom pollution, more safe, & more comfortable.
This calls for substantial investment in R&D.
One important compulsion for investing in technological advances in Japan is its
customers high expectations regarding design sophistication, quality, delivery,
schedules, & prices Industry owners in Japan swear by the dictum the customer is a god who is always
right.
High expectations of consumers pose a challenge & an opportunity to the owners of
business institutions.A2. System Complexity
Technology has resulted in complexity
Modern machines work better & faster no doubt
But if they fail, they need the services of experts for repairs
They fail often because of their complexity
A machine or a system is composed of several hundred components
All parts must work in tandem to accomplish a desired task
Reliable performance of each part, therefore, assumes greater significance because of
interdependence of systems.
Management is, therefore, under pressure to keep the whole system working all the time.
A3. Social Change
The role of technology on social change may be
observed in more than one way :-First, there is the change in social life, which results from a change in a technological
process. Thus, an invention may displace thousand of workers, yet the same inventionmay result in the creation of a new city some- where else & create even more jobs than it
originally destroyed. Technological, this way create a turmoil in society.
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Secondly, besides uprooting population, technology directly changes the patterns oftheir social life. An invention may open new employment opportunities to women,radically change hours
spent at work & in the family, increase available leisure time, open jobs to youth, & denythem to middle-aged or old workers. Technological advancement tends to smoothen
out differences, as it creates a more freer & egalitarian society.Thirdly, though social differences tend to be ironed out, status differences are likely to becreated by technological advancement in developing countries as technology flows to lessdeveloped countries mainly through multinational companies. In India, the employees inforeign collaborations are paid much more than are paid in other local Indian companies,though they do the same job in the same field.Fourth, the way we cook, communicate, use media & work are affected by technology. Eventhe language we use is changing, terms that until recently were not even part of our lexiconhave become common place. Social changes are also reflected in our vocabularies like,house-husband, surrogate mother, & domestic partner, etc. It is therefore, rightly said that thewords are the bugles of social change. When our language changes, behavior will not be far
behind.Fifth, technology has its impact on religion in at least two ways, first, religiosity has declinedin importance as consumers have come to rely on technology rather than on benevolentdeities for their well-being. Secondly, (on the negative side), modernisation pressuresagainst genetically modified foods to wholesale rejection of western technologies bycertain religious fundamentalists.
Sixth, technology has revolutionalised the education system. The internet makes vastknowledge bases available to a large number of people electronically.
It has virtually democratised education by enabling in the very poor & remote countries toaccess the worlds best libraries, instructors, & courses available through the Internet.
A4. Social Systems
Of particular interest is the knowledge of technology
At this level, technology creates a distinct type of social system,
namely, the knowledge society
In the knowledge society, use & transfer of
knowledge & information, rather than manualskill, dominates work & employs the largestportion of labour force
The knowledge-worker will have to show why
he should be retained, what benefit he canoffer to the organisation, & how he can add
value to whatever the organisation does
He will have to create new jobs in consultation with
his employer
A job will then become a joint venture
When this happens, the worker can forget pension
plans.
B. Economic Implications
Developments in technology also have
significant economic implications :-
B1. Increased productivity
the most fundamental effect of technology is
greater productivity in terms of both quality& quantity
This is the main reason why technology at all
levels is adopted
As a result of productivity improvements, real
wages of employees tend to rise & prices ofsome products decline.
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B2. Need to Spend on R&D
Research & Development (R&D) assumes
considerable relevance in organisations astechnology advances
Firms are required to consider, decide & take
action on at least six issues.
First, the allocation of resources to R&D.It enables business improve corporateperformance by enabling the firm to betterdevelop synergies among product lines &business units.
Secondly, technology transfer, the process of taking
new technology from the laboratory to the marketplace is equally important when the company fails todevelop much in the way of major innovations.
Thirdly, time factor is important in R&D.Companies can no longer assume that competition
will allow them the time needed to recover theirinvestment.
Fourthly, as new technology comes in, the old
technology needs to be abandoned. The process ofold replaced by new is called technologicaldiscontinuity. Such discontinuity occurs when a newtechnology cannot be used simply to enhance thecurrent technology but actually substitutes for thattechnology to yield better performance. The R&D
manager must determine when to abandon presenttechnology & when to develop or adapt newtechnology.
Fifthly, the firm must also decide on its own R&D or
to outsource technology. As a rule, it may be statedthat a company should buy technologies that arecommonly available but make (& protect) those atare rare, valuable, hard to imitate, & have no closesubstitutes. In addition, outsourcing technology maybe appropriate when :-
The technology is of little significance to com-
petitive advantage
The supplier has proprietary technology
The suppliers technology is better &/or
cheaper & reasonable easy to integrate intothe current system
The technology development process requires
special expertise, &
the technology development process requires
new people & new resources.
Thesixth & the final issue relates to the decision on
product innovation or process innovation. In theearly stages, product innovations are most importantbecause the products physical attributes &capabilities affect financial performanceconsiderably. Later, process innovations such as
improved manufacturing facilities, increasingproduct quality, & faster distribution becomeimportant in maintaining the products economicreturns.
B3. Jobs Become Intellectual
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With the advent of technology, jobs tend to
become more intellectual or upgraded
A job hitherto handled by an illiterate & un-
skilled worker now requires the services of aneducated & component worker
Introduction of new technology dislocates
some workers
This makes it obligatory on the part of
business houses to retrain its employees & torehabilitate those displaced & untrainable
Equal is the responsibility of the government
to provide training & educational facilities to itscitizens - those who pick up & acquaint themselveswith the new technology, the job will be rewarding
as they stand to gain through increased productivity,reduced prices, & increased real wages
Along with upgrading jobs, technology has its
impact on human relations
Since interaction & activity affect sentiments, & they
begin to feel & think about one another & abouttheir work situation.
B4. Problem of Technostructure
Not only jobs become more intellectual &
knowledge-oriented, even the incumbents tendto become highly professional &knowledgeable
Such an enterprise has to face on this account
serious problems :-
First, motivation of such employees is a
difficult task because incentives as attractiveremuneration, job security, & just treatment,hardly inspire the enlightened employees towork more. They are instead motivatedby opportunities which offer challenges or growth
or achievement.Secondly, retraining such employees for long is a
difficult job. Flighting & not sticking to onecompany is their culture. The company has to makeseveral exceptions to discourage rootless ness of itsprofessional employees :-
Regular attendance & punctuality have to be
relaxed
Dual promotion ladders have to be established
so that distinguished technical people can rise
in rank Profit-sharing to be provided to give creative
persons a financial stake in the ideas theycreate
Attendance at professional get-togethers has
to be sponsored
Writing professional articles has to be
encouraged & special assignments & part-time
teaching may be allowed.
Thirdly, scientific & professional workers constitute,
the technostructure. The technostructure tries to
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control the organisation through influencingmanagements decision-making. But they are moreaction oriented & are yet to learn social problems ofbusiness decisions. Management is, therefore, in a
in a tight position to balance the ruffled feelings oftechnocrats & the social consequences of businessdecisions.
B5. Increased Regulation & Stiff Opposition
A by-product of technological advancement is
the ever-increasing regulation imposed onbusiness by the government of the land & stiffopposition from the public as the host govern-ment has thepowers to investigate & ban products that are directly harmfulor hurt the sentiments of a section of society.
B6. Rise & Decline of Products & Organisations
Change of technology is a norm & not an exception
This poses another problem to business
A new technology may spawn a major
industry but it may also destroy an existingone
Transistors, for example, hurt the vacuum-
tube industry & xerography hurt the carbonpaper business
A typical product, today, is subject to a cycle :
introduction, growth, maturity, decline, &
abandonment
An organisation that is associated with particular
technology will go in sequence through the followingstages :-
(i) birth, (ii) growth, (iii) policy, (iv) procedure,
(v) theory, (vi) religion, (vii) ritual, & (viii) last rites.
B7. Boundaries Redefined
Technological changes have significant consequencesfor industries :-
Technological change is a potent force in the
reconfiguring of industry boundaries, it maybroaden or narrow generally exceptedindustry boundaries
As a consequence of its impact on whole
industries, technological change can have asignificant impact on the prevailing businessdefinition of individual companies. Companies
may find themselves in a different businessdue to technological changes that they or others haveeffected
Technological change is one of the important factors
giving rise to product substitution & productdifferentiation. Technological change is a dominantforce in shaping competitive dynamics in manyindustries. It influences industry boundaries &structure, product substitution & differentiation, &the price quality relationships between products
Technological change in the form of process (as
opposed to product) & materials innovations maycontribute to many of the impacts noted above
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Finally, for multi-product companies (preceding
discussion applies to single-business units),technological change may have multiple impacts.
C. Plant Level Changes
The impact of technology at the plant level is also
significant.
C1. Technology & Organisation Structure
Technology has considerable influence on
organisation structure, length of the line ofcommand, & span of control of the chiefexecutive
Where companies use technology, which is fast changing,
matrix structures are more common Some companies use a matrix even though the
rate of technological change is not fast
Besides technology, other factors that have
their influence on organisation structure arehistory & background of a company & the
personalities of the people who founded the firm &managed it subsequently, but the impact of techno-logy is considerable
Line of command tend to be lengthy where the
production is routine & process based
Decision-making is highly centralised
It tends to be short if the production activities are
customised
The use of specialists will be more & hence decision-
making gets delegated
In mass production technologies, the number of
people whom an executive controls tends to be largerthan when the production is unit based
Any technological advancement will result in :-a) the expanded availability of a range of
products & services
b)substitution of capital for labour, leading to
higher productivity & lower costs
c) increases in sales or power for the innovating
organisation relative to its competitors
d)initiation of changes in behaviour among
customers, suppliers, employees, or society, &
e) side-effects on the quality of physical
environment.
C2. Resistance to Change
The manager of a given business unit shall
face resistance to change as new technologyposes new problems
The resistance to change is often psychological
A typical businessman himself is opposed to
adopting new technology as it is expensive &risky
When he is making enough money with
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obsolete technology why must he worry aboutnew technology?
Specifically, resistance to change stems from the
following reasons :-1. Psychological or social commitments to existing
products, process & organisation,
2. Sizable capital investments in long-life single-usefacilities,
3. Low profits & reduced rate of growth,4. Small size or fragmented activities,5. Complacent top management,6. Industry norms & associations or cartels that
perpetuate industry-bound thinking,
7. Lack of successful entrepreneurial models to emulate, &
8. Powerful labour resistance to changes in methods.
C3. Fear of Risk
There is always the fear of risk.
A research oriented-company like DuPont
an intended substitute for the fore-
casted shortage of shoe leather, after an invest-
ment of $3000 million, abandoned the project
in 1971 because of quality & cost problems.
C4. E-commerce
The phenomenal growth of the internet & the
associated World Wide Web has made e-commerce possible
E-commerce is contributing to a growing per-
centage of cross-border transactions
It rolls back some of the constraints of
location, distance, scale, & time zones
The Web allows, both small & large, to expand
their global presence at a lower cost than everbefore, wherever they may be located, & whatever their size
Modern factories are now able to produce
goods in a shorter period of time (to produce one carit takes less than 10 seconds) & with fewer defects -thanks to the introduction of Six Sigma qualityprogrammes
Six Sigma is a statistical term that means 3.5 errors
per million, effectively eliminating performanceproblems & ensuring that products conform tostandards
While e-commerce focuses on marketing & sales
process, E-business emphasises integration ofsystems, processes, organisations, value chains, &markets
Integration operate through Internet & helps build
new relationships between businesses & customers
The internet & e-business provide a number of benefits
in global business, including the following :-
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1. Convenience in conducting business worldwide;facilitating communication across borders whichbrings markets closer
2. An electronic meeting & trading place, which addsefficiency in the conduct of business
3. Power to consumers as they gain access to limitlessoptions & price differential
4. Efficiency in distribution
C5. Telecommunications
The obvious dimension of the technological
environment facing international business istelecommunications
This growth is welcome as business, domestic
or global, cannot prosper without an efficient
telephone system, such as, 3G, MMS ofNOKIA.C6. Transportation
In addition to developments in computers &
telecommunications, several major innovations
in transportation have occurred since World
War II
While the advent of commercial jet has
reduced the travel time of businessmen,containerisation has lowered the costs ofshipping goods over long distances.
C7. Gobalisation of Production
Technological breakthroughs have facilitated
globalisation of production
A satellite based communications system
allows Texas Instruments (TI) to co-ordinate
on a global scale, its production planning, cost
accounting, financial planning, marketing,
customer service, & human resource.
C8. Markets
Along with the globalisation of production,
technological innovations have facilitated theinternationalisation of markets
As stated earlier, containerisation has made it
more economical to transport goods over longdistances, thereby creating global market
Low-cost global communications networks
such as the World Wide Web are helping toelectronic global market places
In additions, low-cost jet travel has resulted inthe mass movement of people around theworld
This has reduced the cultural distance between the
countries & is bringing about convergence ofconsumer tastes & preferences
At the same time, global communications networks
& global media are creating a worldwide culture
Worldwide culture is creating a world market for
consumer goods.
C9. Technology Transfers
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Technology transfers includes :-
i) Internal transfer of technology from the R&D
or engineering department to themanufacturing department of a firm based in
a country
ii) The same transfer of technology from a
laboratory or operations of an MNC in onecountry to its laboratory or operations inanother country
iii) The transfer of technology from a research
consortium supported by many firms to one of
its members
Simply told, technology transfer is a process thatpermits the flow of technology from a source to areceiver through published material
Purchase & sale of machinery, equipment & inter-
mediate goods, transfer of data & personnel; &interpersonal communication
Enhancing Technological Capabilities
1. Severe Compitition
2. To gain competitive edge3. Huge funds for R & D only with developed countries4. Developing countries depend on adaptation & assimilation of existing technologies5. India developing quality IT & bio-technology6. Developing countries prefer hard aspect of technology(plant, equipment, patents NOT softaspect(knowledge, know-how, mgt.practices)7. Import of technology is a short term measure
Technology Generation
1. TNC play major role2. Economies of scale, ability to finance R&D
3. Govt. depts. Some private firms, individual scientists, with the help of govt. / Big corporationsdo R&D4. FDI brings technology to the host country5. Developing countries mainly depend on hard aspect of technology, also onadapting/improving existing technologies6. MNC / TNC coming to developing countries for R&D due to abundant and economicalscientists here.
Technology transfer 1. Internalised by TNC To affiliates for development, production, economies of scale, secrecyintact, economical & faster, repeated upgradation, new skills to host country, new avenues to
parent co.BUT, new technology can be expensive to affiliate, difficult to absorb and adopt new tech. inhost country2. Externalised transfer Tech. transfer through, franchising, licencing, sub-contracting, jointventures etc.Steps to falicitate tech. trfr.
Attract new MNC,
Provide incentives,
Attract investment,
Liberalize tax / trade regime
Improve infrastructure,
Improve skills of employees,
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Help local firms in getting right
technology from right sources
Technology transfer comprise six categories :-
1. International Technology Transfer is acrossnational boundaries. Generally, such transfers takeplace between developed & developing countries.
2. Regional Technology Transfer is transferredfrom one region of a country to another.
3. Cross-industry or Cross-sector TechnologyTransfer is transferred from one industrial sector
to another.
4. Interfirm Technology Transfer is transferredfrom one company to another.
5. Intra-firm Technology Transfer is transferredwithin a firm, from one location to another. Intra-firm transfers can also be made from onedepartment to another within the same facility.
6. Pirating or Reverse-Engineering wherebyaccess to technology is obtained as the expense of theproprietary rights of the owners of technology.
International Technology TransferParties in the Transfer Processi) Home country,ii) Host Country, &iii) The Transaction
i) Home country
Argue that the establishment of production facilitiesBy MNCs in subsidiaries abroad decrease theirExport potential
Some of the MNCs imports stem from theirSubsidiaries, the volume of imports of the home
Country tends to increase
Besides, technology transfer tends to effect adversely
Competitive advantage of the home country
Labour unions in the home country too oppose
Technology transfer on the ground that the jobs
Generated from the new technology will benefit the
Host country citizens.
ii)Host Country
a) Economic Implicationsb) Social Implications
Economic Implications Economic implications include payment of fee,
royalty, dividends, interest, & salaries to foreigntechnicians & tax concessions resulting in loss to thenational exchequer
All these are payable to the transferring country &
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might prove very expensive to the host country
Many times, the type of technology transferred by
international business is not appropriate todeveloping countries, is designed to produce thetypes of goods that a rich country needs
& to do so by methods, which are appropriate to
resources endowment of developed nations.
b) Social Implications
Along with the transfer of technology, there is the
transmission of culture from the exporting countries
The upper & middle class Indians are a case in point
Majority of these neo-rich people are totally Wester-
nised & Americanised in their attitudes, behaviours,food habits, & dress accustomedness
This is because, we import technology from theUnited States & European countries.
iii)Transaction
This element focuses on the nitty-grities of the transfer.
Stages in the Transfer Process
The transfer of technology between countries,
particularly from rich to developing nations, proceedsin five different, but coordinated stages :-
1.Assignments, including sale & licensing agreementscovering all forms of industrial property includingpatents, inventors certificates, utility models,industrial designs, trademarks, service names, &trade names.
2.Arrangements, covering the provision of know-how& technical expertise in the form of feasibility
studies, plans, diagrams, models, instructions,guides, formulations, service contracts &specifications, &/or involving technical, advising,& managerial personnel, personnel training, &equipments for training.
3.Arrangements, covering the provision of basic ordetailed engineering designs, & the installation &operations of plant & equipment.
4.Purchases, including leases & other forms ofacquisition of machinery, equipment, intermediategoods, &/or raw materials insofar as they are part of
transactions involving technology transfers
5.Industrial & technical cooperation agreements ofany kind, including turnkey agreements,international subcontracting, as well as provision formanagements of & marketing servicesTechnology is not a homogeneous phenomenon. There
are different types of technology, each posing fundamentally
different problems & demanding
different solutions in the international transfer process.
International Technology Issues -
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Foreign Technology Acquisition
One of the major issues in technology relates to the
mode of acquisition
Developing new technology may conjure up visions
of scientists & product developers working in R&D
laboratories In reality, new technology comes from many
different sources, including suppliers, manufacturersusers, other industries, universities, government & MNCs
While every source needs to be explored, each firm
has specific sources for most of the new technologies.
Broadly the acquisition routes are three :-A. Internal Technology AcquisitionB. External AcquisitionC. Combined Sources
Internal Technology Acquisition Internal technology acquisition option have the
advantage that any innovation becomes the exclusiveproperty of the firm
In addition, the resulting technology will be tailored
to meet the firms needs
However, internal development has risks
The development take longer time than acquiring
already developed technology from external sources In addition, internally generated technology is more
expensive than the one acquired from outsidesources.
B. External Acquisition
External technology acquisition is the process of
acquiring technology developed by other for use inthe company
External technology acquisition generally has the
advantage of reduced cost & time to implement &lower risks
However, technology available from outside sources
was generally developed for different applications
Therefore, external acquisition should contain an
aspect of adaptation to the acquiring co. application.
C. Combined Sources
Many forms of technology acquisition are
combinations of external & internal activities
Combined acquisition seek to overcome thelimitations of internal & external sources, takingadvantages of both the actions at the same time
Technology acquisition RoutesPURELY INTERNAL PURELY EXTERNAL
Technology transfer X
& Absorption
Contract R&D X
R&D Strategic
Partnership X X
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Licensing X
Purchasing X
Joint Venture X
Acquisition of Co.With Technology X
Choice of Technology
Terms & Conditions of Technology Transfer
Globalisation The world economy is passing through structural
changes
These changes are driven by globalisation of
business as well as by the revolution in information,communication, & transportation technology
Nations now have powerful technology in their
hands, fundamentally transforming the way inwhich business is conducted around the globe
The World Trade Organisation (WTO) iscontributing to globalisation by removing tradebarriers between countries & involving mechanismfor smooth conduct of trade among nations
The WTO has also evolved a mechanism to manage
technology better
The main provision of the WTO that influence
technology transfer are included under the followingsections :-1. Trade Related Aspects of Intellectual Property
Rights (TRIPs)
2. Trade Related Investment Measures (TRIMs)3. Subsidies & Countervailing Measures (SCMs)4. The Information Technology Agreements
(ITA)
Barriers to Technology TransferThe final international technology issue relates tobarriers. The problems encountered in transfer oftechnology are :-
A limited general understanding of the concept of
technology, & the lack of consistent framework for
its study Lack of systematic planning for technology in
developing countries or misunderstanding of itsunderlying philosophy
Lack of bilateral scientific/ technology advantage in
the process of technology transfer (mutual benefits)
Lack of systematic & integrated engineering & socio-
economic approach to the technology transferprocess
Lack of a relevant quantitative framework/
approach to the analysis & evaluation of technology
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transfer to developing countries
Failure to include ergonomic aspects in technology
transfer or to accord sufficient value to the humanmachine interface variable of the transferredtechnology, or the failure to adjust the technology to
the existing socio-cultural system Lack of attention to environmental consideration &
assessment of technological impact
Failure to determine whether a national consensus
& orientation exist for a transfer
Failure to recognise the local potential (cultural &
economic) for adoption of technology (that is, failureto determine the availability of social & economicinfrastructures)
Failure to determine if the existing national
productive capacity is adequate to support theapplication of the transferred technology
Restricting the feasibility study of technology
transfer to financial assessments (mostly cost benefitanalysis)
Absence of any substantial effort to review & utilise
the potential of technological interchange & socio-technical collaboration for technology transferbetween developing countries
Presence of ethnical problems within the technology
transfer
failure to evaluate or consider conflict causing
factors pertaining to the transferred technology.
These factors can be categories into :-1. sector conflict factors conflicts that can arise
within the techno-economic systems
2. rural urban conflict factors arising because ofspatial (that is, regional) imbalance in thedistribution of physical resources needed for specificindustry in the long-term (for instance, sacrificing
the existing production institutions in an area inorder to initiate to new, imported, mostly large scaletechnology), leading to
3. Factors disturbing the socio-cultural balance thatoperate with in the social system :due to the nonconformity of the transferredtechnology with the available potential, & with theinherent objective of development policies &national techno-economic plans in developingcountries ; & due to the lack of specific software &any other sophisticated supportive tools for
technological planning & technology assessmentwithin the technology transfer framework.
Technology Diffusion (adoption)
Diffuse means spread out, scatter, pour inDifferent directions, Diffusion of technology is the process by which technologyis communicated among and adopted by the members of a social system.
Technology is transfered & shared by suppliers, buyers and affiliates
R&D institutions
Competitors
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Technology Dissemination (Spread widely) -
Ex : Worldwide expansion of mobile networks has put mobile technology into the hands
of millions of people who do not have access to desktop computers or reliable landlineconnections to the Internet. Innovative programs have been put in place to disseminatecrucial health, social and political data over mobile devices and to use them to collecteyewitness reports and personal health information.
Technology Spill over (overflow)
Positive and negative, TNC can poach R&D staff of local firms offering better incentives
thus hindering the local firms prospectives.
Technology Diffusion
Diffuse means spread out, scatter, pour indifferent directions, Diffusion of technology is the process by
which technology is communicated among and adopted by the
members of a social system. People naturally resist change
Technology Spill over (overflow)
INTERNATIONAL BUSINES THEORIES :-
1. MERCANTILE THEORY OF 17TH CENTURY
17th century ofmercantilism which emphasized that a country should export as manygoods as possible and minimize the import of goods. Mercantilism emphasized tradesurplus and zero sum game - where only one participant would reap the benefits,while absolute advantage theory proposed a positive sum game - where allparticipants in the free trade would benefit from international commerce.Mercantilism also advocated use of government to achieve trade surplus while AdamSmiths theory emphasized free trade, where supply and demand of goods would bedictated by the invisible market forces, with no government involvement - laissez-faire.
2. The absolute advantage theoryThe absolute advantage theory was given by Adam Smith in 1776; according to the absoluteadvantage theory each country always finds some absolute advantage over another country in theproduction of a particular good or service. Simply because some countries have naturaladvantage of cheap labour, skilled labour, mineral resources, fertile land etc. these countries areable to produce some specific type of commodities at cheaperprices as compared to others. So,each country specializes in the production of a particular commodity. For example, India findsabsolute advantage in the production of the silk saris due to the availability of skilled workers inthe field, so India can easily export silk saris to the other nations and import those goods inwhich other countries find absolute advantages.
But this theory is not able to justify all aspects of international business. This theory leaves noscope of international business for those countries that are having absolute advantage in all fieldsor for those countries that are having no absolute advantage in any field.
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3. The comparative ADVANTAGE theory
After 40 years of absolute advantage theory, in order to provide the full justification ofinternational business David Richardo presented the Richardian modelcomparative costtheory. According to the comparative cost theory, two countries should do business with eachother if one country is having an advantage in the ability of producing one good relative to
another good as compared to some other countrys relative ability of producing same goods. Itcan be well understood by taking an illustration-
If USA could produce 25 bottles of wine and 50 pounds of beef by using all of its productionresources and France could yield 150 bottles of wine and 60 pounds of beef by using the sameresources, then according to absolute advantage theory France finds clear advantage over USA inthe production of both beef and wine. So, there should not be any business activity between thetwo countries. But this is not the case according to the comparative cost theory. Comparativecost theory suggests relative comparing of the beef and wine production. In relative comparingwe can find that France sacrifices 2.5 bottles of wine for producing each pound of beef (150/60)and USA sacrifices 0.5 bottles of wine for producing each pound of beef (25/50). So, we can see
that production of beef is more expensive in France as compared to USA. Comparative costtheory suggests USA to import wine from France instead of producing it and in similar mannertheory suggests France to import beef from USA instead of producing it.
In this way, comparative cost theory well explains the driving forces behind internationalbusiness.
4. Opportunity cost theoryThe opportunity cost theory was proposed by Gottfried Haberler in 1959. The opportunity cost isthe value of alternatives which have to be forgone in order to obtain a particular thing. Forexample, Rs. 1,000 is invested in the equity of Rama News Limited and earned a dividend of six
per cent in 1999, the opportunity cost of this investment is 10 per cent interest had this amountbeen deposited in a commercial bank for one year term.
Another example is that, India produces textile garments by utilizing its human resources worthof Rs. 1 billion and exports to the US in 1999. The opportunity cost of this project is, had Indiadeveloped software packages by utilizing the same human resources and exported the same toUSA in 1999, the worth of the exports would have been Rs. 10 billion. Opportunity costapproach specifies the cost in terms of the value of the alternatives which have to be foregone inorder to fulfil a specific art.
Thus, this theory provides the basis for international business in terms of exporting a particular
product rather than other products. The previous example suggests that it would be profitable forIndia to develop and export software packages rather than textile garments to the USA.
RATIONALE (Advantages) FOR GLOBALISATION :- (fundamental reason, logical basis)
-
1. Cost reduction
2. Global learning
3. Arbitrage advantage
4. Rapid industrialisation
5. Better allocation of resources
6. Reduction in poverty
7. Employment generation
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8. Balanced development
9. Better quality of life
10. Human development
11. Dissemination of knowledge
12. Integration of economies
13. Flow of men, money, material
14. Advancement in transportation, communication & technology
15. Creation ofTrading blocs, such as the
North American Free Trade Agreement (NAFTA)-Members U.S, canada, Mexico
the European Union (EU) Britain, France, Germany, Italy, Spain etc.
the Asia-Pacific Economic Co-operation (APEC) Australia, Canada, Indonesia, Japan,
Korea, malaysia, New Zealand, Singapore, Thailand, etc.
the Association of South East Asian Nations (ASEAN) Brunei, Myanmar, Combodia,
malaysia, Philipines, Singapore, Thailand, Vietnam.
and the East Africa Community (EAC) Brundi, kenya, Rawanda, Tanzania, Uganda
support regional cooperation between geographical neighbours.
Disadvantages of Globalisation
1. Threat to domestic industry
2. Unemployment
3. Exploitation of labour
4. Overuse of natural resources
5. Widening gap between rich & poor
6. Threat to national sovereignty
INTERNATIONAL BUSINESS THEORIES
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1. Mercantile theory-17th century England Trade for Gold & Silver, maintain trade
surplus - Export more import less, Govt. should impose tariff on Imports, based on zero
sum game gain for 1 country loss for other country. Critisised for this, there should
be positive sum game where all countries gain by trade.
2.Absolute Cost Advantage theory- BY Adam Smith in 1776, states that countries
should produce and export that product which they can produce at a lesser cost than
others. Ex- Britain cloth, France wine. Critisised for unrealistic assumptions
homogeneity of products, tastes, two country, two commodity, labour cost of
production.
3. Comparative Cost Advantage theory-David Recardo-1817, states that countries
should produce and export that product which they can produce at a lesser Comparative
cost than others. Assumptions
Labour only, homogenous, fixed supply, full employment, same tech. in both countries,
no transport cost, no barriers of trade.
4. Factor Endowment theoryby Eli Hecksher-1919 & Bertil Ohlin -1933 What
factor a country has more ? Labour OR capital . Ex. India & China have ample cheap
labour so should engage and export of labour oriented products cloth / leatherproducts, and import Capital oriented products from U.S / Japan etc.
Risk in international trade - Buyer insolvency
Non-acceptance
Credit risk
Regulatory risk
Intervention
Political risk
War and other uncontrollable events
unfavorable exchange rate movements
TRADE BARRIERS
Tariffs (taxes and duties imposed on goods and services that are imported and
exported)ex. Import duty,Customs duty
Non-tariff barriers to trade - Import licenses , Export licenses , Import quotas
Top trading nations
Main articles: List of countries by exports and List of countries by imports
Rank Country Exports + Imports Date of
information
- European Union (Extra-EU27) $3,197,000,000,000 2009 [26]
1 United States $2,439,700,000,000 2009 est.
2 Peoples Republic of China $2,208,000,000,000 2009 est.
http://en.wikipedia.org/wiki/Tariffhttp://en.wikipedia.org/wiki/Non-tariff_barriers_to_tradehttp://en.wikipedia.org/wiki/Import_licensehttp://en.wikipedia.org/wiki/Import_quotahttp://en.wikipedia.org/wiki/List_of_countries_by_exportshttp://en.wikipedia.org/wiki/List_of_countries_by_importshttp://en.wikipedia.org/wiki/European_Unionhttp://en.wikipedia.org/wiki/European_Unionhttp://en.wikipedia.org/wiki/International_trade#cite_note-25%23cite_note-25http://en.wikipedia.org/wiki/United_Stateshttp://en.wikipedia.org/wiki/United_Stateshttp://en.wikipedia.org/wiki/People's_Republic_of_Chinahttp://en.wikipedia.org/wiki/People's_Republic_of_Chinahttp://en.wikipedia.org/wiki/International_tradehttp://en.wikipedia.org/wiki/International_tradehttp://en.wikipedia.org/wiki/International_tradehttp://en.wikipedia.org/wiki/International_tradehttp://en.wikipedia.org/wiki/Tariffhttp://en.wikipedia.org/wiki/Non-tariff_barriers_to_tradehttp://en.wikipedia.org/wiki/Import_licensehttp://en.wikipedia.org/wiki/Import_quotahttp://en.wikipedia.org/wiki/List_of_countries_by_exportshttp://en.wikipedia.org/wiki/List_of_countries_by_importshttp://en.wikipedia.org/wiki/European_Unionhttp://en.wikipedia.org/wiki/International_trade#cite_note-25%23cite_note-25http://en.wikipedia.org/wiki/United_Stateshttp://en.wikipedia.org/wiki/People's_Republic_of_China7/28/2019 Ibm Unit 2-Detail
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3 Germany $2,052,000,000,000 2009 est.
4 Japan $1,006,900,000,000 2009 est.
5 France $989,000,000,000 2009 est.
6 United Kingdom $824,900,000,000 2009 est.
7 Netherlands $756,500,000,000 2009 est.
8 Italy $727,700,000,000 2009 est.
- Hong Kong $672,600,000,000 2009 est.
9 South Korea $668,500,000,000 2009 est.
10 Belgium $611,100,000,000 2009 est.
11 Canada $603,700,000,000 2009 est.
12 Spain $508,900,000,000 2009 est.
13 Russia $492,400,000,000 2009 est.
14 Mexico $458,200,000,000 2009 est.
15 Singapore $454,800,000,000 2009 est.
16 India $387,300,000,000 2009 est.
17 Taiwan (Republic of China) $371,400,000,000 2009 est.
18 Switzerland $367,300,000,000 2009 est.
19 Australia $322,400,000,000 2009 est.
20 United Arab Emirates $315,000,000,000 2009 est.
Source : Exports. Imports.The World Factbook.
Top traded commodities (exports)
Rank Commodity Value in US$(000) Date of
information
1 Mineral fuels, oils, distillation products, etc $1,658,851,456 20092 Electrical, electronic equipment $1,605,700,864 2009
3 Machinery, nuclear reactors, boilers, etc $1,520,199,680 2009
4 Vehicles other than railway, tramway $841,412,992 2009
5 Pharmaceutical products $416,039,840 2009
6 Optical, photo, technical, medical, etc apparatus $396,337,696 2009
7 Plastics and articles there of $386,628,064 2009
8 Pearls, precious stones, metals, coins, etc $320,174,080 2009
9 Organic chemicals $310,106,432 2009
10 Iron and steel $273,024,416 2009
Risk in international trade
Companies doing business across international borders face many of the same risks as wouldnormally be evident in strictly domestic transactions. For example,
Buyer insolvency (purchaser cannot pay);
Non-acceptance (buyer rejects goods as different from the agreed upon specifications);
Credit risk (allowing the buyer to take possession of goods prior to payment);
Regulatory risk (e.g., a change in rules that prevents the transaction);
Intervention (governmental action to prevent a transaction being completed); Political risk (change in leadership interfering with transactions or prices); and
War and other uncontrollable events.
In addition, international trade also faces the risk of unfavorable exchange rate movements (and,the potential benefit of favorable movements).[
TRADE BARRIERS
Trade barriers are a general term that describes any government policy or regulation thatrestricts international trade. The barriers can take many forms, including the following terms that
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include many restrictions in international trade within multiple countries that import and exportany items of trade:
Tariffs
Non-tariff barriers to trade
Import licenses Export licenses
Import quotas
Subsidies
Voluntary Export Restraints
Local content requirements
Embargo
Most trade barriers work on the same principle: the imposition of some sort ofcost on trade thatraises the price of the traded products. If two or more nations repeatedly use trade barriers
against each other, then a trade warresults.
Economists generally agree that trade barriers are detrimental and decrease overall economicefficiency, this can be explained by the theory of comparative advantage. In theory, free tradeinvolves the removal of all such barriers, except perhaps those considered necessary for health ornational security. In practice, however, even those countries promoting free trade heavilysubsidize certain industries, such as agriculture and steel.
Trade barriers are often criticized for the effect they have on the developing world. Because rich-country players call most of the shots and set trade policies, goods such as crops that developingcountries are best at producing still face high barriers. Trade barriers such as taxes on food
imports or subsidies for farmers in developed economies lead to overproduction and dumping onworld markets, thus lowering prices and hurting poor-country farmers. Tariffs also tend to beanti-poor, with low rates for raw commodities and high rates for labor-intensive processedgoods. The Commitment to Development Index measures the effect that rich country tradepolicies actually have on the developing world.
Examples of free trade areas North American Free Trade Agreement (NAFTA)
South Asia Free Trade Agreement (SAFTA)
European Free Trade Association
European Union (EU) Union of South American Nations
New West Partnership (An internal free-trade zone in Canada between Alberta, British
Columbia, and Saskatchewan)
Other trade barriers include differences in culture, customs, traditions, laws, language andcurrency.
A tariffis a tax levied on imports orexports. The word is derived from the Arabic word tarif,meaning fees to be paid.
Tariffs are usually associated with protectionism, a governments policy of controlling tradebetween nations to support the interests of its own citizens. For economic reasons, tariffs areusually imposed on imported goods.
In the past, tariffs formed a much larger part of government revenue than they do today.
When shipments of goods arrive at a border crossing or port, customs officers inspect thecontents and charge a tax according to the tariff formula. Since the goods cannot continue ontheir way until the duty is paid, it is the easiest duty to collect, and the cost of collection is small.Traders seeking to evade tariffs are known as smugglers.
There are various types of tariffs:
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An ad valorem tariffs is a set percentage of the value of the good that is being imported.
Sometimes these are problematic, as when the international price of a good falls, so doesthe tariff, and domestic industries become more vulnerable to competition. Conversely,when the price of a good rises on the international market so does the tariff, but a countryis often less interested in protection when the price is high.
They also face the problem of inappropriate transfer pricing where a company declares a valuefor goods being traded which differs from the market price, aimed at reducing overall taxes due.
A SPECIFICtariff, is a tariff of a specific amount of money that does not vary with the
price of the good. These tariffs are vulnerable to changes in the market or inflation unlessupdated periodically.
AREVENUEtariff is a set of rates designed primarily to raise money for the government.
A tariff on coffee imports imposed by countries where coffee cannot be grown, forexample, raises a steady flow of revenue.
APROHIBITIVEtariff is one so high that nearly no one imports any of that item.
APROTECTIVEtariff is intended to artificially inflate prices of imports and protectdomestic industries from foreign competition (see also effective rate of protection,)especially from competitors whose host nations allow them to operate under conditionsthat are illegal in the protected nation, or who subsidize their exports.
An environmentaltariff, similar to a protective tariff, is also known as a greentariff or
eco-tariff, and is placed on products being imported from, and also being sent tocountries with substandard environmental pollution controls.
ARETALIATORYtariff is one placed against a country who already charges tariffs
against the country charging the retaliatory tariff (e.g. If the United States were to chargetariffs on Chinese goods, China would probably charge a tariff on American goods, also).These are usually used in an attempt to get other tariffs rescinded.
Non-tariff barriers to trade (NTBs) are trade barriers that restrict importsbut are not in theusual form of a tariff. Some common examples of NTBs are anti-dumping measures andcountervailing duties, which, although they are called non-tariff barriers, have the effect oftariffs once they are enacted.
Their use has risen sharply after the WTO rules led to a very significant reduction in tariff use.Some non-tariff trade barriers are expressly permitted in very limited circumstances, when theyare deemed necessary to protect health, safety, or sanitation, or to protect depletable naturalresources. In other forms, they are criticized as a means to evade free trade rules such as those ofthe World Trade Organization (WTO), the European Union (EU), orNorth American Free TradeAgreement (NAFTA) that restrict the use of tariffs.
Some of non-tariff barriers are not directly related to foreign economic regulations, butnevertheless they have a significant impact on foreign-economic activity and foreign tradebetween countries.
Trade between countries is referred to trade in goods, services and factors of production. Non-tariff barriers to trade include import quotas, special licenses, unreasonable standards for thequality of goods, bureaucratic delays at customs, export restrictions, limiting the activities ofstate trading, export subsidies, countervailing duties, technical barriers to trade, sanitary andphyto-sanitary measures, rules of origin, etc. Sometimes in this list they include macroeconomicmeasures affecting trade.
Six Types of Non-Tariff Barriers to Trade1. Specific Limitations on Trade:
1. Quotas2. Import Licensing requirements3. Proportion restrictions of foreign to domestic goods (local content requirements)4. Minimum import price limits
5. Embargoes2. Customs and Administrative Entry Procedures:
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1. Valuation systems2. Antidumping practices3. Tariff classifications4. Documentation requirements5. Fees
3. Standards:1. Standard disparities2. Intergovernmental acceptances of testing methods and standards3. Packaging, labeling, and marking
4. Government Participation in Trade:1. Government procurement policies2. Export subsidies3. Countervailing duties4. Domestic assistance programs
5. Charges on imports:1. Prior import deposit subsidies
2. Administrative fees3. Special supplementary duties4. Import credit discriminations5. Variable levies6. Border taxes
6. Others:1. Voluntary export restraints2. Orderly marketing agreements
Examples of Non-Tariff Barriers to Trade
Non-tariff barriers to trade can be:
Import bans
General or product-specific quotas
Rules of Origin
Quality conditions imposed by the importing country on the exporting countries
Sanitary and phyto-sanitary conditions
Packaging conditions
Labeling conditions
Product standards
Complex regulatory environment
Determination of eligibility of an exporting country by the importing country Determination of eligibility of an exporting establishment(firm, company) by the
importing country.
Additional trade documents like Certificate of Origin, Certificate of Authenticity etc.
Occupational safety and health regulation
Employment law
Import licenses
State subsidies, procurement, trading, state ownership
Export subsidies
Fixation of a minimum import price
Product classification
Quota shares
Foreign exchange market controls and multiplicity
Inadequate infrastructure
Buy national policy
Over-valued currency
Intellectual property laws (patents, copyrights)
Restrictive licenses
Seasonal import regimes
Corrupt and/or lengthy customs procedures
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