Assignments r2 Sem 4

Page 1 Ritesh Lad | R.
N : 520947644 | LC : 2844 | MBA Semester 4| Sikkim Manipal University
MB0036 – Strategic Management & Business Policy

Set - 1
1. Explain the different circumstances under which a suitable growth

strategy should be selected by any company to improve its performance
(i.e., intensive, integrative or diversification growth). You may select an
example of your choice to substantiate your views
Ans. There are three alternatives to improve the sales performance of a business unit,
to fill the gap between actual sales and targeted sales:
a) Intensive growth
b) Integrative growth
c) Diversification growth
a) Intensive Growth:
It refers to the process of identifying opportunities to achieve further growth
within the company’s current businesses. To achieve intensive growth, the
management should first evaluate the available opportunities to improve the
performance of its existing current businesses.
It may find three options:
• To penetrate into existing markets
• To develop new markets
• To develop new products
At times, it may be possible to gain more market share with the current
products in their current markets through a market penetration strategy. For
instance, SONY introduced TV sets with Trinitron picture tubes into the market
in 1996 priced at a premium of Rs.10,000 and above over the market through
a niche market capture strategy. They gradually lowered the prices to market
levels. However, it also simultaneously launched higherend products (high-
technology products) to maintain its global image as a technology leader. By
lowering the prices of TVs with Trinitron picture tubes, the company could
successfully penetrate into the markets to add new customers to its customer
base.
Market Development Strategy is to explore the possibility to find or develop
new markets for its current products (from the northern region to the eastern
region etc.). Most multinational companies have been entering Indian markets
with this strategy, to develop markets globally. However, care should be taken
to ensure that these new markets are not low density or saturated markets,
which could lead to price pressures.
Product Development Strategy involves consideration of new products of
potential interest to its current markets (e.g. Gramaphone Records to Musical
Productions to CDs)– as part of a Diversification strategy.
MICROSOFT’s New Strategy
It is called PC-plus. It has three elements:
a) Providing computer power to the most commonly used devices such as cell
phone, personal computer, toaster oven, dishwasher, refrigerator, washing
machines and so on.
b) Developing software to allow these devices to communicate.
c) Investing heavily to help build wireless and high-speed internet access
throughout the world to link it all together.
Microsoft envisions a home where everyday appliances and electronicsare
smart. According to Bill Gates, ‘In the near future, PC-based networks will help
us control many of our domestic matters with devices that cost no more than
$ 100 each ‘. It is also said at Microsoft that VCRs can be programmed via e-
Page 2 Ritesh Lad | R.N : 520947644 | LC : 2844 | MBA Semester 4| Sikkim Manipal University
mail, laundry washers can be designed to send an instant message to the

home computer when the load is done and refrigerators can be made to send
an e-mail when there’s no more milk. Microsoft plans to give these appliances
‘brains‘ and provide them the means to talk to each other through their
Windows CE Operating System.
b) Integrative Growth:
It refers to the process of identifying opportunities to develop or acquire
businesses that are related to the company’s current businesses. More often,
the business processes have to be integrated for linear growth in the profits.
The corporate plan may be designed to undertake backward, forward or
horizontal integration within the industry.
If a company operating in music systems takes over the manufacturing
business of its plastic material supplier, it would be able to gain more control
over the market or generate more profit. (Backward Integration)
Alternatively, if this company acquires some of its most profitably operating
intermediaries such as wholesalers or retailers, it is forward integration. If the
company legally takes over or acquires the business of any of its leading
competitors, it is called horizontal integration (however, if this competitor is
weak, it might be counter-productive due to dilution of brand image).
c) Diversification Growth:
It refers to the process of identifying opportunities to develop or acquire
businesses that are not related to the company’s current businesses. This
makes sense when such opportunities outside the present businesses are
identified with attractive returns and that industry has business strengths to
be successful. In most cases, this is planned with new products that have
technological or marketing synergies with existing businesses to cater to a
different group of customers (Concentric Diversification).
A printing press might shift over to offset printing with computerised content
generation to appeal to higher-end customers and also add new application
areas ( Horizontal Diversification ) – or even sell stationery.
Alternatively, the company might choose new businesses that have nothing to
do with the current technology, products or markets (Conglomerate
Diversification). The classic examples for this would be engineering and textile
firms setting up software development centres or Call Centres with new
service clients.
2. What are the components of a good Business Plan and briefly explain
the importance of each.
Ans. A good business plan will help attract necessary financing by demonstrating the
feasibility of your venture and the level of thought and professionalism you bring
to the task.
It is also important to establish a timeline for completing the plan. A business plan
can be completed by one staff member working full time in as little as a week,
although a thorough market analysis will add several days at least. A committee
will probably need much more time. Combinations of staff, volunteers, consultants
and a board committee may lengthen or shorten the process depending on skill
level, available time, experience with planning and research, and the group’s
facilitation needs. business plan should contain the following sections:
1. Executive summary
2. Company and product description
3. Market description
4. Operations
5. Management and ownership
6. Financial information and timeline
7. Risks and their mitigation

1. Executive Summary
In this section of your business plan, provide a description of your company,
the industry you will be competing in, and the product or service you plan to
offer. Sell your concept! The executive summary may be the first and only
section of your business plan that most of your audience will read. Tell the
audience why the business is a great idea. Some readers will look at this
section to determine whether or not they want to learn more about a business.
Other readers will look to the executive summary as a sample of the quality
and professionalism of the overall plan. The executive summary should be no
more than one to three pages long and should answer the following questions:
• Who are you? (describe your organization)
• What are you planning? (describe the service or product)
• Why are you planning it? (discuss the demand and market for the
service or product)
• How will you operate your business?
• When will you be in operation? (overview of timeline)
• What is your expected net profit? (discuss your projected sales and
costs)
Although the executive summary is the first part of your business plan, you
should write it after you have written the other sections of the plan in order to
include the most important points of each section.
2. Company and Product Description
In describing your company be sure to include what type of business you are
planning (homeownership development, wholesale, retail, manufacturing or
service) and the legal structure (corporation or partnership). You should
discuss why you are creating this new venture, referencing the goals you set
at the beginning of the business planning process. Also include a description
of your non-profit organization, the role it has played in developing this new
venture and the on-going role, if any, it will play in operations. Give the reader
a brief overview of the industry, describing historic and current growth trends.
Whenever possible, provide documentation or references supporting your
trend analysis such as articles from business-oriented newspapers and
magazines, research journals or other publications. Include these references in
the attachments of your business plan.
Product or Service
After describing your company and its industry context, describe the products
or services you plan to provide. Focus on what distinguishes your product or
service from the rest of the market. Discuss what will attract consumers to
your product or service. Provide as much detail as necessary to inform the
reader about the particular characteristics of your product that distinguish it
from its competition – many nonprofits, for example, expect to produce
higher-quality housing than otherwise exists in the area. Mention any
distinctive elements in the manufacture of the product, such as being “hand-
made by a particular people from a specific area.” If you are providing a
service, explain the steps you will take to provide a service that is better than
your competition.
Price
Provide a realistic estimate of the price for your product or service, and
discuss the rationale behind that price. An unrealistic price estimate may
undermine the credibility of your plan and raise concerns that your product or
service may not be of sufficient quality or that you will not be able to maintain
profitability in the long run. Describe where this price positions you in the
marketplace: at the high end, low end or in the middle of the existing range of
prices for a similar product or service. In other sections of the plan you will
discuss the target market for your product or service and also provide
additional details on how the price of your product fits into the overall financial
projections for the enterprise.
Place
Describe the location where you will produce or distribute your product or
provide your service. Discuss the advantages of the location, such as its
accessibility, surrounding amenities and other characteristics that may
enhance your business. Depending on your anticipated customer base,
accessibility to your location via public transportation could affect the
marketability of your product or service.
Customers
In this section of your business plan, you will describe the customer base or
market for your product or service. In addition to providing a detailed
description of your customer base, you will also need to describe your
competition (other local developers or nearby businesses providing a similar
service to your potential customer base). Who will purchase your product or
use your service? How large is your customer base? Define the characteristics
of your target market in terms of its:
• Demographics – Measures of age, gender, race, religion and family
size.
• Geography – Measures based on location.
• Socioeconomic Status – Measures based on individual or household
annual income.
Provide statistical data to describe the size of your target market. Sources for
this information may include recent data from the Bureau of Statistics, state or
local census data, or information gathered by your organization, such as
membership lists, neighborhood surveys and group or individual interviews.
Be sure to list the sources for your data, as this will further validate your
market assumptions. Include any relevant information regarding the growth
potential for your target market if your business is expected to rely on growth.
Cite any research forecasting population increases in your target market or
other trends and factors that may increase the demand for your product or
service.
Competition
Discuss how people identified in your target market currently meet their need
for your product or service. What other businesses exist in your area that are
similar to your proposed venture? For example, for a housingbusiness, what
are the local markets for purchase and rental? How much are people currently
paying for similar products or services? Briefly describe what differentiates
your proposed venture from these existing businesses and discuss why you
are entering this market.
Sales Projections
Present an estimate of how many people you expect will purchase your
product or service. Your estimate should be based on the size of your market,
the characteristics of your customers and the share of the market you will gain
over your competition. Project how many units you will sell at a specified price
over several years. The initial year should be broken down in monthly or
quarterly increments. Account for initial presentation and market penetration
of your product and any seasonal variations in sales, if appropriate.
3. Market Description
In this section, you will describe how you plan to operate the business. You will
present information on how you plan to create your product or provide your
service, describe the staff required to operate and manage the business,
discuss the equipment and materials necessary, and define the site or facility
requirements, if any. A key component of the operation of your business will
be your sales and marketing strategy, so you must describe how you will
inform your target market about your product or service and how you will
convince customers to purchase it.
Production Description
Describe the steps for creating your product, from the raw material or initial
stage to the finished product, packaged and ready for distribution and sale. If
you plan to provide a service, describe the process of service deliver (such as
the initial interview, for instance, if you are offering consulting services),
assessment, research and design, and final presentation. Provide a description
of any sub-contractors or external services you plan to use in the production
process. The reader of the plan may be unfamiliar with the industry, so avoid
using industry jargon to describe the production process.
Staffing
Describe the staff required to operate your business: discuss how many
people you will need; describe the tasks they will carry out; and the skills they
will need. Prepare a chart outlining the salaries and benefits you will provide
to your workforce. Provide information on how you will recruit staff and
provide initial and ongoing training of employees.
4. Equipment and Materials
To manufacture your product or provide your service, what type of equipment
will you need? Describe any machinery and vehicles necessary in the
production, packaging and distribution of your product, including any office
equipment such as computers, copiers, furniture, fixtures and telephone
systems. Also discuss the types of materials you will use in the production
process and describe the source and cost of those materials.
Facility
Describe the type of facility in which you will house your business. Indicate the
amount of building space you will need for production and administration. Also
discuss any building features required for the production process such as high
ceilings, specialized ventilation and heating systems, sanitized laboratory
space or vehicular accessibility. If you have already identified a location and a
facility that meets your requirements, describe its features. Even if you are
planning to provide a service instead of manufacturing a product, you need to
demonstrate that you will have adequate space for administrative functions
and other activities related to the service you plan to provide . Market
Description Describe your strategy for locating your target market, informing
or educating customers about your product or service and convincing them to
purchase it. Provide details on the methods you will use to advertise your
product, such as print media (advertisements in newspapers, magazines or
trade journals), electronic media (television, radio and the Internet), direct
mail, telemarketing, individual sales agents or representatives, or other
approaches. Discuss the product’s or service’s features you plan to emphasize
to gain the attention of your target market. Also detail how you will distribute
and sell your product or service. Will you use sales agents or existing retail
outlets, or directly distribute your product through a delivery service such as
United Parcel Service, Federal Express or independent trucking company?
5. Operations
In this section of your business plan, describe the senior managers responsible
for overseeing the start-up and operation of your business, their background
and their responsibilities in the business. Be sure to highlight your
management team’s experience in managing the production, marketing and
administration of similar businesses or within the selected industry and attach
the resumes of each member to the plan. Be sure to provide a complete job
description of any vacancies in your management team. Describe the
responsibilities, the skills, the background required and the steps you plan to
take to fill that key position.
Ownership
What is its relationship to your existing organization? Who is on the board of
directors / board of advisors of the new business and what are their
backgrounds and areas of expertise? Potential investors or lenders will be
interested in the ownership stake of the board of directors and also in what
portion of the company’s equity is available. Success is often due to one’s
2.3.6 Management and Ownership In this section you will describe the
financial feasibility of your planned venture and provide several financial
reports and statements to document why your business will be a viable
enterprise and a sound investment. At a minimum, you should provide a brief
descriptive narrative for each of the following financial statements and include
a copy in the attachments to your plan:
• Start-up budget
• Cash flow projection
• Income statement
• Balance sheet
In preparing these statements, you may want to seek the advice of a certified
public accountant (CPA).
Start-up Budget - Describe the initial expenses you will incur to get your
business up and running. Some items you might include in your start-up
budget research and product design and development expenses, legal
incorporation and licensing expenses, facility purchase or rental, equipment
and vehicle purchase or rental, and initial material or supply purchase. You
can use Worksheet B as a sample format for preparing your start-up budget.
Cash Flow Projection - This statement presents a month-to-month schedule
of the estimated cash inflows and outflows of your business for the first year.
This schedule should indicate how much money your business will have or
need and when you will need it. You should describe your sources of income
and capital, detailing your projected sales revenue and indicating your own or
investor equity contribution, lenders, investors and other sources of capital.
Itemize your projected expenses, distinguishing between the cost of goods
sold (materials, supplies, production labor), overhead expenses (rent, utilities,
insurance, maintenance, interest, insurance, administrative costs and salaries,
legal and accounting services, marketing, taxes, fees and other ongoing
operating expenses) and capital expenditures (land and buildings, equipment,
furniture, vehicles, and building repair or renovation expenses). In preparing
this statement, account for a gradual increase in sales from initial product
introduction and any expected seasonal fluctuations in revenue projections.
Income Statement - Prepare a multiyear (three- to five - year) statement of
projected revenue, expenses, capital expenditures and cost of goods sold. If
you make assumptions about the growth of your business, provide supporting
documentation such as growth patterns of similar companies or studies that
forecast an industry-wide growth rate. This statement should indicate to the
reader the potential of your business to generate cash and its profitability over
time. For an existing business, also submit an income statement for at least
three prior consecutive years. Lenders may look at this statement to
determine whether your business can support the additional debt you are
requesting.
Balance Sheet - A start-up business probably will not have any assets or
liabilities at the time you are drafting the business plan. Provide a copy of the
balance sheet of the business’s sponsoring organization or individual. Describe
in your narrative any assets that will be allocated to the start-up of the
business.
7 Financial Information and Start up Timeline
Capital Requirements - Describe the amount and type of financing you are
seeking for your business. Are you looking for debt from a lender or equity
from an investor? Refer to your start up budget and cash flow statement
presented earlier. Discuss how and when you will draw on these funds and
how they will affect the bottom line. Also describe any commitments or
investments that you may have already secured. If you are seeking investors,
such as venture capitalists, describe what they will receive in return for their
capital. What is the repayment period and the expected return on investment?
Also discuss the nature of their ownership share and how it may change with
future investments. Equity investors are looking for rates of return higher than
rates offered by banks or other business lenders. The level of risk in your
business and industry will help to determine the actual market rate, as will the
availability of equity dollars. Check with other businesses (although not direct
competitors) to see what return on investment their investors demanded. Be
prepared to negotiate. And make sure you research the investment market
carefully; several socially minded investment pools exist and more are in
development. or lenders, describe the type of financing you are seeking:
• Seed Capital – Short-term financing to cover start-up costs.
• Fixed Asset Financing – Longer-term financing for property, building
improvements, equipment or vehicles. The asset being purchased is
usually pledged as security for the loan.
• Working Capital – Short-term financing to cover operating expenses
and to bridge gaps in cash flow.
Initial Start-up Timeline - Provide a timeline of tasks and events necessary
to get your business operational. Be sure to describe the current stage you are
in and what steps you have taken to date. Include deadlines for task
completion. Set realistic deadlines according to your capacity to complete
these tasks. The following is a list of some of the steps you may wish to
include:
• Filing legal incorporation documents
• Identifying and securing suitable space
• Designing and developing the product
• Obtaining required licenses or permits
• Securing necessary financing
• Leasing or purchasing equipment
• Hiring key staff
• Hiring and training of production or support staff
• Purchasing materials and production supplies
• Beginning marketing activities
• Opening
Although it is impossible to know exactly what will go wrong in starting and
running your business, thinking about different challenges will strengthen your
plan. Potential problems could include:
• Insufficient public subsidy available to new home owners or residents
• The competition drops its prices
• Not enough customers
• Production costs exceed estimates
• Difficulty in finding qualified employees
• Environmental or governmental changes such as tax increases,
additional regulations or population changes
For each potential problem, discuss its likelihood and describe possible
solutions or actions you might undertake to mitigate the problem.
8. Risks and their Mitigation
Although it is impossible to know exactly what will go wrong in starting and
running your business, thinking about different challenges will strengthen your
plan. After you have completed all of the elements of your business plan, you
should focus its presentation. A well-organized plan will assist you in
communicating the most important elements of your business plan to the

reader, and a persuasive plan will help you to convince the reader to invest in
your business.
3. You wish to start a new venture to manufacture auto components.

Explain different stages in the process of starting this new business.
to the task.
The first step in planning a new business venture is to establish goals that you
seek to achieve with the business. You can establish these goals in a number of
ways, but an inclusive and ordered process like an organizational strategic
planning session or a comprehensive neighborhood planning process may be
best. The board of directors of your organization should review and approve the
goals, because these goals will influence the direction of the organization and
require the allocation of valuable staff and financial resources. Your goals will
serve as a filter to screen a wide range of possible business opportunities. If you
fail to establish clear goals early in the process, your organization may spend
substantial time and resources pursuing potential business ventures that may be
financially viable but do not serve the mission of your organization in other
important ways. A liquor store on the corner may be a clear money-maker;
however, it may not be the retail to assist your community desires. The following
are examples of goals you may seek to achieve through the creation of a new
business venture:
Revenue Generation – Your organization may hope to create a business that
will generate sufficient net income or profit to finance other programs, activities
or services provided by your organization.
Employment Creation – A new business venture may create job opportunities
for community residents or the constituency served by your organization.
Neighborhood Development Strategy – A new business venture might serve
as an anchor to a deteriorating neighborhood commercial area, attract additional
businesses to the area and fill a gap in existing retail services. You may need to
find a use for a vacant commercial property that blights a strategic area of your
neighborhood. Or your business might focus on the rehabilitation of dilapidated
single family homes in the community Whenever possible, goals should have
quantifiable outcomes such as “to generate a minimum of $50,000 of net income
or profit within three years”; “to employ at least 15 community residents within
two years in new permanent jobs at a livable wage”; “to occupy and support a
minimum of 10,000 square feet of neighborhood commercial space”; or “to
rehabilitate
50 single-family houses over three years.” Clearly defined and quantifiable goals
provide objective measurements to screen potential business opportunities. They
also establish clear criteria to evaluate the success of the business venture.
Establish Goals - Once you have identified goals for a new business venture, the
next step in the business planning process is to identify and select the right
business. Many organizations may find themselves starting at this point in the
process.
Business opportunities may have been dropped at your doorstep. Perhaps an
entrepreneurial member of the board of directors or a community resident has
approached your organization with an idea for a new business, or a neighborhood
business has closed or moved out of the area, taking jobs and leaving a vacant
facility behind. Even if this is the case, we recommend that you take a step back
and set goals. Failing to do so could result in a waste of valuable time and
resources pursuing an idea that may seem feasible, but fails to accomplish
important goals or to meet the mission of your organization. Depending on the
goals you have set, you might take several approaches to identify potential
business opportunities.
Local Market Study - Whether your goal is to revitalize or fill space in a
neighborhood commercial district or to rehabilitate vacant housing stock, you
should conduct a local market study. A good market study will measure the level
of existing goods and services provided in the area, and assess the capacity of
the area to support existing and additional commercial or homeownership
activity. This assessment is based on the shopping and traffic patterns of the area
and the demographic and socio-economic characteristics of the community. A bad
or insufficient market study could encourage your organization to pursue a
business destined to fail, with potentially disastrous results for the organization as
a whole. Through a market study you will be able to identify gaps in existing
products and services and unsatisfied demand for additional or expanded
products and services. If your organization does not have staff capacity to
conduct a market study, you might hire a consultant or solicit the assistance of
business administration students from a local college or university. Conducting a
solid and thorough market study up front will provide essential information for
your final business plan.
Analysis of Local and Regional Industry Trends - Another method of
investigating potential business opportunities is to research local and regional
business and industry trends. You may be able to identify which business or
industrial sectors are growing or declining in your city, metropolitan area or
region. The regional or metropolitan area planning agency for your area is a good
source of data on industry trends.
Internal Capacity - The board, staff or membership of your organization may
possess knowledge and skills in a particular business sector or industry. Your
organization may wish to draw upon this internal expertise in selecting potential
business opportunities.
Internal Purchasing Needs / Collaborative Procurement - Perhaps, your
organization frequently purchases a particular service or product. If nearby
affiliate organizations also use this service or product, this may present a
business opportunity. Examples of such products or services include printing or
copying services, travel services, transportation services, property management
services, office supplies, catering services, and other products. You will still need
to conduct a complete market study to determine the demand for this product or
service beyond your internal needs or the needs of your partners or affiliates.
Identify Business Opportunities
Buying an Existing Business - Rather than starting a new business, you may
wish to consider purchasing an existing business. Perhaps a local retail or small
light manufacturing business that has been an anchor to the local retail area or a
much-needed source of jobs in the neighborhood is for sale. Its closure would
mean the loss of jobs and services for your neighborhood. Your organization might
consider purchasing and taking over the enterprise instead of starting a new
business. If you decide to pursue this option, you still need to go through the
steps of creating a business plan. However, before moving ahead, these are just a
few important areas to research in assessing the business you plan to purchase:
Be sure to conduct a thorough review of the financial statements for the past
three to five years to determine the current fiscal status and recent financial
trends, the validity of the accounts receivable and the status of the accounts
payable. Are all the required licenses and permits in place and can they be
transferred to a new owner? Also look at the quality of key employees who,
because of their expertise, may need to remain with the business. You will also
need to assess the customer or client base and determine whether its members
will remain loyal to the business after it changes hands.
Another area to evaluate is the perception or image of the business. Inspect the
facilities and talk to suppliers, customers and other businesses in the area to learn
more about the reputation of the business. At this early stage of your planning
Page Ritesh Lad | R.N : 520947644 | LC : 2844 | MBA Semester 4| Sikkim Manipal University
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process, be sure to consult an attorney experienced in corporation law. As a non-

profit corporation, engaging in income-generating activities not related to your
mission may affect your tax-exempt status. You may also wish to protect your
organization from any liability issues connected with the proposed business
activity. After you have
decided on a particular business activity, have a qualified attorney advise
you on the proper corporate structure for your new venture. In addition to
qualified legal counsel, seek the expertise of an experienced professional in that
particular industry. He or she will bring valuable knowledge and insights regarding
the industry that will prove extremely useful during the business planning
process.
Advisory - You have decided on a business opportunity that meets the goals of
your organization. Now you are ready to test the feasibility of the venture and to
present your business concept to the world. A solid business plan will clearly
explain the business concept, describe the market for your product or service,
attract investment, and establish operating goals and guidelines. The first step in
writing your business plan is to identify your target audience. Will this be an
internal plan the board will use to assess the feasibility and appropriateness of the
business? Or will this plan be distributed to a larger external audience such as
funding sources, commercial lenders or the community to gain financial backing
and political support for the proposed venture? The content and emphasis of the
plan will shift according to the audience. You will also need to decide who will
conduct the necessary research and write the plan. The following table lists the
advantages and disadvantages of several options for getting the work done. You
might consider a combination of the options.
4. Explain the process of due Diligence and why it is necessary.

Ans. A business which wants to attract foreign investments must present a business
plan. But a business plan is the equivalent of a visit card. The introduction is very
important - but, once the foreign investor has expressed interest, a second, more
serious, more onerous and more tedious process commences:
Due Diligence.
"Due Diligence" is a legal term (borrowed from the securities industry). It means,
essentially, to make sure that all the facts regarding the firm are available and
have been independently verified. In some respects, it is very similar to an audit.
All the documents of the firm are assembled and reviewed, the management is
interviewed and a team of financial experts, lawyers and accountants descends
on the firm to analyze it.
First Rule - The firm must appoint ONE due diligence coordinator. This person
interfaces with all outside due diligence teams. He collects all the materials
requested and oversees all the activities which make up the due diligence
process. The firm must have ONE VOICE. Only one person represents the
company, answers questions, makes presentations and serves as a coordinator
when the DD teams wish to interview people connected to the firm.
Second Rule - Brief your workers. Give them the big picture. Why is the company
raising funds, who are the investors, how will the future of the firm (and their
personal future) look if the investor comes in. Both employees and management
must realize that this is a top priority. They must be instructed not to lie. They
must know the DD coordinator and the company's spokesman in the DD process.
The DD is a process which is more structured than the preparation of a Business
Plan. It is confined both in time and in subjects: Legal, Financial, Technical,
Marketing, Controls.
The Marketing Plan - Must include the following elements:
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• A brief history of the business (to show its track performance and growth)
• Points regarding the political, legal (licences) and competitive environment
• A vision of the business in the future
• Products and services and their uses
• Comparison of the firm's products and services to those of the competitors
• Warranties, guarantees and after-sales service
• Development of new products or services
• A general overview of the market and market segmentation
• Is the market rising or falling (the trend: past and future)
• What customer needs do the products / services satisfy
• Which markets segments do we concentrate on and why
• What factors are important in the customer's decision to buy (or not to
buy)
• A list of the direct competitors and a short description of each
• The strengths and weaknesses of the competitors relative to the firm
• Missing information regarding the markets, the clients and the competitors
• Planned market research
• A sales forecast by product group
• The pricing strategy (how is pricing decided)
• Promotion of the sales of the products (including a description of the sales
force, sales-related incentives, sales targets, training of the sales
personnel, special offers, dealerships, telemarketing and sales support).
Attach a flow chart of the purchasing process from the moment that the client is
approached by the sales force until he buys the product.
• Marketing and advertising campaigns (including cost estimates) - broken
by market and by media
• Distribution of the products
• A flow chart describing the receipt of orders, invoicing, shipping.
• Customer after-sales service (hotline, support, maintenance, complaints,
upgrades, etc.)
• Customer loyalty (example: churn rate and how is it monitored and
controlled).
Legal Details
• Full name of the firm
• Ownership of the firm
• Court registration documents
• Copies of all protocols of the Board of Directors and the General Assembly
of Shareholders
• Signatory rights backed by the appropriate decisions
• The charter (statute) of the firm and other incorporation documents
• Copies of licences granted to the firm
• A legal opinion regarding the above licences
• A list of lawsuit that were filed against the firm and that the firm filed
against third parties (litigation) plus a list of disputes which are likely to
reach the courts
• Legal opinions regarding the possible outcomes of all the lawsuits and
disputes including their potential influence on the firm
Financial Due Diligence
• Last 3 years income statements of the firm or of constituents of the firm, if
the firm is the result of a merger. The statements have to include:
• Balance Sheets
• Income Statements
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• Cash Flow statements

• Audit reports (preferably done according to the International Accounting
Standards, or, if the firm is looking to raise money in the USA, in
accordance with FASB)
• Cash Flow Projections and the assumptions underlying them
Controls
• Accounting systems used
• Methods to price products and services
• Payment terms, collections of debts and ageing of receivables
• Introduction of international accounting standards
• Monitoring of sales
• Monitoring of orders and shipments
• Keeping of records, filing, archives
• Cost accounting system
• Budgeting and budget monitoring and controls
• Internal audits (frequency and procedures)
• External audits (frequency and procedures)
• The banks that the firm is working with: history, references, balances
Technical Plan
• Description of manufacturing processes (hardware, software,
communications, other)
• Need for know-how, technological transfer and licensing required
• Suppliers of equipment, software, services (including offers)
• Manpower (skilled and unskilled)
• Infrastructure (power, water, etc.)
• Transport and communications (example: satellites, lines, receivers,
transmitters)
• Raw materials: sources, cost and quality
• Relations with suppliers and support industries
• Import restrictions or licensing (where applicable)
• Sites, technical specification
• Environmental issues and how they are addressed
• Leases, special arrangements
• Integration of new operations into existing ones (protocols, etc.)
A successful due diligence is the key to an eventual investment. This is a process
much more serious and important than the preparation of the Business Plan.
5. Is Corporate Social Responsibility necessary and how does it benefit a

company and its shareholders?
Ans. CSR is a concept whereby companies integrate social and environmental concerns
in their business operations and in their interaction with their stakeholders on a
voluntary basis. The main function of an enterprise is to create value through
producing goods and services that society demands, thereby generating profit for
its owners and shareholders as well as welfare for society, particularly through an
ongoing process of job creation. However, new social and market pressures are
gradually leading to a change in the values and in the horizon of business activity.
There is today a growing perception among enterprises that sustainable business
success and shareholder value cannot be achieved solely through maximising
short-term profits, but instead through market-oriented, yet responsible
behaviour. Companies are aware that they can contribute to sustainable
development by managing their operations in such a way as to enhance economic
growth and increase competitiveness whilst ensuring environmental protection
and promoting social responsibility, including consumer interests.
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In this context, an increasing number of firms have embraced a culture of CSR.

Despite the wide spectrum of approaches to CSR, there is large consensus on its
main features:
• CSR is behaviour by businesses over and above legal requirements,
voluntarily adopted because businesses deem it to be in their long-term
interest;
• CSR is intrinsically linked to the concept of sustainable development:
businesses need to integrate the economic, social and environmental
impact in their operations
• CSR is not an optional "add-on" to business core activities - but about the
way in which businesses are managed.
Socially responsible initiatives by entrepreneurs have a long tradition in Europe.
What distinguishes today’s understanding of CSR from the initiatives of the past is
the attempt to manage it strategically and to develop instruments for this. It
means a business approach, which puts stakeholder’s expectations and the
principle of continuous improvement and innovation at the heart of business
strategies. What constitutes CSR depends on the particular situation of individual
enterprises and on the specific context in which they operate, be it in Europe or
elsewhere. In view of the EU enlargement, it is however important to enhance
common understanding both in Member States and candidate countries.
The Growing Recognition of CSR - CSR has found recognition among
enterprises, policy-makers and other stakeholders, as an important element of
new and emerging forms of governance, which can help them to respond to the
following fundamental changes:
• Globalisation has created new opportunities for enterprises, but it also
has increased their organisational complexity and the increasing extension
of business activities abroad has led to new responsibilities on a global
scale, particularly in developing countries.
• Considerations of image and reputation play an increasingly important
role in the business competitive environment, as consumers and NGO’s
ask for more information about the conditions in which products and
services are generated and the sustainability impact thereof, and tend to
reward, with their behaviour, socially and environmentally responsible
firms.
• Partly as a consequence of this, financial stakeholders ask for the
disclosure of information going beyond traditional financial reporting so as
to allow them to better identify the success and risk factors inherent in a
company and its responsiveness to public opinion.
• As knowledge and innovation become increasingly important for
competitiveness, enterprises have a higher interest in retaining highly
skilled and competent personnel.
6. Distinguish between a Financial Investor and a Strategic Investor

explaining the role they play in a Company.
Ans. Financial Investor vs. Strategic Investor

In the not so distant past, there was little difference between financial
andstrategic investors. Investors of all colors sought to safeguard their investment
by taking over as many management functions as they could. Additionally,
investments were small and shareholders few. A firm resembled a household and
the number of people involved – in ownership and in management – was
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correspondingly limited. People invested in industries they were acquainted with

first hand.
As markets grew, the scales of industrial production (and of service provision)
expanded. A single investor (or a small group of investors) could no longer
accommodate the needs even of a single firm. As knowledge increased and
specialization ensued – it was no longer feasible or possible to micro-manage a
firm one invested in. Actually, separate businesses of money making and business
management emerged. An investor was expected to excel in obtaining high yields
on his capital – not in industrial management or in marketing. A manager was
expected to manage, not to be capable of personally tackling the various and
varying tasks of the business that he managed.
Thus, two classes of investors emerged. One type supplied firms with capital. The
other type supplied them with know-how, technology, management skills,
marketing techniques, intellectual property, clientele and a vision, a sense of
direction. In many cases, the strategic investor also provided the necessary
funding.
But, more and more, a separation was maintained. Venture capital and risk capital
funds, for instance, are purely financial investors. So are, to a growing extent,
investment banks and other financial institutions. The financial investor
represents the past. Its money is the result of past - right and wrong - decisions.
Its orientation is short term: an "exit strategy" is sought as soon as feasible. For
“exit strategy” read quick profits. The financial investor is always on the lookout,
searching for willing buyers for his stake. The stock exchange is a popular exit
strategy. The financial investor has little interest in the company's management.
Optimally, his money buys for him not only a good product and a good market,
but also a good management. But his interpretation of the rolls and functions of
"good management" are very different to that offered by the strategic investor.
The financial investor is satisfied with a management team which maximizes
value. The price of his shares is the most important indication of success. This is
"bottom line" short termism which also characterizes operators in the capital
markets. Invested in so many ventures and companies, the financial investor has
no interest, nor the resources to get seriously involved in any one of them. Micro-
management is left to others - but, in many cases, so is macro-management. The
financial investor participates in quarterly or annual general shareholders
meetings. This is the extent of its involvement. The strategic investor, on the
other hand, represents the real long term accumulator of value. Paradoxically, it is
the strategic investor that has the greater influence on the value of the
company's shares. The quality of management, the rate of the introduction of new
products, the success or failure of marketing strategies, the level of customer
satisfaction, the education of the workforce - all depend on the strategic investor.
That there is a strong relationship between the quality and decisions of the
strategic investor and the share price is small wonder. The strategic investor
represents a discounted future in the same manner that shares do. Indeed,
gradually, the balance between financial investors and strategic investors is
shifting in favour of the latter. People understand that money is abundant and
what is in short supply is good management. Given the ability to create a brand,
to generate profits, to issue new products and to acquire new \clients - money is
abundant.
These are the functions normally reserved to financial investors:
Financial Management The financial investor is expected to take over the
financial management of the firm and to directly appoint the senior management
and, especially, the management echelons, which directly deal with the finances
of the firm.
1. To regulate, supervise and implement a timely, full and accurate set of
accounting books of the firm reflecting all its activities in a manner
commensurate with the relevant legislation and regulation in the territories of
operations of the firm and with internal guidelines set from time to time by the
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Board of Directors of the firm. This is usually achieved both during a Due
Diligence process and later, as financial management is implemented.
2. To implement continuous financial audit and control systems to monitor the
performance of the firm, its flow of funds, the adherence to the budget, the
expenditures, the income, the cost of sales and other budgetary items.
3. To timely, regularly and duly prepare and present to the Board of Directors
financial statements and reports as required by all pertinent laws and
regulations in the territories of the operations of the firm and as deemed
necessary and demanded from time to time by the Board of Directors of the
Firm.
4. To comply with all reporting, accounting and audit requirements imposed by
the capital markets or regulatory bodies of capital markets in which the
securities of the firm are traded or are about to be traded or otherwise listed.
5. To prepare and present for the approval of the Board of Directors an annual
budget, other budgets, financial plans, business plans, feasibility studies,
investment memoranda and all other financial and business documents as
may be required from time to time by the Board of Directors of the Firm.
6. To alert the Board of Directors and to warn it regarding any irregularity, lack of
compliance, lack of adherence, lacunas and problems whether actual or
potential concerning the financial systems, the financial operations, the
financing plans, the accounting, the audits, the budgets and any other matter
of a financial nature or which could or does have a financial implication.
7. To collaborate and coordinate the activities of outside suppliers of financial
services hired or contracted by the firm, including accountants, auditors,
financial consultants, underwriters and brokers, the banking system and other
financial venues.
8. To maintain a working relationship and to develop additional relationships with
banks, financial institutions and capital markets with the aim of securing the
funds necessary for the operations of the firm, the attainment of its
development plans and its investments.
9. To fully computerize all the above activities in a combined hardware software
and communications system which will integrate into the systems of other
members of the group of companies.
10. Otherwise, to initiate and engage in all manner of activities, whether
financial or of other nature, conducive to the financial health, the growth
prospects and the fulfillment of investment plans of the firm to the best of his
ability and with the appropriate dedication of the time and efforts required.
Collection and Credit Assessment
1. To construct and implement credit risk assessment tools, questionnaires,
quantitative methods, data gathering methods and venues in order to properly
evaluate and predict the credit risk rating of a client, distributor, or supplier.
2. To constantly monitor and analyse the payment morale, regularity,
nonpayment and non-performance events, etc. – in order to determine the
changes in the credit risk rating of said factors.
3. To analyse receivables and collectibles on a regular and timely basis.
4. To improve the collection methods in order to reduce the amounts of arrears
and overdue payments, or the average period of such arrears and overdue
payments.
5. To collaborate with legal institutions, law enforcement agencies and private
collection firms in assuring the timely flow and payment of all due payments,
arrears and overdue payments and other collectibles.
16
6. To coordinate an educational campaign to ensure the voluntary collaboration

of the clients, distributors and other debtors in the timely and orderly payment
of their dues.
The strategic investor is, usually, put in charge of the following:
Project Planning and Project Management The strategic investor is uniquely
positioned to plan the technical side of the project and to implement it. He is,
therefore, put in charge of:
• The selection of infrastructure, equipment, raw materials, industrial
processes, etc.
• Negotiations and agreements with providers and suppliers
• Minimizing the costs of infrastructure by deploying proprietary components
and planning
• The provision of corporate guarantees and letters of comfort to suppliers
• The planning and erecting of the various sites, structures, buildings,
premises, factories, etc.
• The planning and implementation of line connections, computer network
connections, protocols, solving issues of compatibility (hardware and
software, etc.)
• Project planning, implementation and supervision
Marketing and Sales
1. The presentation to the Board an annual plan of sales and marketing
including: market penetration targets, profiles of potential social and
economic categories of clients, sales promotion methods, advertising
campaigns, image, public relations and other media campaigns. The strategic
investor also implements these plans or supervises their implementation.
2. The strategic investor is usually possessed of a brand name recognized in
many countries. It is the market leaders in certain territories. It has been
providing goods and services to users for a long period of time, reliably. This is
an important asset, which, if properly used, can attract users. The
enhancement of the brand name, its recognition and market awareness,
market penetration, co-branding, collaboration with other suppliers – are all
the responsibilities of the strategic investor.
3. The dissemination of the product as a preferred choice among vendors,
distributors, individual users and businesses in the territory.
4. Special events, sponsorships, collaboration with businesses.
5. The planning and implementation of incentive systems (e.g., points,
vouchers).
6. The strategic investor usually organizes a distribution and dealership network,
a franchising network, or a sales network (retail chains) including: training,
pricing, pecuniary and quality supervision, network control, inventory and
accounting controls, advertising, local marketing and sales promotion and
other network management functions.
7. The strategic investor is also in charge of "vision thinking": new methods of
operation, new marketing ploys, new market niches, predicting the future
trends and market needs, market analyses and research, etc.
The strategic investor typically brings to the firm valuable experience in
marketing and sales. It has numerous off the shelf marketing plans and drawer
sales promotion campaigns. It developed software and personnel capable of
analyzing any market into effective niches and of creating the right media (image
and PR), advertising and sales promotion drives best suited for it. It has built large
databases with multi-year profiles of the purchasing patterns and demographic
data related to thousands of clients in many countries. It owns libraries of
material, images, sounds, paper clippings, articles, PR and image materials, and
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proprietary trademarks and brand names. Above all, it accumulated years of

marketing and sales promotion ideas which crystallized into a new conception of
the business.
Technology
1. The planning and implementation of new technological systems up to their
fully operational phase. The strategic partner's engineers are available to plan,
implement and supervise all the stages of the technological side of the
business.
2. The planning and implementation of a fully operative computer system
(hardware, software, communication, intranet) to deal with all the aspects of
the structure and the operation of the firm. The strategic investor puts at the
disposal of the firm proprietary software developed by it and specifically
tailored to the needs of companies operating in the firm's market.
3. The encouragement of the development of in-house, proprietary, technological
solutions to the needs of the firm, its clients and suppliers.
4. The planning and the execution of an integration program with new
technologies in the field, in collaboration with other suppliers or market
technological leaders.
Education and Training
The strategic investor is responsible to train all the personnel in the firm:
operators, customer services, distributors, vendors, sales personnel. The training
is conducted at its sole expense and includes tours of its facilities abroad.
The entrepreneurs – who sought to introduce the two types of investors, in the
first place – are usually left with the following functions:
Administration and Control
1. To structure the firm in an optimal manner, most conducive to the conduct of
its business and to present the new structure for the Board's approval within
30 days from the date of the GM's appointment.
2. To run the day to day business of the firm.
3. To oversee the personnel of the firm and to resolve all the personnel issues.
4. To secure the unobstructed flow of relevant information and the protection of
confidential organization.
5. To represent the firm in its contacts, representations and negotiations with
other firms, authorities, or persons.
This is why entrepreneurs find it very hard to cohabitate with investors of any
kind. Entrepreneurs are excellent at identifying the needs of the market and at
introducing technological or service solutions to satisfy such needs. But the very
personality traits which qualify them to become entrepreneurs – also hinder the
future development of their firms. Only the introduction of outside investors can
resolve the dilemma. Outside investors are not emotionally involved. They may be
less visionary – but also more experienced.
They are more interested in business results than in dreams. And – being well
acquainted with entrepreneurs – they insist on having unmitigated control of the
business, for fear of losing all their money. These things antagonize the
entrepreneurs. They feel that they are losing their creation to cold-hearted, mean
spirited, corporate predators. They rebel and prefer to remain small or even to
close shop than to give up their cherished freedoms. This is where nine out of ten
entrepreneurs fail - in knowing when to let go.
18
MB0036 – Strategic Management & Business Policy

Set- 2
1. What is the purpose of a Business Plan? Explain the features of the

component of the Plan dealing with the Company and its product
description.
to the task The first step in planning a new business venture is to establish goals
that you seek to achieve with the business. You can establish these goals in a
number of ways, but an inclusive and ordered process like an organizational
strategic planning session or a comprehensive neighborhood planning process
may be best. The board of directors of your organization should review and
approve the goals, because these goals will influence the direction of the
organization and require the allocation of valuable staff and financial resources.
Your goals will serve as a filter to screen a wide range of possible business
opportunities. If you fail to establish clear goals early in the process, your
organization may spend substantial time and resources pursuing potential
business ventures that may be financially viable but do not serve the mission of
your organization in other important ways. A liquor store on the corner may be a
clear money-maker; however, it may not be the retail to assist your community
desires.
Company and Product Description
In describing your company be sure to include what type of business you are
planning (homeownership development, wholesale, retail, manufacturing or
service) and the legal structure (corporation or partnership). You should discuss
why you are creating this new venture, referencing the goals you set at the
beginning of the business planning process. Also include a description of your
non-profit organization, the role it has played in developing this new venture and
the on-going role, if any, it will play in operations. Give the reader a brief overview
of the industry, describing historic and current growth trends. Whenever possible,
provide documentation or references supporting your trend analysis such as
articles from business-oriented newspapers and magazines, research journals or
other publications. Include these references in the attachments of your business
plan.
Product or Service
After describing your company and its industry context, describe the products or
services you plan to provide. Focus on what distinguishes your product or service
from the rest of the market. Discuss what will attract consumers to your product
or service. Provide as much detail as necessary to inform the reader about the
particular characteristics of your product that distinguish it from its competition –
many nonprofits, for example, expect to produce higher-quality housing than
otherwise exists in the area. Mention any distinctive elements in the manufacture
of the product, such as being “hand-made by a particular people from a specific
area.” If you are providing a service, explain the steps you will take to provide a
service that is better than your competition.
Price
Provide a realistic estimate of the price for your product or service, and discuss
the rationale behind that price. An unrealistic price estimate may undermine the
credibility of your plan and raise concerns that your product or service may not be
of sufficient quality or that you will not be able to maintain profitability in the long
run. Describe where this price positions you in the marketplace: at the high end,
low end or in the middle of the existing range of prices for a similar product or
19
service. In other sections of the plan you will discuss the target market for your
product or service and also provide additional details on how the price of your
product fits into the overall financial projections for the enterprise.
Place
Describe the location where you will produce or distribute your product or provide
your service. Discuss the advantages of the location, such as its accessibility,
surrounding amenities and other characteristics that may enhance your business.
Depending on your anticipated customer base, accessibility to your location via
public transportation could affect the marketability of your product or service.
Customers
In this section of your business plan, you will describe the customer base or
market for your product or service. In addition to providing a detailed description
of your customer base, you will also need to describe your competition (other
local developers or nearby businesses providing a similar service to your potential
customer base). Who will purchase your product or use your service? How large is
your customer base? Define the characteristics of your target market in terms of
its:
• Demographics – Measures of age, gender, race, religion and family size.
• Geography – Measures based on location.
• Socioeconomic Status – Measures based on individual or household annual
income.
Provide statistical data to describe the size of your target market. Sources for this
information may include recent data from the Bureau of Statistics, state or local
census data, or information gathered by your organization, such as membership
lists, neighborhood surveys and group or individual interviews. Be sure to list the
sources for your data, as this will further validate your market assumptions.
Include any relevant information regarding the growth potential for your target
market if your business is expected to rely on growth. Cite any research
forecasting population increases in your target market or other trends and factors
that may increase the demand for your product or service.
Competition
Discuss how people identified in your target market currently meet their need for
your product or service. What other businesses exist in your area that are similar
to your proposed venture? For example, for a housing business, what are the
local markets for purchase and rental? How much are people currently paying for
similar products or services? Briefly describe what differentiates your proposed
venture from these existing businesses and discuss why you are entering this
market.
Sales Projections
Present an estimate of how many people you expect will purchase your product or
service. Your estimate should be based on the size of your market, the
characteristics of your customers and the share of the market you will gain over
your competition. Project how many units you will sell at a specified price over
several years. The initial year should be broken down in monthly or quarterly
increments. Account for initial presentation and market penetration of your
product and any seasonal variations in sales, if appropriate.
2. Write short notes on : a) sales projections b) importance of creativity in

Business
Ans. a. Sales Projections
Present an estimate of how many people you expect will purchase your product or
service. Your estimate should be based on the size of your market, the
20
characteristics of your customers and the share of the market you will gain over
your competition. Project how many units you will sell at a specified price over
several years. The initial year should be broken down in monthly or quarterly
increments. Account for initial presentation and market penetration of your
product and any seasonal variations in sales, if appropriate.
b. Importance of Creativity in Business
Creative thinking benefits all areas and activities of management. It is required to
dream up better ways of marketing goods, to devise new production methods, to
find new ways to motivate people, and so on. Creativity turns up in every business
situation where there is a chance that things can be done in a more businesslike,
more profitable or more satisfying way.
The following are typical of the kinds of problem which require creative thinking:
• How to make more effective use of a manager’s time
• How to improve a product’s appeal to customers
• How to improve motivation amongst staff
• How to appeal to customers’wants and needs
• How to cut costs through more efficient/effective production methods
• How to identify new and profitable product-market opportunities
• How to get skilled and experience staff to stay with the company without
paying them excessively high salaries
Problems which require creative thinking are ‘open-ended’ problems: that is,
problems for which there is more than one solution. Executives have to make
decisions which require creative problem solving in planning, organising, leading
and controlling their organisations:
Planning
• Determining the mission of the organisation
• Determining the organisational objectives
• Identifying strengths,weaknesses, opportunities and threats
• Adjusting the organisation behaviour and strategies to competitors’
strategies
• Deciding how to implement competitive strategies
Organising
• Deciding what jobs need to be done within an organisational unit
• Deciding how various jobs within an organisational unit can be grouped
together, etc.
• Deciding how much authority should be delegated to various
organisational positions
• Determining how best to train people for their jobs
Leading
• Finding ways of increasing productivity in the workplace
Controlling
• Deciding what systems of control are needed
Setting standards
• Identifying why standards/objectives have not been achieved
It is argued that in an organisational sense creative thinking is required most
when there is a lack of consensus regarding goals and also a lack of
understanding about cause–effect relationships (Thompson, 1967). Disagreement
often occurs when problems arise which have not been previously encountered
and when outcomes and goals are uncertain.The need for creative thinking often
becomes paramount when paradigm shift occurs or is likely to occur soon.
21
3. What factors are to be taken into account in a crisis communications

strategy?
Ans. The following items should be taken into account in the crisis communications
strategy:
• Communications should be timely and honest.
• To the extent possible, an audience should hear news from the
organization first.
• Communications should provide objective and subjective assessments.
• All employees should be informed at approximately the same time.
• Give bad news all at once – do not sugarcoat it.
• Provide opportunity for audiences to ask questions, if possible.
• Provide regular updates and let audiences know when the next update will
be issued.
• Treat audiences as you would like to be treated.
• Communicate in a manner appropriate to circumstances:
– Face-to-face meetings (individual and group)
– News conferences
– Voice mail/email
– Company Intranet and Internet sites
– Toll-free hotline
– Special newsletter
– Announcements using local/national media.
Preplanning for communications is critical. Drafts of message templates, scripts,
and statements can be crafted in advance for threats identified in the Risk
Assessment.
Procedures to ensure that communications can be distributed at short notice
should also be established, particularly when using resources such as Intranet and
Internet sites and toll-free hotlines.
4. What elements should be included in a Marketing Plan under Due

Diligence while seeking investment in for your Company?
Ans. The Marketing Plan
Must include the following elements:
• A brief history of the business (to show its track performance and growth)
• Points regarding the political, legal (licences) and competitive environment
• A vision of the business in the future
• Products and services and their uses
• Comparison of the firm's products and services to those of the competitors
• Warranties, guarantees and after-sales service
• Development of new products or services
• A general overview of the market and market segmentation
• Is the market rising or falling (the trend: past and future)
• What customer needs do the products / services satisfy
• Which markets segments do we concentrate on and why
• What factors are important in the customer's decision to buy (or not to
buy)
• A list of the direct competitors and a short description of each
• The strengths and weaknesses of the competitors relative to the firm
• Missing information regarding the markets, the clients and the competitors
• Planned market research
• A sales forecast by product group
22
• The pricing strategy (how is pricing decided)

• Promotion of the sales of the products (including a description of the sales
force, sales-related incentives, sales targets, training of the sales
personnel, special offers, dealerships, telemarketing and sales support).
• Attach a flow chart of the purchasing process from the moment that the
client is approached by the sales force until he buys the product.
• Marketing and advertising campaigns (including cost estimates) - broken
by market and by media
• Distribution of the products
• A flow chart describing the receipt of orders, invoicing, shipping.
• Customer after-sales service (hotline, support, maintenance, complaints,
upgrades, etc.)
• Customer loyalty (example: churn rate and how is it monitored and
controlled).
5. Distinguish between Joint Ventures and Licensing, explaining the

relative advantages and disadvantages of each.
Ans. Licensing and Assigning IP rights
One basic choice is whether you should actively exploit your IP rights yourself, or
to keep your IP rights and license them to others to use, or sell or assign the
rights to another person. You can, in principle, make different choices in different
countries for exploiting IP rights for the same underlying invention. If you are
based in Malaysia, you could in theory decide to exploit your patent yourself in
the East Asian region, grant a license a Canadian company to use the invention in
North America, and sell or assign the rights in Europe to a Danish company –
whether or not this is the best approach in practice is a different matter, of
course.
A licence is a grant of permission made by the patent owner to another to
exercise any specified rights as agreed. Licensing is a good way for an owner to
benefit from their work as they retain ownership of the patented invention while
granting permission to others to use it and gaining benefits, such as financial
royalties, from that use. However, it normally requires the owner of the invention
to invest time and resources in monitoring the licensed use, and in maintaining
and enforcing the underlying IP right.
The patent right normally includes the right to exclude others from making, using,
selling or importing the patented product, and similar rights concerning patented
processes. The license can therefore cover the use of the patented invention in
many different ways.
For instance, licences can be exclusive or non-exclusive. If a patent owner grants
a non-exclusive licence to Company A to make and sell their patented invention in
Malaysia, the patent owner would still be able to also grant Company B another
non-exclusive for the same rights and the same time period in Malaysia. In
contrast, if a patent owner granted an exclusive licence to Company A to make
and sell the invention in Malaysia, they would not be able to give a licence to
anyone else in Malaysia while the licence with Company A remained inforce.
Licenses are normally confined to a particular geographical area – typically, the
jurisdiction in which particular IP rights have effect. You can grant different
exclusive licences for different territories at the same time. For example, a patent
owner can grant an exclusive licence to make and sell their patented invention in
Malaysia for the term of the patent, and grant a separate exclusive licence to
manufacture and sell their patented invention in India for the term of the patent.
Separate licences can be granted for different ways of using the same technology.
For example, if an inventor creates a new form of pharmaceutical delivery, she
could grant an exclusive licence to one company to use the technology for an
23
arthritis drug, a separate exclusive licence to another company to use it for relief
of cold symptoms, and a further exclusive licence to a third company to use it for
veterinary pharmaceuticals.
A licence is merely the grant of permission to undertake some of the actions
covered by intellectual property rights, and the patent holder retains ownership
and control of the basic patent. An assignment of intellectual property rights is
the sale of a patent right, or a share of the patent. It should be remembered that
the person who makes an invention can be different to the person who owns the
patent rights in that invention. If an inventor assigns their patent rights to
someone else they no longer own those rights. Indeed, they can be in
infringement of the patent right if they continue to use it. Patent licences and
assignments of patent rights do not have to cover all patent rights together.
Licences are often limited to specific rights, territories and time periods. For
example, a patent owner could exclusively licence only their importation right to a
company for the territory of Indonesia for 12 months. If an inventor owns patents
on the same invention in five different countries, they could assign (or sell) these
patents to five different owners in each of those countries. Portions of a patent
right can also be assigned – so that in order to finance your invention, you might
choose to sell a half-share to a commercial partner.
If you assign your rights, you normally lose any possibility of further licensing or
commercially exploiting your intellectual property rights. Therefore, the amount
you charge for an assignment is usually considerably higher than the royalty fee
you would charge for a patent licence. When assigning the rights, you might seek
to negotiate a licence from the new owner to ensure that you can continue to use
your invention. For instance, you might negotiate an arrangement that gives you
licence to use the patented invention in the event that you come up with an
improvement on your original invention and this falls within the scope of the
assigned patent. Equally, the new owner of the assigned patent might want to get
access to your subsequent improvements on the invention.
Joint Venture Agreements and Start-up Companies
Rather than simply exploit your IP rights by licensing or assignment, you might
choose to set up a new legal mechanism to exploit your technology. Typically this
can be a partnership expressed through a joint venture agreement or a new
corporation, such as a start-up or spin-off company. These options require much
more work on your part than licensing or assigning your intellectual property
rights. This could be a desirable choice in cases where:
– you want to keep your institute’s research activities separate from the
development and commercialisation of technology, especially when your
institute has a public interest focus or an educational role; or
– you need to attract financial support from those prepared to take a risk with
an unproven technology (‘angel investors’ or ‘venture capitalists’), and they
will only take on a long-term risk if they can get a share of future profits of the
technology.
In working out the right vehicle for your technology, you will normally need
specific legal advice from a commercial lawyer, preferably one with experience in
technology and commercialisation in your jurisdiction. The laws governing
partnerships and companies differ considerably from one country to another, and
this discussion is only intended to give a general flavour of the various options.
A joint venture agreement involves a formal, legally binding commitment between
two or more partners to work together on a shared enterprise. It is normally
created for a specific purpose (for example, to commercialise a specific new
technology) and for a limited duration. For instance, you might sign a partnership
agreement with a manufacturing company to develop and market a product
based on your invention. Before entering into a joint venture agreement, you
need to check out possible commercial partners and make sure that the
objectives of your potential commercial partners are consistent with your
24
objectives. In the joint venture agreement, the partners typically agree to share
the benefits, as well as the risks and liabilities, in a specified way.
But this kind of partnership isn’t normally able in itself to enter legal
commitments, or own IP in its own right, so that the partners remain directly
legally responsible for any losses or other liabilities that the partnership’s
operations create. In other words, a partnership which is not a corporation, a
company or a specific institution doesn’t really separately exist as a legal entity.
By contrast, a company is a new legal entity (a ‘legal person’ recognised by the
law as having its own legal identity) which can own and license IP and enter into
legal commitments in its own right. A spin-off company is an independent
company created from an existing legal body – for example, if a research institute
decided to turn its licensing division or a particular laboratory into a separate
company. A start-up company is a general term for a new company in its early
stages of development. If a company is defined as a limited liability company, the
partners or investors normally cannot lose more than their investment in the
company (but officeholders in the company might be personally responsible for
their actions in the way they manage the company). This separate legal identity
means that a startup company can be a useful way of developing and
commercialising a new technology based on original research, while keeping the
main research effort of an institute focussed on broader scientific and public
objectives, and insulated from the commercial risks and pressures of the
commercialisation process. At the same time, the research institute can benefit
from the commercialisation of its research, through receiving its share of the
profits and growth in assets of the spin-off company, thus strengthening the
institute’s capacity to do scientific research.
The company is normally owned through shares (its ‘equity’). These effectively
represent a portion of the assets and entitlement to profits of the company.
Investors can purchase shares in the company, which is one way of bringing in
new financial resources to support the development of the technology – in
exchange, the investors stand to benefit from the growth in the company’s worth,
as their shares proportionately rise in value, and to receive a portion of any profits
produced by the company’s operations, commensurate with the number of shares
they own. If it is a public company, shares in the company can be bought and sold
on the open stock market. An initial public offering is when the shares in a start
up company are first made available to the public to purchase. A private
company’s shares, by contrast, are not traded on the open market (but can still
be bought and sold).
The option of starting up your own company to manufacture and market your
patented invention requires you to have business skills, marketing skills,
management skills and substantial capital to draw on for factory premises, hiring
staff and so on. But it also can offer a mechanism for attracting financial backing
for research, development and marketing, which can improve access to the
necessary resources and expertise.
Which model of commercialisation is best for you? Each new technology and
associated package of IP rights is potentially difference, and the mechanism you
choose for commercialisation should take into account the particular features of
the technology. One basic consideration is to what extent you, as originator of the
technology, wish to be involved and to invest in the subsequent development of
the technology. You will need to compare the advantages and disadvantages of
each model of commercialisation. Generally speaking, the higher degree of risk
and commitment of finance and resources you can invest, the higher the degree
of control you can secure over exploitation of the technology invention, and the
higher the financial return to your institution may be.
There are many possible variations on each of these general models, and in
practice they can overlap. In deciding which model of commercialisation is best
for you, it is always a good idea to seek commercial or legal advice. Remember
that IPRs alone do not guarantee you a financial return on your invention. You
25
need to make good commercial decisions to benefit financially from your

intellectual property rights. Properly managed, intellectual property rights should
not be a burden but should yield a return from your hard work in creating an
invention.
6. You wish to commercialize your invention. What factors would you

weigh in choosing an appropriate course?
Ans. Commercialising inventions can involve a great deal of commercial risk, which
small companies and research institutes might not be able to accept and manage.
Because of these considerations, in many cases institutions and companies
choose not to commercialise their invention at all, but elect to sell (‘assign’) or
license their rights to the invention to other companies for them to take the
invention to the marketplace. Because intellectual property rights can be so costly
to obtain, to keep in force and to enforce, they should not be pursued for their
own sake. Patenting your invention may be worthless, and in fact could waste
resources, unless you have a commercial strategy in which your patenting
program has a logical place. And this strategy will usually involve some form of
partnership – this may be a bank or venture capitalist providing you with the
funds you need, a company with access to technology or a product that is needed
for the success of your invention, or a commercial enterprise with product
development and marketing skills. When you are weighing up whether to
commercialise your invention yourself, or whether you should find commercial
partners or another way of developing your invention, you should consider:
1. Your overall objectives Are you looking just to fund further research, or
to create a new industry particularly for the benefit of your own country, or to
build up a capital asset, or simply to disseminate the fruits of your research as
broadly as possible, with some control over the way the technology is used?
2. Your financial position Can you accept the cost and financial risk of
investing in patents and other IPRs, and other aspects of commercialisation;
do you have the reserves to defend and enforce your IPRs, potentially in
several countries; will financial constraints keep you out of some of the major
potential markets for the invention?
3. The skills and resources available Do you, or your organization, have
the capacity to develop and implement a product development and marketing
program for a new product? What are the focus and core expertise of your
organization?
4. Regulatory requirements for getting onto the market Do you have
access to sufficient expertise and resources to undertake the kind of testing
and approval processes that might be required for a new product, such as a
new pharmaceutical, a new pesticide or a genetically modified crop? Can you
deal with labelling and certification requirements in different countries? Are
there joint ventures or local participation obligations to enter some markets?
5. Your options for overseas production or export Do you have the
capacity to produce, export and market your invention in major foreign
markets?
6. The nature of the technology The invention may require access to
other IP-protected technologies or know-how for it to be produced; and
particular manufacturing technologies might be required for it to be made in
an economic manner, so that the product is competitively priced.
7. The strength of the competition Does your product need to find a
place in a crowded market with strong competition, requiring the backing and
resources of a major company in the field?
26
8. The range of possible uses for your invention Do you have the
capacity to put it to work in all the areas it could be used, or do you need
partnership with others to make sure your invention achieves its full potential?
27
MB0037 – International Business Management

Set- 1
Q.1 a. How has liberalizing trade helped international business?

b. What are the merits and demerits of international trade?
Ans. a. Policies that make an economy open to trade and investment with the rest
of the world are needed for sustained economic growth. The evidence on this is
clear. No country in recent decades has achieved economic success, in terms
of substantial increases in living standards for its people, without being open to
the rest of the world. In contrast, trade opening (along with opening to foreign
direct investment) has been an important element in the economic success of
East Asia, where the average import tariff has fallen from 30 percent to 10
percent over the past 20 years. Opening up their economies to the global
economy has been essential in enabling many developing countries to develop
competitive advantages in the manufacture of certain products. In these
countries, defined by the World Bank as the "new globalizers," the number of
people in absolute poverty declined by over 120 million (14 percent) between
1993 and 1998. There is considerable evidence that more outward-oriented
countries tend consistently to grow faster than ones that are inward-looking.
Indeed, one finding is that the benefits of trade liberalization can exceed the
costs by more than a factor of 10. Countries that have opened their economies
in recent years, including India, Vietnam, and Uganda, have experienced faster
growth and more poverty reduction. On average, those developing countries
that lowered tariffs sharply in the 1980s grew more quickly in the 1990s than
those that did not. Freeing trade frequently benefits the poor especially.
Developing countries can ill-afford the large implicit subsidies, often channeled
to narrow privileged interests that trade protection provides. Moreover, the
increased growth that results from free trade itself tends to increase the
incomes of the poor in roughly the same proportion as those of the population
as a whole. New jobs are created for unskilled workers, raising them into the
middle class. Overall, inequality among countries has been on the decline since
1990, reflecting more rapid economic growth in developing countries, in part
the result of trade liberalization The potential gains from eliminating remaining
trade barriers are considerable. Estimate of the gains from eliminating all
barriers to merchandise trade range from US$250 billion to US$680 billion per
year. About two-thirds of these gains would accrue to industrial countries. But
the amount accruing to developing countries would still be more than twice the
level of aid they currently receive. Moreover, developing countries would gain
more from global trade liberalization as a percentage of their GDP than
industrial countries, because their economies are more highly protected and
because they face higher barriers.Although there are benefits from improved
access to other countries' markets, countries benefit most from liberalizing
their own markets. The main benefits for industrial countries would come from
the liberalization of their agricultural markets. Developing countries would gain
about equally from liberalization of manufacturing and agriculture. The group
of low-income countries, however, would gain most from agricultural
liberalization in industrial countries because of the greater relative importance
of agriculture in their economies.
b. Merits of International Trade
 Enhance your domestic competitiveness
 Increase sales and profits
 Gain your global market share
 Reduce dependence on existing markets
 Exploit international trade technology
28
 Reduce dependence on existing markets Exploit international trade

technology
 Extend sales potential of existing products
 Stabilize seasonal market fluctuations
 Enhance potential for expansion of your business
 Sell excess production capacity
 Maintain cost competitiveness in your domestic market
Demerits of International Trade
 You may need to wait for long-term gains
 Hire staff to launch international trading
 Modify your product or packaging
 Develop new promotional material
 Incur added administrative costs
 Dedicate personnel for travelling
 Wait long for payments
 Apply for additional financing
 Deal with special licenses and regulations.
2. Discuss the impact of culture on International Business.

Ans. Culture and International Business
The following can be looked as the various aspects of the cultural dichotomies.
In this new millennium, few executives can afford to turn a blind eye to global
business opportunities. Japanese auto-executives monitor carefully what their
European and Korean competitors are up to in getting a bigger slice of the
Chinese auto-market. Executives of Hollywood movie studios need to weigh the
appeal of an expensive movie in Europe and Asia as much as in the US before a
firm commitment. The globalizing wind has broadened the mindsets of
executives, extended the geographical reach of firms, and nudged international
business (IB) research into some new trajectories. One such new trajectory is the
concern with national culture. Whereas traditional IB research has been
concerned with economic/ legal issues and organizational forms and structures,
the importance of national culture –broadly defined as values, beliefs, norms, and
behavioural patterns of a national group –has become increasingly important in
the last two decades, largely as a result of the classic work of Hofstede (1980).
National culture has been shown to impact on major business activities, from
capital structure (Chui et al., 2002) to group performance (Gibson, 1999). For
reviews, see’ Boyacigiller and Adler’ (1991) and ‘Earley and Gibson’ (2002).
The purpose of this Unit is to provide a state-of-the-art review of several recent
advances in culture and IB research, with an eye toward productive avenues for
future research. Itis not our purpose to be comprehensive; our goal is to spotlight
a few highly promising areas for leapfrogging the field in an increasingly
boundary-less business world. We first review the issues surrounding cultural
convergence and divergence, and the processes underlying cultural changes. We
then examine novel constructs for characterizing cultures, and how to enhance
the precision of cultural models by pinpointing when the effects of culture are
important. Finally, we examine the usefulness of experimental methods, which
are rarely employed in the field of culture and IB. A schematic summary of our
coverage is given in Table 2.1, which suggests that the topics reviewed are
loosely related, and that their juxtaposition in the present paper represents our
attempt to highlight their importance rather than their coherence as elements of
an integrative framework.2.2.1 Cultural change, convergence and divergence in
an era of partial globalization An issue of considerable theoretical significance is
concerned with cultural changes and transformations taking place in different
parts of the world. In fact, since the landmark study of Haire et al. (1966) and the
29
publication of Industrialism and Industrial Man by Kerr et al. (1960), researchers

have continued to search for similarities in culture-specific beliefs and attitudes in
various aspects of work related attitudes and behaviours, consumption patterns,
and the like. If cultures of the various locales of the world are indeed converging
(e.g., Heuer et al., 1999), IB-related practices would indeed become increasingly
similar. Standard, culture-free business practices would eventually emerge, and
inefficiencies and complexities associated with divergent beliefs and practices in
the past era would disappear. In the following section, we review the evidence on
the issue and conclude that such an outlook pertaining to the convergence of
various IB practices is overly optimistic.2.2.2 Evolution of partial globalization
Globalization refers to a ‘growing economic interdependence among countries, as
reflected in the increased cross-border flow of three types of entities: goods and
services, capital, and know-how’ (Govindarajan and Gupta, 2001, 4). Few spoke of
‘world economy’ 25 years ago, and the prevalent term was ‘international trade’
(Drucker, 1995). However today, international trade has culminated in the
emergence of a global economy, consisting of flows of information, technology,
money, and people, and is conducted via government international organizations
such as the North American Free Trade Agreement (NAFTA) and the European
Community; global organizations such as the International Organization for
Standardization (ISO); multinational companies (MNCs); and cross –border
alliances in the form of joint ventures, international mergers, and acquisitions.
These inter –relationships have enhanced participation in the world economy, and
have become a key to domestic economic growth and prosperity (Drucker, 1995,
153).Yet, globalization is not without its misgivings and discontents (Sassan,
1998). A vivid image associated with the G8 summits is the fervent protests
against globalization in many parts of the world, as shown in television and
reported in the popular media. Strong opposition to globalization usually
originates from developing countries that have been hurt by the destabilizing
effects of globalization, but in recent times we have also seen heated debates in
Western economies triggered by significant loss of professional jobs as a result of
off shoring to low –wage countries. Indeed, workers in manufacturing and farming
in advanced economies are becoming increasingly wary of globalization, as their
income continues to decline significantly. In parallel to the angry protests against
globalization, the flow of goods, services, and investments across national borders
has continued to fall after the rapid gains of the 1990s. Furthermore, the creation
of regional trade blocs, such as NAFTA, the European Union, and the Association
of Southeast Asian Nations, have stimulated discussions about creating other
trade zones involving countries in South Asia, Africa, and other parts of the world.
Although it is often assumed that countries belonging to the World Trade
Organization (WTO) have embraced globalization, the fact is that the world is only
partially globalized, at best (Schaeffer, 2003). Many parts of Central Asia and
Eastern Europe, including the former republics of the Soviet Union, parts of Latin
America, Africa, and parts of South Asia, have been sceptical of globalization
(Greider, 1997). In fact, less than 10% of the world’s population is fully globalized
(i.e., being active participants in the consumption of global products and services)
(Schaeffer, 2003). Therefore, it is imperative that we analyze the issues of cultural
convergence and divergence in this partially globalized world. ‘Universal culture’
often refers to the assumptions, values, and practices of people in the West and
some elites in non-Western cultures. Huntington (1996) suggested that it
originates from the intellectual elites from a selected group of countries who meet
annually in the World Economic Forum in Davos, Switzerland. These individuals
are highly educated, work with symbols and numbers, are fluent in English, are
extensively involved with international commitments, and travel frequently
outside their country. They share the cultural value of individualism, and believe
strongly in market economics and political democracy. Although those belonging
to the Davos group control virtually all of the world’s important international
institutions, many of the world’s governments, and a great majority of the world’s
economic and military capabilities, the cultural values of the Davos group are
probably embraced by only a small fraction of the six billion people of the world.
Popular culture, again mostly Western European and American in origin, also
30
contributes to a convergence of consumption patterns and leisure activities

around the world. However, the convergence may be superficial, and have only a
small influence on fundamental issues such as beliefs, norms, and ideas about
how individuals, groups, institutions, and other important social agencies ought to
function. In fact, Huntington (1996, 58) noted that ‘The essence of Western
civilization is the Magna Carta, not the Magna Mac. The fact that non-Westerners
may bite into the latter has no implications for their accepting the former’. This
argument is obvious if we reverse the typical situation and put Western
Europeans and Americans in the shoes of recipients of cultural influence. For
instance, while Chinese Kung Fu dominates fight scenes in Hollywood movies such
as Matrix Reloaded, and Chinese restaurants abound in the West, it seems
implausible that Americans and Europeans have espoused more Chinese values
because of their fondness of Chinese Kung Fu and food. A major argument against
cultural convergence is that traditionalism and modernity may be unrelated
(Smith and Bond, 1998). Strong traditional values, such as group solidarity,
interpersonal harmony, paternalism, and feminism, can co-exist with modern
values of individual achievement and competition. A case in point is the findings
that Chinese in Singapore and China indeed endorsed both traditional and modern
values (Chang et al., 2003; Zhang et al., 2003). It is also conceivable that, just as
we talk about Westernization of cultural values around the world, we may also
talk about Easternization of values in response to forces of modernity and
consumption values imposed by globalization (Marsella and Choi, 1993).Although
the argument that the world is becoming one culture seems untenable, there are
some areas that do show signs of convergence. We explore in the following the
roles of several factors that simultaneously cause cultures of the world to either
converge or diverge, in an attempt to identify several productive avenues for
future research.2.2.3 Role of multiculturalism and cultural identityThe broad
ideological framework of a country, corporation, or situation is the most important
determinant of the cultural identity that people develop in a given locale (Triandis,
1994). The ‘melting pot’ ideology suggests that each cultural group loses some of
its dominant characteristics in order to become the mainstream: this is
assimilation, or what Triandis (1994) calls subtractive multiculturalism.In contrast,
when people from a cultural group add appropriate skills and characteristics of
other groups, it may be called integration, or additive multiculturalism. Both of
these processes are essential for cultural convergence to proceed. However, if
there is a significant history of conflict between the cultural groups, it is hard to
initiate these processes, as in the case of Israelis and Palestinians. In general,
although there has been some research on the typology of animosity against
other nations (e.g., Jung et al., 2002), we do not know much about how emotional
antagonism against other cultural groups affects trade patterns and intercultural
cooperation in a business context. The issues of cultural identity and emotional
reactions to other cultural groups in an IB context constitute a significant gap in
our research effort in this area.2.2.4 Implications of convergence and divergence
issuesOne message is clear: while convergence in some domains of IB activity is
easily noticeable, especially in consumer values and lifestyles, significant
divergence of cultures persists. In fact, Hofstede (2001) asserts that mental
programs of people around the world do not change rapidly, but remain rather
consistent over time. His findings indicate that cultural shifts are relative as
opposed to absolute. Although clusters of some countries in given geographical
locales (e.g., Argentina, Brazil, Chile) might indicate significant culture shifts
towards embracing Anglo values, the changes do not diminish the absolute
differences between such countries and those of the Anglo countries (i.e., US,
Canada, UK). Huntington, in his ‘The Clash of Civilizations’ (1996), presents the
view that there is indeed a resurgence of non-Western cultures around the world,
which could result in the redistribution of national power in the conduct of
international affairs. The attempt by the Davos group to bring about uniform
practices in various aspects of IB and work culture, thereby sustaining the forces
of globalization, is certainly worthwhile. However, our analysis suggests that there
is no guarantee that such convergence will come about easily, or without long
periods of resistance.IB scholars need to understand that although some countries
31
might exhibit strong tendencies toward cultural convergence, as is found in

Western countries, there are countries that will reject globalization, not only
because of its adverse economic impacts (Greider, 1997) but also because
globalization tends to introduce distortions (in their view) in profound cultural
syndromes that characterize their national character. Furthermore, reactions to
globalization may take other forms. Bhagat et al. (2003) have recently argued
that adaptation is another approach that could characterize the tendencies of
some cultures in the face of mounting pressures to globalize. Other approaches
are rejection, creative synthesis, and innovation (Bhagat et al., 2003). These
different approaches highlight once again the complex dynamics that underlie
cultural convergence and divergence in a partially globalized world. Also, in
discussing issues of convergence and divergence, it is necessary to recognize that
the shift in values is not always from Western societyto others, but can result in
the change of Western cultural values as well. For example, the emphasis on
quality and teamwork in the West is partly a result of the popularity of Japanese
management two decades ago.Scholars of IB should recognize that theissue of
convergence and divergence in this era of partial globalization will remain as a
persistent and complex issue whose direction might only be assessed on a region-
by-region basis. It is also wise to adopt an interdisciplinary perspective in
understanding the forces that create both convergence and divergence of
cultures in different parts of the world. For instance, in Understanding
Globalization, Schaeffer (2003) has provided an insightful discussion of the social
consequences of political, economic and other changes, which have significant
implications for IB. The cause-effect relationships of globalization and its various
outcomes, especially the cultural outcomes, are not only characterized by bi-
directional arrows, but are embedded in a complex web of relationships. How
these complex relationships and processes play out on the stage of IB remains to
be uncovered by IB researchers.2.2.5 Processes of cultural changesIn the previous
section, we make the point that, through the process of globalization, cultures
influence each other and change, but whether or not these changes will bring
about cultural convergence is yet to be seen. In this section, we delineate a
general model that describes and explains the complex processes underlying
cultural changes. As explained before, IB is both an agent and a recipient of
cultural change, and for international business to flourish it is important to
understand its complex, reciprocal relationships with cultural change.In line with
the view of Hofstede (2001) that culture changes very slowly, culture has been
treated as a relatively stable characteristic, reflecting a shared knowledge
structure that attenuates variability in values, behavioral norms, and patterns of
behaviours (Erez and Earley, 1993). Cultural stability helps to reduce ambiguity,
and leads to more control over expected behavioural outcomes (Weick and Quinn,
1999; Leana and Barry, 2000). For instance, most existing models of culture and
work behaviour assume cultural stability and emphasize thefit between a given
culture and certain managerial and motivational practices (Erez and Earley,
1993). High fit means high adaptation of managerial practices to a given culture
and, therefore, high effectiveness. The assumption of cultural stability is valid as
long as there are no environmental changes that precipitate adaptation and
cultural change. Yet, the end of the 20thcentury and the beginning of the new
millennium have been characterized by turbulent political and economical
changes, which instigate cultural changes. In line with this argument, Lewin and
Kim (2004), in their comprehensive chapter on adaptation and selection in
strategy and change, distinguished between theories driven by the underlying
assumption that adaptation is the mechanism to cope with change, and theories
driven by the underlying assumption of selection and the survival of the fittest,
suggesting that ineffective forms of organization disappear, and new forms
emerge. However, although organizational changes as a reaction to
environmental changes have been subjected to considerable conceptual analyses,
the issue of cultural change at the national level has rarely been addressed. There
are relatively few theories of culture that pertain to the dynamic aspect of culture.
One exception is the eco-cultural model by Berry et al. (2002), which views
culture as evolving adaptations to ecological and socio-political influences, and
32
views individual psychological characteristics in a population as adaptive to their

cultural context, as well as to the broader ecological and socio-political influences.
Similarly, Kitayama (2002) proposes a system view to understanding the dynamic
nature of culture, as opposed to the entity view that sees culture as a static
entity. This system view suggests that each person’s psychological processes are
organized through the active effort to coordinate one’s behaviours with the
pertinent cultural systems of practices and public meanings. Yet, concurrently,
many aspects of the psychological systems develop rather flexibly as they are
attuned to the surrounding socio-cultural environment, and are likely to be
configured in different ways across different socio-cultural groups. These adaptive
views of culture are supported by empirical evidence. For example, Vande Vliert
et al. (1999) identified curvilinear relationships between temperature, masculinity
and domestic political violence across 53 countries. Their findings showed that
masculinity and domestic violence are higher in moderately warm countries than
in countries with extreme temperatures. Inglehart and Baker (2000) examined
cultural change as reflected by changes in basic values in three waves of the
World Values Surveys, which included 65 societies and 75% of the world’s
population. Their analysis showed that economic development was associated
with shifts away from traditional norms and values toward values that are
increasingly rational, tolerant, trusting, and participatory. However, the data also
showed that the broad cultural heritage of a society, whether it is Protestant,
Roman Catholic, Orthodox, Confucian, or Communist, leaves an enduring imprint
on traditional values despite the forces of modernization.The process of
globalization described before has introduced the most significant change in IB,
with its effects filtering down to the national, organizational, group and individual
levels. Reciprocally, changes at micro-levels of culture, when shared by the
members of the society, culminate into macro level phenomena and change the
macro-levelsof culture. In the absence of research models that can shed light on
this complex process of cultural change, Erez and Gati (2004) proposed that the
general model of multi-level analysis (Klein and Kozlowski, 2000) could be
adopted for understanding the dynamics of culture and cultural change.
3. a. Explain the brief structure of WTO.

b. Highlight the drawbacks of GATT.
Ans. a. Structure of World Trade Organization (WTO)
The WTO’s overriding objective is to help trade flow smoothly, freely, fairly and
predictably. It does this by:
 Administering trade agreements
 Acting as a forum for trade negotiations
 Settling trade disputes
 Reviewing national trade policies
 Assisting developing countries in trade policy issues, through
technical assistance and training programs
 Cooperating with other international organizations
Structure
The WTO has nearly 150 members, accounting for over 97% of world trade.
Around 30 others are negotiating membership. Decisions are made by the
entire membership. This is typically by consensus. A majority vote is also
possible but it has never been used in the WTO, and was extremely rare under
the WTO’s predecessor, GATT. The WTO’s agreements have been ratified in all
members’ parliaments. The WTO’s top level decision-making body is the
Ministerial Conference which meets at least once every two years.
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Below this is the General Council (normally ambassadors and heads of

delegation in Geneva, but sometimes officials sent from members’ capitals)
which meets several times a year in the Geneva headquarters. The General
Council also meets as the Trade Policy Review Body and the Dispute
Settlement Body.
At the next level, the Goods Council, Services Council and Intellectual
Property (TRIPS) Council report to the General Council. Numerous specialized
committees, working groups and working parties deal with the individual
agreements and other areas such as the environment, development,
membership applications and regional trade agreements.
Secretariat The WTO Secretariat, based in Geneva, has around 600 staff and
is headed by a director-general. Its annual budget is roughly 160 million Swiss
francs. It does not have branch offices outside Geneva. Since decisions are
taken by the members themselves, the Secretariat does not have the decision-
making role that other international bureaucracies are given with. The
Secretariat’s main duties are to supply technical support for the various
councils and committees and the ministerial conferences, to provide technical
assistance for developing countries, to analyze world trade, and to explain WTO
affairs to the public and media. The Secretariat also provides some forms of
legal assistance in the dispute settlement process and advises governments
wishing to become members of the WTO.
The WTO is ‘member-driven’, with decisions taken by consensus among all
member governments. The WTO is run by its member governments. All major
decisions are made by the membership as a whole, either by ministers (who
meet at least once every two years) or by their ambassadors or delegates (who
meet regularly in Geneva). Decisions are normally taken by consensus. In this
respect, the WTO is different from some other international organizations such
as the World Bank and International Monetary Fund. In the WTO, power is not
delegated to a board of directors or the organization’s head. When WTO rules
impose disciplines on countries’ policies, that is the outcome of negotiations
among WTO members, the rules are enforced by the members themselves
under agreed procedures that they negotiated, including the possibility of trade
sanctions. But those sanctions are imposed by member countries, and
authorized by the membership as a whole. This is quite different from other
agencies whose bureaucracies can, for example, influence a country’s policy by
threatening to withhold credit.
Reaching decisions by consensus among some 150 members can be difficult.
Its main advantage is that decisions made this way are more acceptable to all
members. And despite the difficulty, some remarkable agreements have been
reached. Nevertheless, proposals for the creation of a smaller executive body –
perhaps like a board of directors each representing different groups of
countries – are heard periodically. But for now, the WTO is a member-driven,
consensus-based organization.
Highest authority: the Ministerial Conference So, the WTO belongs to its
members. The countries make their decisions through various councils and
committees, whose membership consists of all WTO members. Topmost is the
ministerial conference which has to meet at least once every two years. The
Ministerial Conference can take decisions on all matters under any of the
multilateral trade agreements.
Second level: General Council in three guises Day-to-day work in between
the ministerial conferences is handled by three bodies:
 The General Council
 The Dispute Settlement Body
 The Trade Policy Review Body
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All three are in fact the same – the Agreement Establishing the WTO states
they are all the General Council, although they meet under different terms of
reference. Again, all three consist of all WTO members. They report to the
Ministerial Conference. The General Council acts on behalf of the Ministerial
Conference on all WTO affairs. It meets as the Dispute Settlement Body and the
Trade Policy Review Body to oversee procedures for settling disputes between
members and to analyze members’ trade policies.
Third level: Councils for each broad area of trade, and more back to top
Three more councils, each handling a different broad area of trade, report tothe
General Council:
 The Council for Trade in Goods (Goods Council)
 The Council for Trade in Services (Services Council)
 The Council for Trade – Related Aspects of Intellectual Property Rights
(TRIPS Council)
As their names indicate, the three are responsible for the workings of the WTO
agreements dealing with their respective areas of trade. Again they consist of
all WTO members. These three also have the subsidiary bodies. Six other
bodies report to the General Council. The scope of their coverage is
smaller, so they are “committees”. But they still consist of all WTO members.
They cover issues such as trade and development, the environment, regional
trading arrangements, and administrative issues. The Singapore Ministerial
Conference in December 1996 decided to create new working groups to look at
investment and competition policy, transparency in government procurement,
and trade facilitation. Two more subsidiary bodies dealing with the plural-
lateral agreements (which are not signed by all WTO members) keep the
General Council informed of their activities regularly.
Fourth level: down to the nitty-gritty Each of the higher level councils has
subsidiary bodies. The Goods Council has 11 committees dealing with specific
subjects (such as agriculture, market access, subsidies, anti-dumping measures
and so on). Again, these consist of all member countries. Also reporting to the
Goods Council is the Textiles Monitoring Body, which consists of a chairman
and 10 members acting in their personal capacities, and groups dealing with
notifications (governments informing the WTO about current and new policies
or measures) and state trading enterprises. The Services Council’s subsidiary
bodies deal with financial services, domestic regulations, GATS rules and
specific commitments. At the General Council level, the Dispute Settlement
Body also has two subsidiaries: the dispute settlement “panels” of experts
appointed to adjudicate on unresolved disputes, and the Appellate Body that
deals with appeals.
Heads of Delegations and other boards: the need for informality Important
breakthroughs are rarely made in formal meetings of these bodies, least of all
in the higher level councils. Since decisions are made by consensus, without
voting, informal consultations within the WTO play a vital role in bringing a
vastly diverse membership round to an agreement. One step away from the
formal meetings is informal meetings that still include the full membership,
such as those of the Heads of Delegations (HOD). More difficult issues have to
be thrashed out in smaller groups. A common recent practice is for the
chairperson of a negotiating group to attempt to forge a compromise by
holding consultations with delegations individually, in twos or threes, or in
groups of 20 – 30 of the most interested delegations.
These smaller meetings have to be handled sensitively. The key is to ensure
that everyone is kept informed about what is going on (the process must be
“transparent”) even if they are not in a particular consultation or meeting, and
that they have an opportunity to participate or provide input (it must be
“inclusive”). One term has become controversial, but more among some
outside observers than among delegations. The “Green Room” is a phrase
35
taken from the informal name of the director-general’s conference room. It is

used to refer to meetings of 20 – 40 delegations, usually at the level of heads
of delegations. These meetings can take place elsewhere, such as at Ministerial
Conferences, and can be called by the minister chairing the conference as well
as the director-general. Similar smaller group consultations can be organized
by the chairs of committees negotiating individual subjects, although the term
Green Room is not usually used for these.
In the past delegations have sometimes felt that Green Room meetings could
lead to compromises being struck behind their backs. So, extra efforts are
made to ensure that the process is handled correctly, with regular reports back
to the full membership. The way countries now negotiate has helped
somewhat. In order to increase their bargaining power, countries have formed
coalitions. In some subjects such as agriculture virtually all countries are
members of at least one coalition – and in many cases, several coalitions. This
means that all countries can be represented in the process if the coordinators
and other key players are present. The coordinators also take responsibility for
both “transparency” and “inclusiveness” by keeping their coalitions informed
and by taking the positions negotiated within their alliances. In the end,
decisions have to be taken by all members and by consensus.
The membership as a whole would resist attempts to impose the will of a small
group. No one has been able to find an alternative way of achieving consensus
on difficult issues, because it is virtually impossible for members to change
their positions voluntarily in meetings of the full membership. Market access
negotiations also involve small groups, but for a completely different reason.
The final outcome is a multilateral package of individual countries’
commitments, but those commitments are the result of numerous bilateral,
informal bargaining sessions, which depend on individual countries’ interests.
(Examples include the traditional tariff negotiations, and market access talks in
services.) So, informal consultations in various forms play a vital role in
allowing consensus to be reached, but they do not appear in organization
charts, precisely because they are informal. They are not separate from the
formal meetings, however. They are necessary for making formal decisions in
the councils and committees. Nor are the formal meetings unimportant. They
are the forums for exchanging views, putting countries’ positions on the record,
and ultimately for confirming decisions. The art of achieving agreement among
all WTO members is to strike an appropriate balance, so that a breakthrough
achieved among only a few countries can be acceptable to the rest of the
membership.
b. Drawbacks of GATT.
1. The GATT was a set of rules, a multilateral agreement, with no
institutional foundation, only a small associated secretariat which had its
origins in the attempt to establish an International Trade Organization in
the 1940s.
2. The GATT was applied on a "provisional basis" even if, after more
than forty years, governments chose to treat it as a permanent
commitment.
3. The GATT rules applied to trade in merchandise goods.
4. While GATT was a multilateral instrument, by the 1980s many new
agreements had been added of a plural-lateral, and therefore selective,
nature.
5. The WTO dispute settlement system is faster, more automatic, and
thus much less susceptible to blockages, than the old GATT system. The
implementation of WTO dispute findings will also be more easily assured.
Q.4. a. Give a short note on the regional economic integration.

36
b. Mention the benefits of WTO.

Ans. a. Regional Economic Integration
Regional integration can take many forms, and nowhere is this more evident
than in the vastly different integration processes taking place in the regions of
Europe and East Asia. The subject of this paper is regional integration as it has
developed in East Asia with a focus on the drivers of that integration. While
the paper is not intended as a direct comparison of integration in East Asia
and Europe, it will include some comparisons between the two regions.
Integration in East Asia has progressed very slowly and is still in an early stage
despite that the process has continued for decades. In fact, it could be said
that the process began centuries ago – even as far back as the 15th century.
By comparison, European integration has progressed steadily and has
gradually deepened over the last 50 years to reach an advanced stage today
with a common currency and well-developed regional institutions. Thus, the
speed of progression and the level of integration attained in the two regions
are quite dissimilar. In addition to these differences, the drivers behind the
integration process in each region are different. In Europe, the origins of
integration have been institutional in nature, and the development of
institutions has been prominent throughout the process. Thus, regional
institutions have been the driving force behind integration in Europe. In East
Asia, the development of regional institutions has also occurred; however,
progress in this area has been slow and the few existing institutions are fairly
weak and ineffective.
Nevertheless, regional integration is taking place in East Asia, but the driving
force is the market rather than policy or institutions. Corporations and the
production networks they have established are driving integration in East Asia.
Finland: Regional Economic Integration
Until 1917 the Grand Duchy of Finland enjoyed a privileged position as a
relatively advanced part of the Russian Empire, supplying metal products and
ships in exchange for agricultural goods. These ties collapsed, however, when
political tensions between the Bolshevik regime and the Finnish Republic
precluded commercial agreements. The interwar pattern was reversed in the
years following World War II, as reparations payments and barter trade grew
into a close trading relationship in which Finland exported industrial goods,
especially capital goods, in exchange for raw materials and fuels – an
arrangement roughly parallel to that which had existed before 1917.
Starting in the late 1950s, however, Finland broke away from its dependence
on the Soviet market, successfully opening its economy to the two West
European trading blocks, the European Economic Community (EEC – see
Glossary) and the European Free Trade Association (EFTA – see Glossary).
Expanded trade with the West did not imply renunciation of profitable
exchanges with the East, however, because Finnish commercial ties with the
Soviet Union and with the other members of the Council for Mutual Economic
Assistance (CMEA, CEMA, or Comecon – see Glossary) deepened after 1960.
By the late 1980s, Finland provided a unique example of a neutral country
with a free-market economy that had developed increasing economic
interdependence with both the market economies of Western Europe and the
planned economies of Eastern Europe. Although many Western observers saw
in Finnish foreign economic policy the dominance of security concerns over
economic interests, close inspection revealed a mixture of motives. The
guiding principles of postwar foreign policy – Finland's need to assure the
Soviet Union that it did not have to fear threats from (or through) Finnish
territory as well as Finland's practice of active neutrality – influenced trade
policies toward the East, especially in the immediate postwar years. Such
concerns blocked Finnish participation in the Marshall Plan and in the
Organization for European Economic Co-operation (OEEC), which was
established to coordinate the use of Marshall Plan aid Trade with the East also
37
served important economic interests, however, driving the rapid development

of the metalworking industries during the 1950s and helping to absorb labor
released from the modernizing farm sector. In the years after the 1973 oil
crisis, Finnish exports to the Soviet Union also provided an essential market at
a time of recession in Western markets. Commentators suggested that by the
1980s, the Finns, less concerned with security than they had been in the early
postwar years, based policy decisions almost exclusively on market
considerations.
b. Benefits of WTO.
1. The system helps to keep the peace This sounds like an exaggerated claim,
and it would be wrong to make too much of it. Nevertheless, the system does
contribute to international peace, and if we understand why, we have a clearer
picture of what the system actually does. Peace is partly an outcome of two of
the most fundamental principles of the trading system: helping trade to flow
smoothly and providing countries with a constructive and fair outlet for
dealing with disputes over trade issues. It is also an outcome of the
international confidence and cooperation that the system creates and
reinforces. History is littered with examples of trade disputes turning into war.
One of the most vivid is the trade war of the 1930s when countries competed
to raise trade barriers in order to protect domestic producers and retaliate
against each others’ barriers. This worsened the Great Depression and
eventually played a part in the outbreak of World War 2. Two developments
immediately after the Second World War helped to avoid a repeat of the pre-
war trade tensions. In Europe, international cooperation developed in coal,
and in iron and steel. Globally, the General Agreement on Tariffs and Trade
(GATT) was created. Both have proved successful, so much so that they are
now considerably expanded – one has become the European Union, the other
the World Trade Organization (WTO). How does this work? Crudely put, sales
people are usually reluctant to fight their customers. In other words, if trade
flows smoothly and both sides enjoy a healthy commercial relationship,
political conflict is less likely. What’s more, smoothly – flowing trade also helps
people all over the worldbecome better off. People who are more prosperous
and contented are also less likely to fight. But that is not all. The GATT/WTO
system is an important confidence builder. The trade wars in the 1930s are
proof of how protectionism can easily plunge countries into a situation where
no one wins and everyone loses. The short – sighted protectionist view is that
defending particular sectors against imports is beneficial. But that view
ignores how other countries are going to respond. The longer term reality is
that one protectionist step by one country can easily lead to retaliation from
other countries, a loss of confidence in freer trade, and a slide into serious
economic trouble for all – including the sectors that were originally protected.
Everyone loses. Confidence is the key to avoiding that kind of no-win scenario.
When governments are confident that others will not raise their trade barriers,
they will not be tempted to do the same. They will also be in a much better
frame of mind to cooperate with each other. The WTO trading system plays a
vital role in creating and reinforcing that confidence. Particularly important are
negotiations that lead to agreement by consensus and a focus on abiding by
the rules.
2. The system allows disputes to be handled constructively As trade expands
in volume, in the number of products traded, and in the numbers of countries
and companies trading, there is a greater chance that disputes will arise. The
WTO system helps resolve these disputes peacefully and constructively. There
could be a down side to trade liberalization and expansion. More trade means
more possibilities for disputes to arise. Left to themselves, those disputes
could lead to serious conflict. But in reality, a lot of international trade tension
is reduced because countries can turn to organizations, in particular the WTO,
to settle their trade disputes. Before World War 2 that option was not
available. After the war, the world’s community of trading nations negotiated
38
trade rules which are now entrusted to the WTO. Those rules include an
obligation for members to bring their disputes to the WTO and not to act
unilaterally. When they bring disputes to the WTO, the WTO’s procedure
focuses their attention on the rules. Once a ruling has been made, countries
concentrate on trying to comply with the rules, and perhaps later
renegotiating the rules – not on declaring war on each other.
3. A system based on rules rather than power makes life easier for all The
WTO cannot claim to make all countries equal. But it does reduce some
inequalities, giving smaller countries more voice, and at the same time freeing
the major powers from the complexity of having to negotiate trade
agreements with each of their numerous trading partners Decisions in the
WTO are made by consensus. The WTO agreements were negotiated by all
members, were approved by consensus and were ratified in all members’
parliaments. The agreements apply to everyone. Rich and poor countries alike
have an equal right to challenge each other in the WTO’s dispute settlement
procedures. This makes life easier for all, in several different ways. Smaller
countries can enjoy some increased bargaining power. Without a multilateral
regime such as the WTO’s system, the more powerful countries would be freer
to impose their will unilaterally on their smaller trading partners. Smaller
countries would have to deal with each of the major economic powers
individually, and would be much less able to resist unwanted pressure. In
addition, smaller countries can perform more effectively if they make use of
the opportunities to form alliances and to pool resources. Several are already
doing this. There are matching benefits for larger countries. The major
economic powers can use the single forum of the WTO to negotiate with all or
most of their trading partners at the same time. This makes life much simpler
for the bigger trading countries. The alternative would be continuous and
complicated bilateral negotiations with dozens of countries simultaneously.
And each country could end up with different conditions for trading with each
of its trading partners, making life extremely complicated for its importers and
exporters. The principle of non-discrimination built into the WTO agreements
avoids that complexity. The fact that there is a single set of rules applying to
all members greatly simplifies the entire trade regime. And these agreed rules
give governments a clearer view of which trade policies are acceptable.
4. Freer trade cuts the cost of living We are all consumers. The prices we pay
for our food and clothing, our necessities and luxuries, and everything else in
between, are affected by trade policies. Protectionism is expensive: it raises
prices. The WTO’s global system lowers trade barriers through negotiation and
applies the principle of nondiscrimination. The result is reduced costs of
production (because imports used in production are cheaper) and reduced
prices of finished goods and services, and ultimately a lower cost of living.
There are plenty of studies showing just what the impacts of protectionism
and of freer trade are. These are just a few figures: Food is cheaper When
you protect your agriculture, the cost of your food goes up – by an estimated
$1,500 per year for a family of four in the European Union (1997); by the
equivalent of a 51% tax on food in Japan (1995); by $3 billion per year added
to US consumers’ grocery bills just to support sugar in one year (1988).
Negotiating agricultural trade reform is a complex undertaking. Governments
are still debating the roles agricultural policies play in a range of issues from
food security to environmental protection. But WTO members are now
reducing the subsidies and the trade barriers that are the worst offenders. And
in 2000, new talks started on continuing the reform in agriculture. These have
now been incorporated into a broader work programme, the Doha
Development Agenda, launched at the fourth WTO Ministerial Conference in
Doha, Qatar, in November 2001. Clothes are cheaper Import restrictions and
high customs duties combined to raise US textiles and clothing prices by 58%
in the late 1980s. UK consumers pay an estimated £500 million more per year
for their clothing because of these restrictions. For Canadians the bill is around
C$780 million. For Australians it would be a$300 annually per average family
39
if Australian customs duties had not been reduced in the late 1980s and early
1990s. The textiles and clothing trade is going through a major reform – under
the WTO – that will be completed in 2005. The programme includes
eliminating restrictions on quantities of imports. If customs duties were also to
be eliminated, economists calculate the result could be a gain to the world of
around $23 billion, including $12.3 billion for the US, $0.8 billion for Canada,
$2.2 billion for the EU and around $8 billion for developing countries. The
same goes for other goods When the US limited Japanese car imports in
the early 1980s, car prices rose by 41% between 1981 and 1984 – nearly
double the average for all consumer products. The objective was to save
American jobs, but the higher prices were an important reason why one
million fewer new cars were sold, leading to more job losses. If Australia had
kept its tariffs at 1998 levels, Australian customers would pay on average
a$2,900 more per car today. In 1995, aluminium users in the EU paid an extra
$472 million due to tariff barriers. One of the objectives of the Doha
Development Agenda (DDA) is another round of cuts in tariffs on industrial
products, i.e. manufactured and mining products. Some economists, Robert
Stern, Alan Deardorff and Drusilla Brown, predict that cutting these by one
third would raise developing countries’ income by around $52 billion. … and
services Liberalization in telephone services is making phone calls cheaper – in
the 1990s by 4% per year in developing countries and 2% per year in
industrial countries, taking inflation into account. In China, competition from a
second mobile phone company was at least part of the reason for a 30% cut in
the price of a call. In Ghana the cut was 50%. The group of economists led by
Robert Stern estimates that lowering services barriers by one third under the
Doha Development Agenda would raise developing countries’ incomes by
around $60 billion. And so it goes on. The system now entrusted to the WTO
has been in place for over 50 years. In that time there have been eight major
rounds of trade negotiations. Trade barriers around the world are lower than
they have ever been in modern trading history. They continue to fall, and we
are all benefiting.
5. It gives consumers more choice and a broader range of qualities to choose
from Think of all the things we can now have because we can import them:
fruits and vegetables out of season, foods, clothing and other products that
used to be considered exotic, cut flowers from any part of the world, all sorts
of household goods, books, music, movies, and so on. Think also of the things
people in other countries can have because they buy exports from us and
elsewhere. Look around and consider all the things that would disappear if all
our imports were taken away from us. Imports allow us more choice – both
more goods and services to choose from, and a wider range of qualities. Even
the quality of locally – produced goods can improve because of the
competition from imports. The wider choice isn’t simply a question of
consumers buying foreign finished products. Imports are used as materials,
components and equipment for local production. This expands the range of
final products and services that are made by domestic producers, and it
increases the range of technologies they can use. Sometimes, the success of
an imported product or service on the domestic market can also encourage
new local producers to compete, increasing the choice of brands available to
consumers as well as increasing the range of goods and services produced
locally. If trade allows us to import more, it also allows others to buy more of
our exports. It increases our incomes, providing us with the means of enjoying
the increased choice.
6. Trade raises incomes Lowering trade barriers allows trade to increase,
which adds to incomes – national incomes and personal incomes. But some
adjustment is necessary. The WTO’s own estimates for the impact of the 1994
Uruguay Round trade deal were between $109 billion and $510 billion added
to world income (depending on the assumptions of the calculations and
allowing for margins of error).
40
7. Trade stimulates economic growth and that can be good news for
employment Trade clearly has the potential to create jobs. In practice there is
often factual evidence that lower trade barriers have been good for
employment. But the picture is complicated by a number of factors.
Nevertheless, the alternative – protectionism – is not the way to tackle
employment problems. This is a difficult subject to tackle in simple terms.
There is strong evidence that trade boosts economic growth, and that
economic growth means more jobs. It is also true that some jobs are lost even
when trade is expanding. But a reliable analysis of this poses at least two
problems. First, there are other factors at play. For example, technological
advance has also had a strong impact on employment and productivity,
benefiting some jobs, hurting others. Second, while trade clearly boosts
national income (and prosperity), this is not always translated into new
employment for workers who lost their jobs as a result of competition from
imports. The picture is not the same all over the world. The average length of
time a worker takes to find a new job can be much longer in one country than
for a similar worker in another country experiencing similar conditions. In
other words, some countries are better at making the adjustment than others.
This is partly because some countries have more effective adjustment policies.
Those without effective policies are missing an opportunity. There are many
instances where the facts show that the opportunity has been grasped –
where freer trade has been healthy for employment. The EU Commission
calculates that the creation of its Single Market means that there are
somewhere in the range of 300,000 – 900,000 more jobs than there would be
without the Single Market. Often, job prospects are better in companies
involved in trade. In the United States, 12 million people owe their jobs to
exports; 1.3 million of those jobs were created between 1994 and 1998. And
those jobs tend to be better – paid with better security. In Mexico, the best
jobs are those relatedto export activities: sectors which export 60 per cent or
more of their production, pay wages 39% higher than the rest of the economy
and maquiladora (in-bond assembly) plants pay 3.5 times the Mexican
minimum wage.
8. The basic principles make the system economically more efficient, and they
cut costs Many of the benefits of the trading system are more difficult to
summarize in numbers, but they are still important. They are the result of
essential principles at the heart of the system, and they make life simpler for
the enterprises directly involved in trade and for the producers of goods and
services. Trade allows a division of labour between countries. It allows
resources to be used more appropriately and effectively for production. But
the WTO’s trading system offers more than that. It helps to increase efficiency
and to cut costs even more because of important principles enshrined in the
system. It would not be enough for this company to look at the prices offered
by suppliers around the world. The company would also have to make
separate calculations about the different duty rates it would be charged on the
imports (which would depend on where the imports came from), and it would
have to study each of the regulations that apply to products from each
country. Buying some copper or circuit boards would become very
complicated. That, in simple terms, is one of the problems of discrimination.
Imagine now that the government announces it will charge the same duty
rates on imports from all countries, and it will use the same regulations for all
products, no matter where they come from, whether imported or locally
produced. Life for the company would be much simpler. Sourcing components
would become more efficient and would cost less. Non-discrimination is just
one of the key principles of the WTO’s trading system. Others include:
 Transparency (clear information about policies, rules and
regulations);
41
 Increased certainty about trading conditions (commitments to lower

trade barriers and to increase other countries’ access to one’s markets
are legally binding);
 Simplification and standardization of customs procedure, removal
of red tape, centralized databases of information, and other measures
designed to simplify trade that come under the heading “trade
facilitation”.
Together, they make trading simpler, cutting companies’ costs and increasing
confidence in the future. That in turn also means more jobs and better goods
and services for consumers.
9. The system shields governments from narrow interests The GATT – WTO
system which evolved in the second half of the 20th Century helps
governments take a more balanced view of trade policy. Governments are
better – placed to defend themselves against lobbying from narrow interest
groups by focusing on trade – offs that are made in the interests of everyone
in the economy One of the lessons of the protectionism that dominated the
early decades of the 20th Century was the damage that can be caused if
narrow sectoral interests gain an unbalanced share of political influence. The
result was increasingly restrictive policy which turned into a trade war that no
one won and everyone lost. Superficially, restricting imports looks like an
effective way of supporting an economic sector. But it biases the economy
against other sectors which shouldn’t be penalized – if you protect your
clothing industry, everyone else has to pay for more expensive clothes, which
puts pressure on wages in all sectors, for example. Protectionism can also
escalate as other countries retaliate by raising their own trade barriers. That’s
exactly what happened in the 1920s and 30s with disastrous effects. Even the
sectors demanding protection ended up losing. Governments need to be
armed against pressure from narrow interest groups, and the WTO system can
help. The GATT – WTO system covers a wide range of sectors. So, if during a
GATT – WTO trade negotiation one pressure group lobbies its government to
be considered as a special case in need of protection, the government can
reject the protectionist pressure by arguing that it needs a broadranging
agreement that will benefit all sectors of the economy.
10. The system encourages good government Under WTO rules, once a
commitment has been made to liberalize a sector of trade, it is difficult to
reverse. The rules also discourage a range of unwise policies. For businesses,
that means greater certainty and clarity about trading conditions. For
governments it can often mean good discipline. The rules include
commitments not to backslide into unwise policies. Protectionism in general is
unwise because of the damage it causes domestically and internationally, as
we have already seen. Particular types of trade barriers cause additional
damage because they provide opportunities for corruption and other forms of
bad government. One kind of trade barrier that the WTO’s rules try to tackle is
the quota, for example restricting imports or exports to no more than a
specific amount each year. Because quotas limit supply, they artificially raise
prices, creating abnormally large profits (economists talk about “quota rent”).
That profit can be used to influence policies because more money is available
for lobbying. It can also provide opportunities for corruption, for example in
the allocation of quotas among traders. There are plenty of cases where that
has happened around the world. In other words, quotas are a particularly bad
way of restricting trade. Governments have agreed through the WTO’s rules
that their use should be discouraged. Nevertheless, quotas of various types
remain in use in most countries, and governments argue strongly that they
are needed. But they are controlled by WTO agreements and there are
commitments to reduce or eliminate many of them, particularly in textiles.
Many other areas of the WTO’s agreements can also help reduce corruption
and bad government. Transparency (such as making available to the public all
42
information on trade regulations), other aspects of “trade facilitation”, clearer

criteria for regulations dealing with the safety and standards of products, and
nondiscrimination also help by reducing the scope for arbitrary decision-
making and cheating. Quite often, governments use the WTO as a welcome
external constraint on their policies: “we can’t do this because it would violate
the WTO agreements”.
5. a. Explain five-element product wave model.

b. What do you mean by globalization?
Ans. a. The Five-Element Product Wave the wave model employs design
engineering, process engineering, product marketing, production, and end-of-
life activities as elements. The first wave is associated with the "A" version of
a product or service, and survives through the traditional PLC introduction and
growth phases. A second wave begins with the "B" version, the markedly
improved second model. It starts just before the traditional life cycle maturity
stage and lives until sales decline to a point at which an EOL decision must be
made. Note that design engineering has a peak of activity level at each
upgrade. Process engineering activity shadows that of design engineering, as
system changes will be contemplated and made to facilitate the changes
made in the product or service. Product marketing also has activity level
spikes that closely match engineering design activity, lagged somewhat for
product introduction. Production has one activity peak that results from
demand management and production planning through master production
scheduling.
Finally, the EOL curve peaks at each redesign. The last wave begins shortly
before original production ceases and ends when the product is no longer
manufactured or supported by the EOL Company or division. The EOL element
requires that a decision be made about the preceding version at each major
redesign: continue production, make a short-term run of spares, keep
blueprints active so that parts can be made as ordered, enter into a
manufacturing and support agreement with another entity, or discontinue
production. For the sake of parsimony, Figure 4.5 shows only a two-product
model ("A" and "B" versions). In reality, there may be hundreds of significant
redesigns. The wave effect comes from the fact that the process repeats for
the successful firm, forming swells in design engineering, process engineering,
product marketing, and manufacturing curves before the final crest at EOL
activity.
The five-element product wave, or FPW, uses trigger points, rather than time,
as the horizon over which the element curves vary. Changes in magnitude,
represented by the vertical axis, result from differing activity levels within the
five elements. Simple changes in levels of dollar or unit product sales, in and
of themselves, do not necessarily determine the trigger points. Rather, the
varying activity levels are a direct result of product introductions and
redesigns that, from the outset, must take into account company strategy,
core capabilities, and the state of the competitive environment.
That the five-element wave is grounded in reality becomes apparent when
considering the recent research that suggests product introduction cycles are
being compressed. Bayus (1994) claims that knowledge is being applied
faster, resulting in increasing levels of new product introductions. Yet since
product removals are not keeping pace with introductions, there are an
increasing number of product variations on the market. Slater (1993) observes
that product life cycles are growing shorter and shorter. Vesey (1992) reports
that the strategy for the 1990s is speed to market and discusses the pressures
the market is exerting to shorten product introduction lead times.
Regardless of whether life cycles are actually being compressed or knowledge
is simply being applied faster, it is apparent that firms are increasing the
43
speed with which they bring their products to market. The effect of this is a
compression of the design engineering, process engineering, production, and
product marketing elements of the wave model. (The EOL curve may remain
unchanged because accelerated introductions do not necessarily affect EOL
efforts.) The five-element wave clearly shows the inefficiency of traditional
"over-the-wall" systems as speed to market increases. As the elements
compress, more and more information is thrown over the wall. Recipients find
themselves with less and less time to take action. Taken to the extreme, in-
baskets, phone lines, conference rooms, desks, and floors are soon gridlocked
and littered with unanswered correspondence and things to do. Forget quality;
production itself grinds to a halt.
The solution is to maximize the advantage of the relationships within the five-
element wave and work in concurrent teams, as illustrated in Figure 6. That
way, responsibility is shared throughout the system. Members from each
discipline optimize the system. The method tears down barriers between
departments and speeds the introduction process, thus decreasing costs. The
focal point becomes the customer, rather than the task. The system is totally
interactive and bound together. Each element is connected to all of the others
and is focused on the customer.
What is the recent experience with teams? There is evidence that using
concurrent design teams speeds the product to market and provides
substantial savings. Boeing expects that concurrent design will save some $4
billion in the development of its 777 airliner. Westinghouse recently suggested
that concurrent engineering would eliminate 200 duplicate processes in a
project that consisted of 600 using traditional over-the-wall approaches. Ford's
Team Taurus was able to cut a full year out of model turnaround. In addition,
design changes required after initial production began were reduced by some
76 percent. The strength of the five-element product wave is the fact that it
illuminates critical decision points in the life of a product or service. The
interrelationships of the elements clearly illustrate the benefit of working
product introductions, design changes, and end-of-life decisions in teams. This
is particularly true in today's rapidly compressing environment of speeding
products to market. Furthermore, the model is flexible and may be expanded
or contracted to include those functional areas relevant to the production
team. Thus, whether a given firm's product is a service or a manufactured
good, the five-element wave is a powerful tool that can be deployed to
accelerate effective decision making in markets demanding ever-increasing
levels of speed and agility.
b. Globalization
Economic "globalization" is a historical process, the result of human innovation
and technological progress. It refers to the increasing integration of economies
around the world, particularly through trade and financial flows. The term
sometimes also refers to the movement of people (labor) and knowledge
(technology) across international borders. There are also broader cultural,
political and environmental dimensions of globalization that are not covered
here. At its most basic, there is nothing mysterious about globalization. The
term has come into common usage since the 1980s, reflecting technological
advances that have made it easier and quicker to complete international
transactions – both trade and financial flows. It refers to an extension beyond
national borders of the same market forces that have operated for centuries at
all levels of human economic activity – village markets, urban industries, or
financial centers. Markets promote efficiency through competition and the
division of labor – the specialization that allows people and economies to focus
on what they do best. Global markets offer greater opportunity for people to
tap into more and larger markets around the world. It means that they can
have access to more capital flows, technology, cheaper imports, and larger
export markets. But markets do not necessarily ensure that the benefits of
increased efficiency are shared by all. Countries must be prepared to embrace
44
the policies needed, and in the case of the poorest countries may need the
support of the international community as they do so.
6. Give some examples of companies doing international business and

discuss how they have they have managed their business in the
international markets.
Ans. Case Study: A Perspective Of The Northen Island
SOFTWARE COMPANIES, RAPD M–UP Within six months of announcing it would
invest $4.5 million to establish its new software development center in Northern
Ireland, IMR was up and running with more than one-third its target staff. "The
fast start-up of the Belfast facility reaffirms our confidence to locate in Northern
Ireland," said Sanan. "The success to date in building a quality work force has
surpassed our expectations and opens up new ambitions for our interests in
Northern Ireland."
According to Arthur "Bro" McFerran, president of IMR (NI) Ltd., the company is
hiring 12 to 18 programmers a month in Northern Ireland and is well on its way to
meeting its staffing goal of 300 by 1999. McFerran credited Northern Ireland's
Training & Employment Agency (T&EA) with helping place the company's staffing
on the fast track. "The T&EA not only has helped us to identify and recruit
qualified software graduates from Northern Ireland's universities, it is also
assisting us with a unique initiative to bring additional sources of high quality
talent to the company," McFerran said.
Innovation In Training
Impressed by the number and quality of information technology graduates from
the region's universities, IMR recognized an untapped resource in the well-
educated, versatile graduates of other fields in Northern Ireland. Working with the
T&EA, IMR developed "IMR Academy," an intensive 20-week training program at
the Belfast Institute of Further and Higher Education, to expand the skills of
qualified applicants who are no computer software graduates, but who are equally
well-educated in other Disciplines and who have demonstrated aptitude for
learning computer software programming. Tom Scott of the T&EA said IMR
applicants are assessed throughout the program and those who successfully
complete the course are awarded a National Computing Certificate and full-time
employment with IMR.
Approximately 40 trainees have already participated in the program. "IMR is
extremely pleased with the T&EAs ability to design and deliver a training program
customized to our needs, and one that is delivering us an impressive pool of
incremental programming talent," McFerran said.
Smart And Available
"The recent software investments by IMR and other companies provide a new
opportunity for Northern Ireland's computer graduates," McFerrin said.
Recruitment research by IMR indicates that traditionally, nearly half of the
region's computer graduates have been forced to seek jobs outside Northern
Ireland due to the lack of available information technology positions. Now IT
graduates have the chance to find good jobs in Northern Ireland, and graduates
from other fields can take advantage of the IMR Academy training program to get
a head start on a career in the growing software sector.
McFerrin said. Recruitment research by IMR indicates that traditionally, nearly half
of the region’s computer graduates have been forced to seek jobs outside
Northern Ireland due to the lack of available information technology positions.
Competitive Advantage
Northern Ireland recently has attracted information technology – based
investments from other multinational companies such as BT, Fujitsu, Liberty
45
Mutual Group, Seagate Technology, STB Systems and UniComp. These companies
cite Northern Ireland's work force and favorable cost base in their decisions to
locate in the region. "The availability of high-quality graduates combined with the
region's competitive operating costs and attractive incentives made Northern
Ireland the best possible location for STB," said Richard W. Cooke, STB's director
of engineering operations.
With salaries and fringe costs for well trained software engineers in Northern
Ireland approximately 50 percent lower than costs for US engineers, and low
employee turnover and favorable rates for office space, the overall annual per
capita operational costs to develop high quality software can be significantly less
compared with these same costs in the United States. Typical starting salaries for
IT graduates in Northern Ireland are $22,000 to $25,000 annually. At less than
three percent annually, Northern Ireland's employee turnover rate is a fraction of
the rates typically experienced in other parts of Europe and the United States.
Annual costs per square foot for office space, exclusive of property taxes and
service charges, range from as low as $5 per square foot in some development
areas, to approximately $14 in Belfast. These costs can be as much as 50 percent
lower than office space costs in other European cities.
46
MB0037 – International Business Management

Set- 2
1. Evaluate the monetary system and currency markets in international

business management.
Ans. The exchange rate regimes adopted by countries in today's internationalmonetary
and financial system, and the system itself, are profoundly different from those
envisaged at the 1944 meeting at Bretton Woods establishing the IMF and the
World Bank. In the Bretton Woods system:
 exchange rates were fixed but adjustable. This system aimed both to avoid
the undue volatility thought to characterize floating exchange rates and to
prevent competitive depreciations, while permitting enough flexibility to
adjust to fundamental disequilibrium under international supervision;
 private capital flows were expected to play only a limited role in financing
payments imbalances, and widespread use of controls would prevent
instability in such flows;
 temporary official financing of payments imbalances, mainly through the
IMF, would smooth the adjustment process and avoid unduly sharp
correction of current account imbalances, with their repercussions on trade
flows, output, and employment.
In the current system, exchange rates among the major currencies (principally the
U.S. dollar, the euro, and Japanese yen) fluctuate in response to market forces,
with short-run volatility and occasional large medium-run swings (Figure 1). Some
medium-sized industrial countries also have market – determined floating rate
regimes, while others have adopted harder pegs, including some European
countries outside the euro area. Developing and transition economies have a wide
variety of exchange rate arrangements, with a tendency for many but by no
means all countries to move toward increased exchange rate flexibility (Figure 2).
This variety of exchange rate regimes exists in an environment with the following
characteristics:
 partly for efficiency reasons, and also because of the limited effectiveness
of capital controls, industrial countries have generally abandoned such
controls and emerging market economies have gradually moved away
from them. The growth of international capital flows and globalization of
financial markets has also been spurred by the revolution in
telecommunications and information technology, which has dramatically
lowered transaction costs in financial markets and further promoted the
liberalization and deregulation of international financial transactions;
 international private capital flows finance substantial current account
imbalances, but the changes in these flows appear also sometimes to be a
cause of macroeconomic disturbances or an important channel through
which they are transmitted to the international system;
 developing and transition countries have been increasingly drawn into the
integrating world economy, in terms of both their trade in goods and
services and of financial transactions.
Lessons from the recent crises in emerging markets are that for such countries
with important linkages to global capital markets, the requirements for sustaining
pegged exchange rate regimes have become more demanding as a result of the
increased mobility of capital. Therefore, regimes that allow substantial exchange
rate flexibility are probably desirable unless the exchange rate is firmly fixed
through a currency board, unification with another currency, or the adoption of
another currency as the domestic currency (dollarization).
47
Flexible exchange rates among the major industrial country currencies seem
likely to remain a key feature of the system. The launch of the euro in January
1999 marked a new phase in the evolution of the system, but the European
Central Bank has a clear mandate to focus monetary policy on the domestic
objective of price stability rather than on the exchange rate.
Many medium-sized industrial countries, and developing and transition
economies, in an environment of increasing capital market integration, may also
continue to maintain market-determined floating rates, although more countries
could may adopt harder pegs over the longer term. Thus, prospects are that:
 exchange rates among the euro, the yen, and the dollar are likely to
continue to exhibit volatility, and schemes to reduce volatility are neither
likely to be adopted, nor to be desirable as they prevent monetary policy
from being devoted consistently to domestic stabilization objectives;
 several of the transition countries of central and eastern Europe, especially
those preparing for membership in the European Union, are likely to seek
to establish over time the policy disciplines and institutional structures
required to make possible the eventual adoption of the euro.
The approach taken by the IMF continues to be to advise member countries on
the implications of adopting different exchange rate regimes, to consider the
choice of regime to be a matter for each country to decide and to provide policy
advice that is consistent with the maintenance of the chosen regime (Box 3).
2. a. Mention the different entry strategies to enter international

markets.
b. How has E-commerce helped in international marketing?
Ans. a. Methods of entry
With rare exceptions, products just don’t emerge in foreign markets overnight
– a firm has to build up a market over time. Several strategies, which differ in
aggressiveness, risk, and the amount of control that the firm is able to
maintain, are available:
 Exporting is a relatively low risk strategy in which few investments
are made in the new country. A drawback is that, because the firm makes
few if any marketing investments in the new country, market share may
be below potential. Further, the firm, by not operating in the country,
learns less about the market (What do consumers really want? Which kinds
of advertising campaigns are most successful? What are the most effective
methods of distribution?) If an importer is willing to do a good job of
marketing, this arrangement may represent a "win-win" situation, but it
may be more difficult for the firm to enter on its own later if it decides that
larger profits can be made within the country.
 Licensing and franchising are also low exposure methods of entry –
you allow someone else to use your trademarks and accumulated
expertise. Your partner puts up the money and assumes the risk. Problems
here involve the fact that you are training a potential competitor and that
you have little control over how the business is operated. For example,
American fast food restaurants have found that foreign franchisees often
fail to maintain American standards of cleanliness. Similarly, a foreign
manufacturer may use lower quality ingredients in manufacturing a brand
based on premium contents in the home country.
 Contract manufacturing involves having someone else manufacture
products while you take on some of the marketing efforts yourself. This
saves investment, but again you may be training a competitor.
48
 Direct entry strategies, where the firm either acquires a firm or

builds operations "from scratch" involve the highest exposure, but also the
greatest opportunities for profits. The firm gains more knowledge about
the local market and maintains greater control, but now has a huge
investment. In some countries, the government may expropriate assets
without compensation, so direct investment entails an additional risk. A
variation involves a joint venture, where a local firm puts up some of the
money and knowledge about the local market.
b. Electronic Commerce – Cutting edge

The cutting edge for business today is electronic commerce (e-commerce).
Broadly, defined, electronic commerce is a modern business methodology that
addresses the needs of organizations, merchants, and consumers to cut costs'
while improving the quality of goods and services and increasing the speed of
service delivery. The term also applies to the use of computer networks to
search and retrieve information in support of human and corporate decision
making.
E-Business offers Interactivity E-Business offers the possibility of creating
interactive services between the customer and the provider of the product or
service, that is to say by a twoway flow of information. Ries & Ries describe a
progression over time of the reach of the mass media. Books multiplied the
number of people an individual could reach; Periodicals added the element of
news, radio added the human voice, and television added motion; The Internet
is the first mass medium to add interactivity. “We believe that history will rank
the Internet as the greatest of all media. And the reason is simple. The
Internet is the only mass communications medium that allows interactivity”
Ries & Ries. Interactivity helps create a feeling that the retailer cares about or
knows the individual customer, something that is very difficult to do in high
street retailing, where the customer is usually a stranger to the sales
assistant. Interactivity helps to make the experience more entertaining and
compelling, some exampled follow:
 The website for ordering Smart cars: as the user selects the
bodywork and interior colours, the picture on the screen changes.
 Some clothing sites show clothing on a model that helps the client
imagine the overall look of their purchases together on a ‘virtual model’.
 Complementary products and services, or alternatives, can be
offered at the point of sale in a way that might become obtrusive in a face-
to-face situation – the electronic shopper can merely click ‘no thanks’ at
any point.
 Almost instantaneous calculation of pricing is a major development
in on-line air travel booking.
 Job search sites offer psychological profiling services and aptitude
tests.
 Book retailers suggest other titles also bought by customers who
have also selected the item selected.
 And, more recently, forums, blogs and sites such as YouTube and
MySpace allow users to post their own content to websites.
 Amazon allows customers to rate their purchases by adding user
reviews, both for the products themselves and for third party
 ‘marketplace sellers’ that sell products through Amazon’s website.
49
3. a. Explain Bill of Lading and Letters of credit.

b. What is UNCITRAL and what it does?
Ans. a. Bill of Lading
A Bill of Lading is a type of document that is used to acknowledge the receipt
of a shipment of goods and is an essential document in transporting goods
overland to the exporter's international carrier. A through Bill of Lading
involves the use of at least two different modes of transport from road, rail, air
and sea. The term derives from the noun "bill", a schedule of costs for services
supplied or to be supplied, and from the verb "to lade" which means to load a
cargo onto a ship or other form of transport. In addition to acknowledging the
receipt of goods, a Bill of Lading indicates the particular vessel on which the
goods have been placed, their intended destination, and the terms for
transporting the shipment to its final destination. Inland, ocean, through, and
airway bill are the names given to.
Letter of Credit
A letter of credit is a document issued mostly by a financial institution which
usually provides an irrevocable payment undertaking (it can also be
revocable, confirmed, unconfirmed, transferable or others e.g. back to back:
revolving but is most commonly irrevocable/confirmed) to a beneficiary
against complying documents as stated in the credit. Letter of Credit is
abbreviated as an LC or L/C, and often is referred to as a documentary credit,
abbreviated as DC or D/C, documentary letter of credit, or simply as credit (as
in the UCP 500 and UCP 600). Once the beneficiary or a presenting bank
acting on its behalf, makes a presentation to the issuing bank or confirming
bank, if any, within the expiry date of the LC, comprising documents
complying with the terms and conditions of the LC, the applicable UCP and
international standard banking practice, the issuing bank or confirming bank,
if any, is obliged to honour irrespective of any instructions from the applicant
to the contrary. In other words, the obligation to honour (usually payment) is
shifted from the applicant to the issuing bank or confirming bank, if any. Non-
banks can also issue letters of credit however parties must balance potential
risks. Letters of credit accomplish their purpose by substituting the credit of
the bank for that of the customer, for the purpose of facilitating trade. There
are basically two types: commercial and standby. The commercial letter of
credit is the primary payment mechanism for a transaction, whereas the
standby letter of credit is a secondary payment mechanism.
Commercial Letter of Credit
Commercial letters of credit have been used for centuries to facilitate
payment in international trade. Their use will continue to increase as the
global economy evolves. Letters of credit used in international transactions
are governed by the International Chamber of Commerce Uniform Customs
and Practice for Documentary Credits. The general provisions and definitions
of the International Chamber of Commerce are binding on all parties.
Domestic collections in the United States are governed by the Uniform
Commercial Code.
A commercial letter of credit is a contractual agreement between issuing
banks, on behalf of one of its customers, authorizing another bank, known as
the advising or confirming bank, to make payment to the beneficiary. The
issuing bank, on the request of its customer, opens the letter of credit. The
issuing bank makes a commitment to honour drawings made under the credit.
The beneficiary is normally the provider of goods and/or services. Essentially,
the issuing bank replaces the bank's customer as the payee.
Elements of a Letter of Credit
50
 A payment undertaking given by a bank (issuing bank)

 On behalf of a buyer (applicant)
 To pay a seller (beneficiary) for a given amount of money
 On presentation of specified documents representing the supply of goods
 Within specified time limits
 Documents must conform to terms and conditions set out in the letter of
credit
 Documents to be presented at a specified place
b. United Nations Commission on International Trade Law(UNCITRAL)
The United Nations Commission on International Trade Law (UNCITRAL) was
established by the General Assembly in 1966 (Resolution 2205(XXI) of 17
December 1966). In establishing the Commission, the General Assembly
recognized that disparities in national laws governing international trade
created obstacles to the flow of trade, and it regarded the Commission as the
vehicle by which the United Nations could play a more active role in reducing
or removing these obstacles.
Mandate
The General Assembly gave the Commission the general mandate to further
the progressive harmonization and unification of the law of international trade.
The Commission has since come to be the core legal body of the United
Nations system in the field of international trade law.
4. Explain the importance of STP in international markets.

Ans. The importance of STP
Segmentation is the cornerstone of marketing – almost all marketing efforts in
some way relate to decisions on who to serve or how to implement positioning
through the different parts of the marketing mix. For example, one’s distribution
strategy should consider where one’s target market is most likely to buy the
product, and a promotional strategy should consider the target’s media habits
and which kinds of messages will be most persuasive. Although it is often
tempting, when observing large markets, to try to be "all things to all people," this
is a dangerous strategy because the firm may lose its distinctive appeal to its
chosen segments. In terms of the "big picture," members of a segment should
generally be as similar as possible to each other on a relevant dimension (e.g.,
preference for quality vs. low price) and as different as possible from members of
other segments. That is, members should respond in similar ways to various
treatments (such as discounts or high service) so that common campaigns can be
aimed at segment members, but in order to justify a different treatment of other
segments, their members should have their own unique response behaviour.
5. a. Write a short note on branding and trademarks.

b. What are the features of exchange and currency markets?
Ans. a. Branding and trademarks it is difficult to protect a trademark or brand,
unless all countries are members of a convention. Brand "piracy" is
widespread in many developing countries. Other aspects of branding include
the promotional aspects. A family brand of products under the Zeneca (ex ICI)
label or Sterling Health are likely to be recognised worldwide, and hence
enhance the "subjective" product characteristics.
Warranty Many large value agricultural products like machinery require
warranties. Unfortunately not everyone upholds them. It is common practice in
Africa that if the original equipment has not been bought through an
authorized dealer in the country, that dealer refuses to honour the warranty.
This is unfortunate, because not only may the equipment have been
51
legitimately bought overseas; it also actually builds up consumer resistance to

the dealer. When the consumer is eventually offered with a choice, the
reticent dealer will suffer, for example, with the new dealers coming up.
b. Exchange Rate Markets and Currency Markets
This variety of exchange rate regimes exists in an environment with the
following characteristics:
 partly for efficiency reasons, and also because of the limited
effectiveness of capital controls, industrial countries have generally
abandoned such controls and emerging market economies have gradually
moved away from them. The growth of international capital flows and
globalization of financial markets has also been spurred by the revolution
in telecommunications and information technology, which has dramatically
lowered transaction costs in financial markets and further promoted the
liberalization and deregulation of international financial transactions;
 international private capital flows finance substantial current
account imbalances, but the changes in these flows appear also
sometimes to be a cause of macroeconomic disturbances or an important
channel through which they are transmitted to the international system;
 developing and transition countries have been increasingly drawn
into the integrating world economy, in terms of both their trade in goods
and services and of financial transactions.
6. Discuss the various International product and pricing decisions.

Ans. A product's physical properties are characterized the same the world over. They
can be convenience or shopping goods or durables and non-durables; however,
one can classify products according to their degree of potential for global
marketing:
 local products – seen as only suitable in one single market.
 international products – seen as having extension potential into other
markets.
 multinational products – products adapted to the perceived unique
characteristics of national markets.
 global products – products designed to meet global segments.
Quality, method of operation or use and maintenance (if necessary) are
catchwords in international marketing. A failure to maintain these will lead to
consumer dissatisfaction. This is typified by agricultural machinery where the lack
of spares and/or foreign exchange can lead to lengthy downtimes. It is becoming
increasingly important to maintain quality products based on the ISO 9000
standard, as a prerequisite to export marketing. Consumer beliefs or perceptions
also affect the "world brand" concept. World brands are based on the same
strategic principles, same positioning and same marketing mix but there may be
changes in message or other image. World brands in agriculture are legion. In
fertilizers, brands like Norsk Hydro are universal; in tractors, Massey Ferguson; in
soups, Heinz; in tobacco, BAT; in chemicals, Bayer. These world brand names
have been built up over the years with great investments in marketing and
production. Few world brands, however, have originated from developing
countries. This is hardly surprising given the lack of resources. In some markets
product saturation has been reached, yet surprisingly the same product may not
have reached saturation in other similar markets. Whilst France has long been
saturated by avocadoes, the UK market is not yet, hence raising the opportunity
to enter deeper into this market.
Production decisions
52
In decisions on producing or providing products and services in the international

market it is essential that the production of the product or service is well planned
and coordinated, both within and with other functional area of the firm,
particularly marketing. For example, in horticulture, it is essential that any
supplier or any of his "out grower" (subcontractor) can supply what he says he
can. This is especially vital when contracts for supply are finalized, as failure to
supply could incur large penalties. The main elements to consider are the
production process itself, specifications, culture, the physical product, packaging,
labelling, branding, warranty and service.
International Pricing In New Open-Economy Models
Recent developments in open-economy macroeconomics have progressed under
the paradigm of nominal price rigidities, where monetary disturbances are the
main source of fluctuations. Following developments in closed economy models,
new open-economy models have combined price rigidities and market
imperfections in a fully micro founded inter-temporal general equilibrium setup.
This framework has been used extensively to study the properties of the
international transmission of shocks, as well as the welfare implications of
alternative monetary and exchange rate policies. Imperfect competition is a key
feature of the new open-economy framework. Because agents have some degree
of monopoly power instead of being price takers, this framework allows the
explicit analysis of pricing decisions. The two polar cases for pricing decisions are
producer-currency pricing and local-currency pricing. The first case is the
traditional approach, which assumes that prices are preset in the currency of the
seller. In this case, prices of imported goods change proportionally with
unexpected changes in the nominal exchange rate, and the law of one price
always holds.' In contrast, under the assumption of local-currency pricing, prices
are preset in the buyer's currency. Here, unexpected movements in the nominal
exchange rate do not affect the price of imported goods and lead to short run
deviations from the law of one price.
Empirical evidence using disaggregated data suggests that international markets
for tradable goods remain highly segmented and that deviations in the law of one
price are large, persistent, and highly correlated with movements in the nominal
exchange rate, even for highly tradable goods. Moreover, there is strong evidence
that the large and persistent movements that characterize the behaviour of real
exchange rates at the aggregate level are largely accounted for by deviations in
the law of one price for tradable goods. In this article I make use of a simplified
version of a two-country model where the two markets are segmented, allowing
firms to price discriminate across countries, and where prices are preset in the
consumer's currency.
This model generates movements in the real exchange rate in response to
unexpected monetary shocks, which are a result of the failure of the law of one
price for tradable goods. I then compare this model to a version in which prices
are preset in the producer's currency and examine the implications of these two
alternative price-setting regimes for several key issues. The price-setting regime
determines the currency of denomination of imported goods and the extent to
which changes in exchange rates affect the relative price of imported to domestic
goods and the international allocation of goods in the short run. That is, different
pricing regimes imply different roles for the exchange rate in the international
transmission of monetary disturbances. As we shall see, this assumption has very
striking implications for several important questions, namely real exchange rate
variability, the linkage between macroeconomic volatility and international trade,
and the welfare effects of alternative exchange rate regimes, among others.
While generating deviations from the law of one price that are absent from
models assuming producer-currency pricing, the assumption of local currency
pricing still leaves important features of the data unexplained. The key role of this
assumption in the properties of open-economy models suggests that it is
53
necessary to keep exploring the implications of alternative pricing structures in

open-economy models.
54
MI0029 - Enterprise Resource Planning

Set- 1
1. Write a scenario to explain the failure of ERP implementation.

Ans. ERP packages, if chosen correctly, implemented judiciously and used efficiently,
will raise the productivity and profits of companies dramatically. But many a
company fails in this because of a wrong product, incompetent and haphazard
implementation and inefficient or ineffective usage. To work successfully, the ERP
solutions need a lot of factors to click. There should be good people who know the
business. The vendor should be good and his package should be the one best
suited for the company’s needs.
The ERP consultants should be good. The implementation should be planned well
and executed perfectly. The end-user training should be done so that the people
understand the system, and the effect of their efforts on the overall success of the
program. The introduction of the ERP system will dramatically change the job
descriptions and functions of many employees. Employees who were earlier doing
the work of recording information will, overnight, be transformed into decision-
makers. For example, in the past an order entry clerk's job was to enter the
orders that came to him. With the implementation of a good ERP system, the
order entry clerk becomes an action initiator. As soon as he enters the order into
the system, the information is passed on to the sales, distribution and finance
modules. The distribution module checks whether the item is in stock and if
available, the item is dispatched and the information is sent to the finance
module. If the items are not in stock, then the manufacturing module is given the
information, so that production can start. The customer is informed about the
status of his order. If the items are shipped, the finance module prepares the
invoice and sends it to the customer. All these actions take place automatically as
soon as the order entry clerk enters the information regarding the order into the
system. Thus the order entry clerk is transformed from a data entry operator to a
decision maker whose actions can trigger a chain of actions.
Many employees find this transformation difficult to accept. If the employees are
not given proper training, well in advance, then the systems will fail. Another
factor is the fear of unemployment. When procedures become automated, the
people who were doing those jobs become redundant. So it is quite natural to
have resistance from the employees. But the same employees can be trained in
the new system and can work in more challenging and stimulating environments.
For this also, the employees have to be told, in advance, as to what will happen
and should be given ample time and training to make the transformation. Without
support from the employees, even the best system will fail. So it is very important
that the management should take the necessary steps, well in advance, to
alleviate the fears of, and provide necessary training to their employees.
2. a. What is the use of transparency and information access?

b. What are the limitations of ERP systems? How ERP packages help in
overcoming theses limitations.
Ans. a. In the enterprise way, the entire organization is considered as a systemand all
the departments are its subsystems. The information about all the aspects of
the organization is stored centrally and is available to all departments This
transparency and information access ensures that the departments no longer
work in isolation pursuing their own independent goals. Each subsystem
knows what the others are doing, why they are doing it and what should be
done to move the company towards the common goal. The ERP system helps
to accomplish this task by integrating the information systems, enabling
smooth and seamless flow of information across departmental barriers,
55
automating business process and functions and thus, helping the organization
to work and move forward as a single entity.
b. ERP is an abbreviation for Enterprise Resource Planning and means, the

techniques and concepts for the integrated management of businesses as a
whole, from the viewpoint of the effective use of management resources, to
improve the efficiency of an enterprise. ERP systems serve an important
function by integrating separate business functions – materials management,
product planning, sales, distribution, finance and accounting and others – into
a single application. However, ERP systems have three significant limitations:
1. Managers cannot generate custom reports or queries without help
froma programmer and this inhibits them from obtaining information
quickly, which is essential for maintaining a competitive advantage.
2. ERP systems provide current status only, such as open orders.
Managers often need to look past the current status to find trends and
patterns that aid better decision-making.
3. The data in the ERP application is not integrated with other
enterprise or division systems and does not include external intelligence.
There are many technologies that help to overcome these limitations. These
technologies, when used in conjunction with the ERP package, help in
overcoming the limitations of a standalone ERP system and thus, help the
employees to make better decisions. Some of these technologies are:
 Business Process Reengineering (BPR)
 Management Information System (MIS)
 Decision Support Systems (DSS)
 Executive Information Systems (EIS)
 Data Warehousing
 Data Mining
 On-line Analytical Processing (OLAP)
 Supply Chain Management
3. What is the use of JIT approach to any organization

Ans. Basically JIT means to produce goods and services when needed, not 1 early and
not too late. It is time based and often has quality and efficier targets. JIT is a
production philosophy and not a technology. This is due the fact that it looks at
the whole of the production system, and goes far inventory control. The JIT
system has been called numerous names, fr zero defects and synchronous
production to stockless production at Hew Packard. The JIT system also uses the
pull method of scheduling materialflow (Kanban). A JIT system aims to make
goods available just in time, andthese can be parts, products or subassemblies
and achieve some of the following benefits:
 Increased flexibility
 Parts reduction
 Increased quality
 Simplicity of system
The increased flexibility allows a company the ability to react to changing events,
i.e. change in customer orders, or design modifications. Increased productivity
means that the shortest time and minimum of resources are needed to make a
product. The overall objective of JIT is to produce parts in lot sizes of one, but this
is not economically feasible due to the set-up cost being higher as compared to
the carrying cost. At the heart of JIT, is a set of tools and techniques. To achieve
the aims of JIT a disciplined approach is needed which incorporates three
principles applied to the organization:
56
 Elimination of Waste
 Total Quality Management (TQM)
 Total Employee Involvement
 Ops - Elimination of Waste
Waste elimination is basically removal of any activity that is not value-added, but
first it has to be identified. These activities don't increase product value and are
costly to the company. Examples of non-value-adding activities include traditional
production methods, i.e. inspection of parts, holding stock, inventories, time, etc.
Waste can be eliminated from these activities by removal of defects and by not
over producing hence, make-to order.
Ops - Total Quality Management TQM eliminates waste by eliminating defects.
In a JIT environment, the aim is to prevent defects from occurring, and this is
achieved by detecting problems at their source. The whole organization is
involved in the process, right from the stages of manufacturing, product
development and purchasing. Manufacturing uses statistical process control (SPC)
and in process testing (to allow detection at source), while product development
ensures that new products can be manufactured to specification. Purchasing
makes sure th; the parts that are bought are of the required quality.
HR - Total Employee Involvement Total employee involvement has
management providing the leadership which results in employees wanting to be
involved in the processes. Opportunity provided through education and training,
and work teams.
57
MI0029 - Enterprise Resource Planning

Set- 2
1. Explain the ERP implementation life cycle for the release of new product
in an organization.
Ans. Steps In ERP Implementation
The different phases of the ERP implementation are given below:
 Pre-evaluation Screening
 Package Evaluation
 Project Planning Phase
 Gap Analysis
 Reengineering
 Configuration
 Implementation Team Training
 Testing
 Going Live
 End-user Training
 Post-implementation
Although these phases, may seem very linear and distinct from each other, in
reality, throughout an actual implementation, the phases are in fact quite fluid. In
many cases, companies go through many implementations–in different business
units, different modules, or manufacturing locations. So at any given time, more
than one of the phases may be operational. Some companies opt for the one and
only 'Big Bang', while other companies favour sequential rollouts–each company
has different needs. But whether it is the 'Big Bang' method or sequential rollout,
the lifecycle phases are the same.
1 Pre-Evaluation Screening Once the company has decided to go in for the
ERP system, the search for the perfect package starts. But there are hundreds
of ERP vendors – of all sizes and shapes – all claiming to have the solution that
is ideal for you. Analysing all the packages before reaching a decision is not a
viable solution. It is also a very time consuming process. So it is better to limit
the number of packages that are evaluated to less than five. It is always better
to do a thorough and detailed evaluation of a small number of packages, than
doing a superficial analysis of dozens of packages. Not all packages are equal–
each has its own strengths and weakness. The pre-evaluation process should
eliminate those packages that are not at all suitable for the company's
business processes. One can zero in on the few best packages by looking at
the product literature of the vendors, getting help from external consultants
and most importantly, by finding out what package is used by companies
which are similar. It is always better to find out how the different packages are
performing in environments similar to yours. If one studies the history of the
ERP packages and finds out how each package evolved, it soon becomes
evident that every ERP package grew out of the xperience or opportunity of a
group of people, working in a specific business, who created systems that
could deal with certain business segments. It is generally accepted that most
ERP packages are stronger in certain areas than in others, and each one is
madly trying to add functionality in areas where they have been lacking. As
the companies grew over time the ERP packages evolved. The experience
58
gained from implementation, the feedback by the users, the need to enter into
new markets and the pressure from competitors forced most ERP vendors to
redefine and expand the scope of the activities and functionality of their
products. The concepts were expanded upon, new functions were introduced,
good ideas were copied from others, and so on. But still, each package has a
history (or origin) that determines in which type of business it is best suited
for. While making the analysis it would be a good idea to investigate the
origins of the different packages. Now, most packages cater to almost all
business and service sectors. It would be wrong to say that a system that was
developed initially for manufacturing, is now not capable of catering to the
needs of another business sector, say, software development. The system
would have been thoroughly revamped and redesigned to cater to the needs
of the diverse business sectors that it is catering to. But it should be
remembered that many ERP packages are still very good in some areas, even
though they are capable of catering to the needs of other sectors. Once you
select a few packages after the screening, you can start the detailed
evaluation process.
2. Package Evaluation The evaluation/selection process is one of the most
important phases of the ERP implementation, because the package that you
select will decide the success or failure of the project. Since ERP systems
involve huge investments, once a package is purchased, it is not an easy task
to switch to another one. So it is a 'do it right the first time' proposition. There
is little room for error. The most important factor that should be kept in mind
when analysing the different packages is that none of them are perfect. The
idea that there is no perfect package needs to be understood by everyone in
the decision-making team. The objective of the selection process is not to
identify a package that covers each and every requirement (a perfect fit). The
objective is to find a package that is flexible enough to meet the company's
needs, or in other words, a software that could be customised to obtain a
'good fit'. Once the packages to be evaluated are identified, the company
needs to develop a selection criteria that will permit the evaluation of all the
available packages on the same scale. To choose the best system, the
company should identify the system that meets the business needs, that
matches the business profile and that which identifies with the business
practices of the company. It is impossible to get a system that will perform,
exactly as the company does business, but the aim should be to get the
system that has the least number of differences.
According to S Shankarnarayanan, Senior Consultant with Baan Infosystems
India Pvt Ltd. (ERP Systems – Using IT to gain a competitive advantage), some
important points to be kept in mind while evaluating ERP software include:
 Functional fit with the company's business processes
 Degree of integration between the various components of the ERP system
 Flexibilityl and scalability
 Complexity
 User friendliness
 Quick implementation
 Ability to support multi-site planning and control
 Technology–client/server capabilities, database independence, security
 Availability of regular upgrades
 Amount of customization required
 Local support infrastructure
 Availability of reference sites
 Total costs, including cost of license, training, implementation, main
tenance, customization and hardware requirements.
It is always better to form a selection or evaluation committee that will do the
evaluation process. This committee should comprise of people from the
various departments (the functional experts), the top management (preferably
59
the CIO or COO) and consultants (package experts). The selection committee
should be entrusted with the task of choosing a package for the company.
Since all business functions are represented and the management is involved,
the package that is selected will have company-wide acceptance. The package
experts or the consultants can act as mediators, or play the role of explaining
the pros and cons of each package.
3. Project Planning Phase This is the phase that designs the implementation
process. It is in this phase that the details of how to go about the
implementation are decided. Time schedules, deadlines, etc. for the project
are arrived at. The project plan is developed. Roles are identified and
responsibilities are assigned. The organizational resources that will be used for
the implementation effort are decided and the people who are supposed to
head the implementation are identified. The implementation team members
are selected and task allocation is done. This phase will decide when to begin
the project, how to do it and when the project is supposed to be completed.
This is the phase which will plan the "what to do' in case of contingencies; how
to monitor the progress of the implementation; what control measures should
be installed and what corrective actions should be taken when things get out
of control. The project planning is usually done by a committee constituted by
the team leaders of each implementation group. The committee will be
headed by the ERP in-charge (usually the CIO or COO). The committee will
meet periodically (during the entire implementation lifecycle) to review the
progress and chart the future course of actions.
4. Gap Analysis This is, arguably, the most crucial phase for the success of the
ERP implementation. Put very simply, this is the process through which
companies create a complete model of where they are now, and in which
direction they want to head in the future. The trick is to design a model which
both anticipates and covers any functional gaps. It has been estimated that
even the best ERP package, custom tailored to a company's needs, meets only
80% of the company's functional requirements. The remaining 20% of these
requirements present a problematic issue for the company's BPR (business
process re-engineering). One of the most affordable, albeit painful, solutions
entails altering the business to fit' the ERP package. Of course, a company can
simply agree to live without a particular function (the cheap but annoying
solution). Other solutions include:
 Pinning your hopes on an upgrade (low cost but risky)
 Identifying a third-party product that might fill the gap (hopefully it also
partners with the ERP packages, keeping interfacing to a minimum)
 Designing a custom program
 Altering the ERP source code, (the most expensive alternative; usually
reserved for mission-critical installations)
5. Reengineering It is in this phase that the human factors are taken into
account. In ERP implementation settings, reengineering has two different
connotations. The first connotation is the controversial one, involving the use
of ERP to aid in downsizing efforts. And there have been occasions where high-
level executives have invoked the reengineering slogan, and purchased an
ERP package with the aim of reducing significant numbers of employees.
While every implementation is going to involve some change in job
responsibilities, as processes become more automated and efficient, it is best
to treat ERP as an investment as well as a cost-cutting measure, rather than
as a downsizing tool. 'Downsizing' is a business practice that may have its
place, but it should not be cloaked within the glossier slogan of
'reengineering', or justified by the purchase of an ERP package. ERP should
engender business change, but should not endanger the jobs of thousands of
employees.
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The second use of the word reengineering in the ERP field [or business process
reengineering (BPR) as it is usually called], refers to an ERP implementation
model initially designed and used with much success by the 'Big Six'
consulting firms. The BPR approach to an ERP implementation implies that
there are really two separate, but closely linked implementations involved on
an ERP site: a technical implementation and a business process
implementation. The BPR approach emphasises the human element of
necessary change within organizations. This approach is generally more time
consuming, and has received its share of criticism for creating bloated
budgets and extended projects. But adherents of the BPR approach to ERP,
would argue that there is no way that you can ignore the human element in an
implementation that involves significant changes in responsibilities. As the
ERP market shifts to a mid-market focus, and as all implementations are
becoming more cost-sensitive, the BPR approach has come under some real
scrutiny.
6. Configuration This is the main functional area of the ERP implementation.
There is a bit of mystique around the configuration process and for good
reason: the Holy Grail or unwritten rule of ERP implementation is,
synchronising existing company practices with the ERP package rather than
changing the source code and customising it to suit the company. In order to
do so, business processes have to be understood and mapped in such a way
that the arrived-at solutions match up with the overall goals of the company.
But, companies can't just shut down their operations while the mapping
processes take place. Hence the prototype–a simulation of the actual business
processes of the company–will be used. The prototype allows for thorough
testing of the "to be" model in a controlled environment. As the ERP
consultants configure and test the prototype, they attempt to solve any
logistical problems inherent in the BPR before the actual go-live
implementation.
Configuring a company's system reveals not only the strengths of a company's
business process but also–and perhaps more importantly–its weaknesses. It's
vital to the health of the company and to the success of the ERP
implementation that those configuring the system are able to explain what
won't fit into the package, and where the gaps in functionality occur.
ERP vendors are constantly striving to lower configuration costs. Strategies
currently being pursued include automation and pre-configuration. Baan for
instance, has developed Orgware, an automated configuration tool, while SAP
has pre-configured industry-specific templates that can be tweaked for each
individual company (Accelerated SAP Solutions). The current ERP industry
push towards developing the mid-range market in turn creates an added
incentive to reduce costs, encouraging the sought-after mid-range companies
to feel they can afford to implement a top-of -the -line ERP package. By
creating a custom pre-configured ERP module for a particular industry–say a
shoe software-manufacturing prototype created for a shoe manufacturer–the
need for hands-on custom configuration is reduced, thereby keeping the costs
down. It is hoped that a kind of "question and answer" format can be used to
find out the kinds of business process information hitherto addressed through
the hands-on configuration process. In theory, these pre-configured tools
should save time and money, but every business is unique and at least some
configuration is unique to each project.
7. Implementation Team Training Around the same time that the
configuration is taking place, the implementation team is being trained, not so
much how to use the system, but how to implement it. This is the phase where
the company trains its employees to implement and later, run the system. The
ERP vendors and the hired consultants will leave after the implementation is
over. But for the company to be self-sufficient in running the ERP system, it
should have a good in-house team that can handle the various situations.
Thus, it is very vital that the company recognises the importance of this phase
61
and selects those employees who have the right attitude–people who are
willing to change, learn new things and are not afraid of technology–and good
functional knowledge.
8. Testing This is the phase where you try to break the system. You have
reached a point where you are testing real case scenarios. The system is
configured and now you must come up with extreme-case scenarios–system
overloads, multiple users logging on at the same time with the same query,
users entering invalid data, hackers trying to access restricted areas and so
on. The test cases must be designed specifically to find the weak links in the
system and these bugs should be fixed before going live.
9. Going Live This is it. Lights on, switches thrown, gloves off. On the technical
side, the work is almost complete–data conversion is done, databases are up
and running; and on the functional side, the prototype is fully configured and
tested and ready to go operational. The system is officially proclaimed
operational, even though the implementation team must have been testing it
and running it successfully for some time. But once the system is 'live', the old
system is removed, and the new system is used for doing business.
10. End-User Training This is the phase where the actual users of the system
will be given training on how to use the system. This phase starts much before
the system goes live. The employees who are going to use the new system are
identified. Their current skills are noted and based on the current skill levels,
they are divided into groups. Then each group is given training on the new
system. This training is very important as the success of the ERP system is in
the hands of the end-users. So these training sessions should give the
participants an overall view of the system and how individual actions would
affect the entire system. In addition to these general topics, each employee is
trained on the job or task that he/she ip supposed to perform once the system
goes live. It is human nature to resist change. Also many people are afraid of
computers and other new technologies. So there will be resistance to change.
Another factor is that not all people will be successful in making the
changeover. The company management should address these concerns and
take necessary actions to avoid failure. The end-user training is much more
important and much more difficult (since most end-users are not thrilled at
having to change) than the implementation team training. Companies are
beginning to take this phase seriously, as there is statistical evidence now,
which shows that most implementations fail because of a lack of end-user
training.
11. Post-Implementation (Maintenance Mode) One important factor that
should be kept in mind is that the post implementation phase is very critical.
Once the implementation is over, the vendors and the hired consultants will
go. To reap the full benefits of the ERP system, it is very important that the
system should get enterprise-wide acceptance. There should be enough
employees who are trained to handle the problems that might crop-up. There
should be people, within the company, who have the technical prowess to
make the necessary enhancements to the system as and when required. The
system must be upgraded as and when new versions or new technologies are
introduced. Here the organization should think in terms of the incremental
benefits of the new enhancements. Because with any upgradation or
enhancements, there will be a lot of other aspects like user training that have
to be considered. So instead of going in for upgradation as and when a new
version is announced by the vendor, the organization should first analyse the
costs and benefits.
The post-ERP organization will need a different set of roles and skills than
those with less integrated kinds of systems. At a minimum, everyone who uses
these systems needs to be trained on how they work, how they relate to the
business process and how a transaction ripples through the entire company
whenever they press a key. The training will never end; it is an ongoing
62
process; new people will always be coming in, and new functionality will
always be entering the organization. Just as courtships and honeymoons are
different from marriages, living with ERP systems will be different from
installing them. Projects for implementing the ERP systems get a lot of
resources and attention. However, an organization can only get the maximum
value of these inputs if it successfully adopts and effectively uses the system.
2. How does manufacturing respond to the customer?

Ans. The introduction of the ERP system will dramatically change the job descriptions
and functions of many employees. Employees who were earlier doing the work of
recording information will, overnight, be transformed into decision-makers. For
example, in the past an order entry clerk's job was to enter the orders that came
to him. With the implementation of a good ERP system, the order entry clerk
becomes an action initiator. As soon as he enters the order into the system, the
information is passed on to the sales, distribution and finance modules. The
distribution module checks whether the item is in stock and if available, the item
is dispatched and the information is sent to the finance module. If the items are
not in stock, then the manufacturing module is given the information, so that
production can start. The customer is informed about the status of his order. If the
items are shipped, the finance module prepares the invoice and sends it to the
customer. All these actions take place automatically as soon as the order entry
clerk enters the information regarding the order into the system. Thus the order
entry clerk is transformed from a data entry operator to a decision maker whose
actions can trigger a chain of actions.
These systems lack the integrated approach. There will be an accounting system
for the finance department, a production planning system for the manufacturing
department, an inventory management system for the stores department, and so
on. All these systems will perform in isolation. So if a person wanted some
information which has to be derived from any of these two systems, he has to get
the necessary reports from both systems and then correlate and combine the
data. Because the systems work in isolation, collecting and analysing the data
needed for one department's functioning, can be a difficult task, since, getting
information about some aspect that is dependent on more than one department
can be tedious. No business executive or decision-maker can take good decisions
with the isolated data that he gets from the various reports produced by each
department. Even if he collates the data and produces the information that he
requires, he would have lost valuable time that could have been better spent in
decision-making.
Many manufacturing operations are designed to maximise throughput and lower
costs with little consideration for the impact on inventory levels and distribution
capabilities. ERP is the watchword in the manufacturing industry and more and
more companies are turning to ERP solutions. With almost all the global players
present in the country, the stage is set for the launch of the Indian manufacturing
sector into the age of integrated applications. ERP is a high impact area because
it leads to a bottom-up change in the organization. That is, it is by no means an
incremental technology. While many companies do not even understand the full
implications of using an ERP, they are nevertheless enchanted by the concept of
integrated applications. But a mad rush into ERP, without the necessary business
process discipline, will lead to more flops than hits. The move to ERP is a high-
investment proposition with accompanying investments in hardware, connectivity,
and implementation services, apart from a lot of invisible costs involved in
process change, change management, and training. There are more than 130 ERP
implementations underway in the country presently. SAP, the largest ERP vendor,
has around 75 customers in the country, of which 52 are in the manufacturing
industry, with a dominance by the discrete manufacturing companies. Most of
these are first-generation ERP, which address the area of integration of financials
with logistics. These companies are looking at the first phase of integrating
63
financials with logistics using a packaged application. The next phase taken up is
either sales and distribution or production, depending upon the priority of the
company. Demand-driven industries like automotive sector, consumer goods,
processed foods and the like would take up sales and distribution. There are
presently around 40 companies, which are in the process of implementing
solutions in this area. Possibly, an equal number of companies are looking actively
at production as the next application to be integrated. But, recent studies show
that companies are willing to take up both the phases together right in the
beginning. This is due to the fact that there is a lower perceived risk in
implementation because of code-less implementation becoming the order of the
day, thereby leading to better implementation maturity. Another reason is that
there are enough process models available now in the country itself. Taken
together, the total time taken for rollout is shortened.
The process industry focus is on integrating business applications with the plant
floor. The major areas under consideration are finance, materials, and sales and
distribution. Since production in the case of process industry is plant-oriented, it
falls within the realm of distributed digital control systems. Further, there are no
multi-stage assemblies as in discrete manufacturing companies. The most
important area after this is the maintenance. function. Selection of the proper ERP
package is based solely on the business needs and the fit that the product offers.
As of now, there are few examples in the country of strategic information systems
built around an ERP solution. There are quite a few areas of refinement to ERP
that are being actively looked at by some of the progressive companies. Called as
extended ERP, it seeks to encompass the suppliers and delivery channel partners
into the organization's enterprise information system. Constraint-based planning
tools for supply-chain planning and demand-chain planning are being actively
looked at by companies that operate in specific markets.
3 Write short notes on

a. Baan’s ERP
b. JD Edwards
Ans : a. BaanERP Modules
BaanERP, the successor to Baan IV, is a proven enterprise resource planning
software application. It is fully integrated and provides exceptional
functionality across the enterprise. BaanERP consists of a number of
interdependent components that can be deployed to meet business needs.
The flexibility within BaanERP allows customers to maximise the benefits of
both best-in-class solutions and a fully integrated, high-performance system.
BaanERP includes the following components: manufacturing, finance, project
and distribution.
 Manufacturing Module (includes Bills of Material, Cost Price Calculation,
Engineering Change Control, Engineering DataManagement, Hours
Accounting, Product Classification, Product Configuration, Production
Control, Production Planning, Project Budgeting, Project Control,
Repetitive Manufacturing, Routings, Shop Floor Control, Tool
Requirements, Planning and Control, Capacity Requirements Planning,
Master Production Scheduling and Material Requirements Planning)
 Finance Module (includes Accounts Payable, Accounts Receivable,
Financial Budgets System, Cash Management, Financial Reporting
System, Fixed Assets, General Ledger, Cost Accounting and Sales
Invoicing) ? Project Module (includes Project Budget, Project Definition,
Project Estimating, Project Invoicing, Project Monitoring, Project
Planning, Project Progress and Project Requirements Planning)
 Distribution Module (includes Sales Management, Purchase
Management and Warehouse Management)
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BaanERP Tools
BaanERP Tools consists of a number of software components, which together
form the technical foundation for all BaanERP components. The BaanERP Tools
can be described as a computing platform that provides an independent,
flexible, open and distributed computing and development environment. The
open architecture of the BaanERP Tools makes it possible to:
 Quickly react to new trends in the marketplace that require software or
software configuration changes.
 Develop the Baan applications in such a way that they are kept inde
pendent of third party products such as hardware, operating systems
and databases.
 Easily integrate with third-party products.
 Create customer-specific solutions.
Run-time Tools
The purpose of the run-time tools is to make BaanERP packages independent
from computing-environment-specific issues, such as platform, operating
system, middleware, databases and user interfaces. The run-time tools are
developed in C/C++ and/or Java. Run-time tools: Allows Baan application
developers to focus on application-specific issues only. Removes the overhead
of developing and generating a native application code for each combination
of platform, operating system, database and so on. Greatly reduces the
complexity of providing and maintaining application product updates.
b. JD Edwards World Solutions Company
Company Profile
1977, Denver, Colorado. Three men left the accounting world to form a
software company that would specialise in midrange computing solutions.
Each of the three founders – Jack Thompson, Dan Gregory and Ed McVaney –
lent a small portion of his name for the company name. On March 17, JD
Edwards was formed.
In the early years, JD Edwards designed software for several small and
medium-sized computers, eventually focusing on the IBM System/38 in the
early 1980s. It was in this effort that JD Edwards pioneered the CASE software
development and design tool, which lends consistency across the broad range
of JD Edwards' integrated applications. As JD Edwards began to outgrow its
headquarters in Denver, it started opening branch offices, first in Dallas and
then in Newport Beach, California; Houston; San Francisco; and Bakersfield,
California. Beginning in 1988, the company began to concentrate its efforts on
international expansion and opened its European headquarter in Brussels,
Belgium, which has since been moved to Buckinghamshire, UK.
As JD Edwards' business continued to grow, it became obvious that servicing a
large number of customers was creating challenges. The company could either
remain small and serve customers on an individual basis or, with a
breakthrough in technology, it could become an industry leader in enterprise
software. When McVaney and Thompson began to design and mplement
Worldsoftware, they provided the pathway to success. By the mid-1980s, JD
Edwards was being recognised as an industry-leading supplier of applications
software for the highly successful IBM AS/400 computer, a direct descendant
of the System/38. With the June 1996 introduction of OneWorld, the company
once again achieved a technological breakthrough. Building on the CASE
technology pioneered in the 1980s, OneWorld combines a full range of
platform independent applications with an integrated toolset. OneWorld gives
organizations the power to configure their systems and applications as their
needs change.
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Today, JD Edwards is a publicly traded company that has more than 4,700
customers with sites in over 100 countries and more than 4,200 employees.
The company attributes much of its success to a corporate culture that
emphasises quality at all levels. JD Edwards' commitment to its product
quality, its corporate culture and a customer-centric approach enable the
company to deliver and support leading enterprise software solutions that
solve business problems. JD Edwards is a leading provider of Idea to Action
enterprise applications, encompassing flexible, integrated software for
distribution, finance, human resources, manufacturing and supply chain
management. The company's software operates in multiple computing
environments, and is both Java and HTML enabled. JD Edwards enables Idea to
Action with ActivEra, a customer-centric product and technology solution that
allows companies to change enterprise software after implementation, as their
business needs demand. ActivEra extends the capabilities of the company's
existing OneWorld and JD Edwards SCOREX products.
JD Edwards offers customers the means of achieving greater ongoing control
of their businesses through the ability to define and redefine the way they do
business as markets, customers and competitive conditions change. Behind
this customer commitment is a twenty-two year history of listening to
customers, understanding what they ask of business technology, learning the
nuances of their industry and developing solutions accordingly. By
emphasising Solutions, Relationships, and Value, JD Edwards maintains its
focus on what truly matters to its customers.
 Solutions Business doesn't live by software alone. JD Edwards offers a
balance of technology and service options tailored to your unique
industry and processes. A network of certified service and support
providers complements the services directly available from JD Edwards
to ensure timely implementation and ongoing quality of the solution.
 Relationships With JD Edwards, you have a partner committed to
ushering you through changes in business and technology. The
company's product development, support and training are tuned to
meet your current and evolving needs. By understanding the
customers' industry, paying attention to business fundamentals and
ensuring customer participation in the development process, JD
Edwards work to protect the customer's investment with solutions that
evolve with their business.
 Value In enabling Idea to Action, JD Edwards provides you with an
appreciating software asset – one with the potential to increase in
value over the life of your business. Through continual enhancements
in features and functionality, an architecture open to third-party
technologies, and the real-time adaptability afforded by ActivEra, you
can capitalise on new ideas and maintain your flexibility in the face of
change. JD Edwards also offer multi-currency, multi-language and
multi-location capabilities, so your solution grows as your business
grows.
 Technology JD Edwards offers its solutions primarily for the AS/400
platform. JD Edwards's two application suites, OneWorld and
WorldSoftware/ WorldVision, provide comprehensive supply chain
management functionality across the technology continuum, from host-
centric, to thin-client, to network-centric computing. All three can run
concurrently on the same AS/400, share data and interact with each
other as a unified solution.
 OneWorld JD Edwards OneWorld is flexible enough to support an
extended solution by integrating with legacy, best-of-breed and third-
party products. All this without sacrificing the security, integrity, or
consistency of the existing systems or data. OneWorld's own APIs, as
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well as such industry standards as CORBA, ODBC and other packaged

integration solutions and processware options, ensure that you won't
be locked into limited functionality and out of future opportunities.
67
MI0030 - E-Commerce and Web Design

Set- 1
Q.1 a. Why did Walmart implemented QR system

b. What are the functions of supply chain management?
Ans. a. Quick Response Retailing
Quick response (QR) is a version of JIT purchasing tailored for retailing. Most
often, keeping a store filled with merchandise is a task most shoppers never
consider-until the product they want is out of stock. The frustration that
shoppers experience sometimes gives way to thoughts of "How do retailers
buy and stock products anyway?" The process is quite complex, given that a
single retailer may purchase merchandise from thousands of vendors in a
global market. The failure to stock merchandise that matches customer
demand can be extremely costly. For example, in the soft goods industry
alone, excess inventories, inadequate information, and related inefficiencies
resulted in lost sales of more than $25 billion in 1994.
To reduce the risk of being out of stock, retailers are implementing QR
systems. QR provides for a flexible response to product ordering and lowers
costly inventory levels. QR retailing focuses on market responsiveness while
maintaining low levels of stocks. It creates a closed loop encompassing the
retailer, vendor, and consumer chain, and as consumers make purchases the
vendor automatically orders new deliveries from the retailer through its
computer network. The bar-coded articles are logged by the cash registers at
the point of sale, the inventory system of the store then determines the
needed supply, and the system transmits an order message to the retailer.
The availability of accurate information with respect to the current sales
enables sophisticated marketing capable of responding to consumers'
preferences. One of the famous examples of QR systems was implemented in
the 1980s by Wall-Mart. Wal-Mart invested half a billion dollars in computer
and satellite communications networks, bar-code systems, scanners, and
other QR equipment linking each point-of-sale terminal to distribution centers
and headquarters in Bentonville, Arkansas. Many believe that it was this
system that enabled Wal-Mart to manage the explosive retail sales growth
that catapulted the company to number one position in the US retail business.
The system enabled the company to maintain high service levels and increase
sales while reducing the inventory costs to one-fourth of previous levels. Also
by empowering its individual stores to order directly from suppliers, even
overseas, individual Wal-Mart stores reduced inventory restocking time from
an industry average of six weeks to thirty-six hours. Moreover, by tracking
every sale through the point-of-sales devices to see what product was selling
in large quantities, Wal-Mart stores were better able to keep their stores well
stocked while maintaining tight inventories and low prices.
b. Supply Chain Management
Supply chain management includes the following functions:
 Supplier management. The goal is to reduce the number of suppliers
and get them to become partners in business in a win/win relationship.
The benefits are seen in reduced purchase order (PO) processing costs,
increased numbers of POs processed by fewer employees, and reduced
order processing cycle times.
 Inventory management. The goal is to shorten the order-ship-bill
cycle. When a majority of partners are electronically linked, information
faxed or mailed in the past can now be sent instantly. Documents can
be tracked to ensure they were received, thus improving auditing
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capabilities. The inventory management solution should enable the

reduction of inventory levels, improve inventory turns, and eliminate
outof- stock occurrences.
 Distribution management. The goal is to move documents related to
shipping (bills of lading, purchase orders, advanced ship notices, and
manifest claims). Paperwork that typically took days to cycle in the
past can now be sent in moments and contain more accurate data,
thus allowing improved resources planning.
 Channel management. The goal is to quickly disseminate information
about changing operational conditions to trading partners. In other
words, technical, product, and pricing information that once required
repeated telephone calls and countless labor hours to provide can now
be posted to electronic bulletin boards, thus allowing instant access.
Thus electronically linking production with their international distributor
and reseller networks eliminates thousands of labor hours per week in
the process.
 Payment management. The goal is to link the company and the
suppliers and distributors so that payments can be sent and received
electronically. This process increases the speed at which companies
can compute invoices, reducing clerical errors and lowering transaction
fees and costs while increasing the number of invoices processed
(productivity).
 Financial management. The goal is to enable global companies to
manage their money in various foreign exchange accounts. Companies
must work with financial institutions to boost their ability to deal on a'
global basis. They need to assess their risk and exposure in global
financial markets and deal with global information as opposed to local
market information. Sales force productivity. The goal is to improve the
communication and flow of information among the sales, customer,
and production functions. Linking the sales force with regional and
corporate offices establishes greater access to market intelligence and
competitor information that can be funneled into better customer
service and service quality. Companies need to collect market
intelligence quickly and analyze it more thoroughly. They also need to
help their customers (relationship management) introduce their
products to market faster, giving them a competitive edge.
2. List out the Ecommerce opportunities for industries and give an example
of your understanding for all the opportunities.
Ans. E-commerce Opportunities for Industries
Following are some of the areas where e-commerce is witnessing rapid growth in
the global markets. Indian software and services companies need to tap into
some of these vertical segments to gain the maximum advantage in the e-
commerce solution sector.
1. Financial services. A large number of users use the Internet for some form of
financial guidance.
2. Stock trading. Online stock trading is nowadays one of the most demanding e-
commerce utilities. The ability to offer market access at a competitive price is
a key advantage of online stock broking companies and this is slowly
happening in India too.
3. Banking. Internet banking is now growing. Many banks like ICICI and HDFC are
making inroads into this area.
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4. Legal and professional services. Opportunities also exist for Indian companies
in legal and other professional services. There are significant legal and
regulatory implications of implementing an Internet business or of migrating
from a traditional off-line business. In terms of opportunities for Indian legal
service providers, the requirement for professional, legal and regulatory
advice is expected to increase as the number of ecommerce users increases.
5. Tour and travel. The travel industry has readily adapted to e-commerce. There
has been a growing emphasis on the search for alternative distribution
channels within the sector, particularly with the railways and the airlines, as
they seek to reduce costs. These sectors have adapted well because of their
online reservation systems.
6. Healthcare. Healthcare represents one of the biggest expenditures of
governments worldwide. The Internet has the potential to enhance
communications, streamline processes and create new business opportunities,
by providing high-quality administrative services and integrating information
systems.
3. a. Visit any eBay or Amazon website and write what are the steps to be
followed to transaction on any of these two websites.
b. Explain the different types of aggregators with an example.
Ans. a.
b. Types of Aggregators
There are four types of aggregators such as the following:
1. Content aggregators: They are among the first large-scale sites on the
Web and mostly represent large publishing companies, e.g. Pathfinder.
com. Their basic challenge is that content has to be attractive enough to
make the site viable. For example, CANOE and Hockeyplus, that provide
extensive statistics, analysis, pool information or cricinjo.com.
2. Mainstream aggregators: These include sites like Yahoo providing a Web
directory and a search engine, along with a bunch of attractive tools like e-
mail addresses, home pages, reminders, and many others. The most
attractive feature of these sites is that they have an 'easy-toremember'
URL which is one of the reasons for them to be the top traffic sites on the
Web.
3. Event aggregators: These are sites that provide in-depth content and tools
tailored to the needs of a particular group, which doubles as a clearly
defined customer base, for example, mortgages-build tools, rates, advise,
and the ability to purchase a mortgage online in the same place
(Microsoft's HomeAdvisor or HomeShark).
4. Shopping aggregators: Shopping aggregators let consumers roam through
hundreds of sites and catalogues and find the best price in seconds. They
help consumers sift through dozens of e-commerce sites. For example,
compare.com and bizrate.com evaluate their quality on independent basis
as in the case of consumer reports.
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MI0030 - E-Commerce and Web Design

Set- 2
1. What are the different methods of electronic payments that we come

across in our life. Explain
Ans. Types of Electronic Payment Systems
Electronic payment systems are proliferating in banking, retail, health care, on-
line markets, and even government-in fact, anywhere money needs to change
hands. Organizations are motivated by the need to deliver products and services
more cost effectively and to provide a higher quality of service to customers.
Research into electronic payment systems for consumers can be traced back to
the 1940s, and the first applications-credit cards-appeared soon after. In the early
1970s, the emerging electronic payment technology was labeled electronic funds
transfer (EFT). EFT is defined as "any transfer of funds initiated through an
electronic terminal, telephonic instrument, or computer or magnetic tape so as to
order, instruct, or authorize a financial institution to debit or credit an
account."EFT utilizes computer and telecommunication components both to
supply and to transfer money or financial assets. Transfer is information based
and intangible. Thus EFT stands in marked contrast to conventional money and
payment modes that rely on physical delivery of cash or checks (or other paper
orders to pay) by truck, train, or airplane.
Work on EFT can be segmented into three broad categories:
1. Banking and financial payments
 Large-scale or wholesale payments (e.g., bank-to-bank transfer)
 Small-scale or retail payments (e.g., automated teller machines and cash
dispensers)
 Home banking (e.g., bill payment)
2. Retailing payments
 Credit cards (e.g., VISA or MasterCard)
 Private label credit/ debit cards (e.g., J.C. Penney Card)
 Charge cards (e.g., American Express)
3. On-line electronic commerce payments
 Token-based payment systems
• Electronic cash (e.g., DigiCash)
• Electronic checks (e.g. NetCheque)
• Smart cards or debit cards (e.g., Mondex Electronic Currency Card)
 Credit card-based payment systems
• Encrypted credit cards (e.g., World Wide Web form-based
encryption)
• Third-Party authorization numbers (e.g., First Virtual)
Digital Token-Based Electronic Payment Systems
Entirely new forms of financial instruments are being developed. One such new
financial instrument is "electronic tokens" in the form of electronic cash/money or
checks. Electronic tokens are designed as electronic analogs of various forms of
payment backed by a bank or financial institution. Simply stated, electronic
tokens are equivalent to cash that is backed by a bank.
Electronic tokens are of three types:
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1. Cash or real-time. Transactions are settled with the exchange of electronic

currency. An example of on-line currency exchange is electronic cash (e-cash).
2. Debit or prepaid. Users pay in advance for the privilege of getting information.
Examples of prepaid payment mechanisms are stored in smart cards and
electronic purses that store electronic money.
3. Credit or postpaid. The server authenticates the customers and verifies with
the bank that funds are adequate before purchase. Examples of postpaid
mechanisms are credit/debit cards and electronic checks.
2. Explain the 4 Ps applied to internet marketing?

Ans. The four Ps applied to Internet Marketing
The four "Ps" of marketing – product, pricing, place, and promotion are
examined and discussed within the context of the customer-oriented value chain
and Internet marketing.
1. Product
A product is a good or service that a business offers to its customers.Without
some sort of viable product to offer, a business cannot survive. The product
component frequently mentioned in the marketing literature is placed in the
production section of the customer oriented value chain. Traditional physical
goods generally have a physical, tangible presence and include items such as
automobiles, grocery items, and printed newspapers. Traditional service
products generally involve the performance of a task for the customer;
examples include work performed by doctors, accountants, hairdressers, and
actors. The Internet has allowed the creation of new virtual service offerings,
such as on-line news and real-time stock quote services. Distinguishing
between goods and services is not always easy (for example, how do you
categorize the output of a movie theater?) The delineation between the two
product types becomes even more difficult as new products and variations of
old products are created and sold on the Internet. Is an electronic greeting
card categorized as a physical good or service product? Labeling a product as
a physical good or service product is not very important. Clearly defining the
attributes of a product or service and the corresponding benefits that it
provides to the consumer is vitally important.
Service provided to the customer after the sale is also an important
component of the total value of the product to the consumer, and may
actually be bundled with the product when it is sold. Examples of such
bundling include guaranteed, 24 hour road-side service that accompanies the
purchase of a new automobile or six months worth of free product upgrades
for a virus scanning software package. To the extent a firm builds the service
component into pre-purchase marketing devices, it can be considered part of
the product the customer is buying.
2. Pricing
The pricing of a good refers to the processes involved in determining the
amount to charge for a specific physical good or service. Pricing models are
typically used to determine a firm's price. The firm's strategy typically dictates
the type of pricing model chosen, such as a high-volume, low-price
penetration strategy. Physical goods are frequently discounted if a large
enough quantity is ordered. Web-based marketers are already producing
interesting pricing strategies. Some sites providing free services for visitors in
order to create a community for which it can sell advertising space. A more
dramatic move is for a site to pay customers to use its services. Frequent
purchase systems are also being used to help strengthen customer loyalty and
encourage repeat buying. On-line auctions are a popular method for selling
items on the Internet. Low minimum prices are typically set, with bidders
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typically bidding the prices up to a fair price. An interesting method of pricing

goods on the Internet is through offers made by consumers.
One question raised by the increased use of the Internet for price comparison
is – will prices be forced down to the lowest possible point? Clearly, increased
competition and consumer buying power will force prices down somewhat, but
other items are also important in the purchasing decision: i.e., service,
availability, reliability of vendor, and incentives.
3. Place (Distribution)
Place is frequently referred to as outbound logistics or distribution. The
distribution task entails moving the product from the producer to the
customer. The product may travel directly from the producer to the consumer
or it may be channeled through intermediaries, such as wholesalers,
warehouses and/or retailers. Tupperware's distribution channels will change as
a result of the changes to its business strategy to incorporate web-based
sales. Inventory items will now be shipped, in some cases, directly to the
consumer without the necessity of first being delivered to its local distributors.
Electronic commerce involving the sale of physical goods can be very useful in
exchanging information between businesses and delivery companies. The
interfacing of sales or purchasing systems with delivery companies enables
faster pick up of goods from warehouses and shop floors for faster delivery to
the customer. Insight Enterprises, Inc. has formed a strategic alliance with
Federal Express, so that Federal Express performs a valuable service by
providing timely deliveries direct from its own suppliers to its customers,
bypassing the need to warehouse many items. The physical Internet itself is
also a delivery channel for digital products. Digital products are goods that are
comprised of digitally encoded software, data, or multimedia files. Delivery of
such products can occur instantaneously in real-time. It is 4:00 AM, and you
need a software package to translate a business document into Japanese. The
stores are close, no problem, you go to an on-line store that, upon digital
receipt and verification of your credit card, downloads a copy of an English-
Japanese business document translation software package. Sale and
distribution are both completed in less time than it would take to drive to a
store (if the store was open)
4. Promotion
The sales and marketing function is a separate entity in the customer oriented
value chain, and the activities performed in this capacity fall under the
traditional marketing category called promotion. The successful promotion of
a product requires that, at a minimum, a positive message be received by
potential customers. This message may be communicated in many ways:
 paid advertising channels;
 news stories and press releases;
 word of mouth;
 consumers' personal experiences; and
 packaging.
The first technique, paid advertising channels, is a common method used by
companies. Typically a firm will have an advertising budget: and the funds are
allocated amongst many competing advertising media, such as newspaper,
magazine, direct-mail, television, radio, billboards, special events, etc. Using
the Internet to create an awareness of products is a relatively low-cost and
increasingly effective medium. Internet marketing firms are aggressively
selling their services to businesses. Because paid advertising requires cash
outlays, marketing groups attempt to track the success or impact of the
marketing funds spent. The ability to specifically identify which mechanism(s)
caused the consumer to buy the product or service is a challenging, and
sometimes impossible, task. The advertising channels in are labeled as either
one-way or two-way channels. One-way channels send a message to the
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potential customer, but do not provide a direct mechanism for communication

to the business. Examples of one-way communication include radio, roadside
bulletin boards, television, magazines, newspaper, and most direct mail. Two-
way channels send the message to the potential customer and provide a
direct mechanism for communication from the potential customer to the
business. Examples of two-way channels include some direct mail via phone
responses and inquiries, infomercials via phone responses and inquiries,
telemarketing, web site advertising via forms-based input, electronic-mail with
hypertext links to interactive web sites or via a reply function, and web
banners that link to interactive web sites.
3. Explain the rules of thumb for designing good websites.

Ans : Rules of thumb for designing good websites
These guidelines are offered as a starting point for developing good webdesign
skill, not as a formula that should be followed point by point.
1. Page Loading Efficiency
The temptation to overload a page with graphics should be resisted. A few
well-chosen graphics are fine, but too much on a page and the visitor may
become frustrated with the required time to load a page, and "click, click"
they are off to another site. Frames also increase the loading time, and if the
site sells or exchanges advertising space in which banners will appear, these
items will also slow down the load time. Web site designers should review the
load time periodically from an off-site connection with a connection speed that
is comparable to a reasonably low connection speed. Users with lower speed
modems than this will probably browse the Internet with their graphics options
turned off. For these users, the web site should be designed with a text-only
option, which displays text in lieu of graphics and contains the same hypertext
links.
2. Simplicity
Avoid clutter on web pages. If the business has a lot of information to convey,
organize it well and spread it out over multiple pages. Unlike printed
advertisements, web site hosting costs are so low and competitive that the
number of pages is typically not a significant cost factor. Do not go overboard,
however, and place so little information on each page that the user must click
to advance to the next page after reading only three or four sentences. A
guideline is to use about 60 characters per line. Also, avoid long pages that
require a lot of scrolling. Again, organizing the material well can preclude
excessive scrolling from being necessary.
3. Use the Space Wisely
Do not ramble on; make each statement count. Just because web space is
relatively cheap does not mean that visitors want to weed through hoards of
verbose commentaries and other non value-added information to find the
items desired.
4. Create a Reason to Return
Once a visitor comes to the site, give them a reason to return. Suggest they
bookmark the site - it works! Some suggestions for items that may cause the
visitor to return:
 daily or weekly specials;
 daily or weekly updates to the site that are clearly labeled, such as
editorials,current events, projects, recipes, etc.;
 frequent buyer programs;
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 contests; and
 events, such as hosting a chat session with a guest celebrity or public
figure.
5. Framing
A frame is a section of the viewer's computer screen. A screen can be split
into multiple sections that can load different web pages, even those from
other sites. The use of frame has it benefits and its drawbacks. Framing is
useful, for example, for providing a directory of options in one frame and the
contents of each option in another frame. It helps the visitor to know where
they are and where they have been, through the use of highlighted hypertext
links. The drawbacks are that they slow the load time, not all browsers support
frames, and most search engines cannot read the hypertext links in the
frames. Over time, these drawbacks will most likely be non-issues.
6. Tables and Fonts
Tables are useful for providing structure to text that will not be lost due to the
size of the visitor's screen and the size of the viewing window, which is
affected by the viewer's web browser. Whenever possible, avoid using all
uppercase letters as they are more difficult for the eye to follow. Further, the
use of fancy fonts may look good on the web designer's screen, but the fonts
displayed to visitors are limited to those that are available on their own
computer. The Times and Helvetica fonts are good fonts for readability on web
sites. As mentioned earlier, try to keep line lengths less than 60 characters per
line.
7. Graphics
Graphics can enhance a web site when used properly. Attempt to use images
that are no larger than 70k or the load time may annoy visitors. Fortunately,
many image software packages allow the user to view the image in different
storage sizes and indicate the approximate load time for each size. The larger
the image, the better the image, but a slightly less vivid image that loads
faster may payoff in terms of retaining visitors. If picture clarity is important,
for example for inventory items, allow the user to choose to view a bigger,
clearer picture by clicking on the smaller picture.
8. Interlaced Graphics
Images that gradually appear sharper are called interlaced graphics. Not
everyone appreciates these pictures, and some people find them annoying.
Designers that use interlace graphics contend that the visitor is able to see
the picture faster, albeit fuzzy, and has something to view while the remainder
of the picture is loading and sharpening.
9. GIF vs. JPEG files
Either format can be used. The primary difference between the two file types
is the compression techniques used. GIF files are typically more efficient for
solid color images, such as logos, or images with large regions of solid color.
JPEG formats will typically yield better results for multi-colored images or
photographs in terms of best quality for the size.
10. Colors and Contrast
Most web site designers agree that dark text on light backgrounds works best.
The key is to have enough contrast between the text and the background.
Some colors work together and some do not; a traditional color wheel is useful
for choosing contrasting colors.
11. Purchasing Information
Sites that sell their products/services on-line should clearly post policies in an
easily found place regarding these items: Tax rates, Shipping rates, Shipping
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schedules, Return policy, Privacy of transaction and Security of data that is

transmitted. Further, items selected for purchase (placed in a shopping cart)
should be easily reviewed at any point. The total bill, including taxes and
shipment cost, should be displayed to the user before asking for payment
information, such as credit card data.
12. Tracking Data
In order to analyze the success or contribution of a site, certain data need to
be tracked. Some useful information includes:
 number of different visitors (not repeat visitors)
 number and frequency of repeat visitors;
 location of site prior to visit, including the search engine used to
locate the site, if applicable;
 length of time of visit;
 pages visited;
 items examined by visitors;
 domain names of visitors;
 country codes of visitors; and
 purchases made, if applicable.
Cookies may be necessary in order to avoid double counting. The examination
of correlations between some of the above items can provide useful
information, such as the correlation between the location of prior site and
length of time visited or purchases made. For example, a site selling infant
clothing may notice a strong correlation between prior site and length of visit
if a significant portion of its visitors are arriving via an advertising banner
placed on a site similar to Parenthood.com. Obviously, much analysis of such
data is necessary before any conclusions should be drawn and used to make
future decisions, however, such data contains a wealth of information if
collected and analyzed properly.
13. Using Navigation elements
Navigation elements are important because a viewer may not always enter a
website from its home page. He or she may enter through any page of the site
or search engine or a hyperlink from a different site. In this situation it is
important to have a way to get to site’s home page or other major pages. A
navigation bar is a series of icon or text hyperlinks to major pages of a
website. The position of navigation bars should be consistent in all the pages
of the website. Navigation bars using icons are often positioned at the top of
the page. Another important navigational technique is the inclusion of top of
page hyperlinks at the bottom of each web page, which would enable a viewer
to quickly return to top of the same page after having scrolled down.
14. Maintain consistency
Web pages design emphasize consistency in its presentation. The e-business
name and contact information is important as customer may print a copy of
individual pages from the website and may want the name and the contact
information available on the printout.
15. Designing a website for a variety of displays
Majority of the audience the display is the function of monitor and the size and
colour capabilities. It is important to keep in mind that the diversity goes end
here, because users may use Television to watch webpage. Other may view
using Personal Digital Assistant (PDA), also referred to as a palmtop or a cell
phone, sight impaired users may be listening to your page and not viewing it.
76
MI0031- Technology Management

Set- 1
1. What is Technology Management? What are the role & Importance of
Technology Management? What is appropriate & Disrupted Technology?
How Technology Management is being inherited by India?
Ans. Technology Management – Many factors make up the technology development
framework and there are several ways of condensing these into a manageable
number of groupings. Table 1.3 shows these factors grouped around six broad
dimensions:
1. Objectives
2. Decision criteria
3. Time
4. Constraints
5. Activities
6. Mechanisms
According to Solomon, “Technology Management is the capacity of a firm, a group
or society to master management of the factors that condition technical change
so as to improve its economic, social and cultural environment and wealth.” The
importance of technology management becomes obvious if one considers both
what the economists call the “input” and the “output” aspects of technical
change, namely, sources of modern technology on one side and its pervasive
impact on society on the other.
According to Stephen Millett, the following four general factors are considered
important for successful R&D management:
 Responsiveness to the needs of clients and customers.
 Regular top-down and bottom-up communication:
 An awareness that technologies alone are not products; and
 Recognition that non-technological factors have profound impact on R&D.
Role and Importance of Technology Management
Technology and management of technology are critical for an enterprise for its
successful operation on long-term basis. Technology management is, however, a
part of the total management system. There are three basic considerations for
starting any new firm based on technological innovation.
1. The idea for a technological innovation;
2. A potential market;
3. Team work in both technological and business expertise.
The above points underline the need for interweaving the technology framework
with other areas of business in an enterprise. The idea of a technological
innovation should be based or linked with the potential market and the
technology team should closely interact with the rest of the divisions of the
enterprise leading to successful logical conclusions in terms ofproducts/ processes
to be developed as per the objectives set in the beginning. This strategy is best
reflected in the form of a “Business Plan” of an enterprise which needs to be
prepared and approved before starting the new business.
The Business Plan: It is a strategic summary of a new venture. Its purposes are:
1. To ensure, by clear focus in strategy, that important points necessary to the
success of any business venture have been considered; and
2. To persuade financial investors to invest in the new venture. A newventure
business plan could include the following:
a. Current business status
77
 Business objectives
 Management and organization
b. Products or services
 Product description
 Technological background
 Competition.
c. Benefits to customers
 Market
 Marketing strategy
d. Capitalization
 Capital requirements
 Financial forecasts
 Benefits to investors
It is thus clear from the above that technology and technology managementare
only a part of the total business activity or business plan of an enterprise.
Appropriate Technology
Appropriate Technology (AT) is being mindful of what we're doing and aware of
the consequences. Appropriate technology works from the bottom up; it is not an
overlay to the situation; it is a genuine grassroots solution to economic needs. In
the Industrial World small businesses account for more technological advances in
their areas of expertise than government supported researchers or research
departments in massive corporations. Third World craftspeople, farmers and other
villagers invent, create, and contribute to the technological process of their area
much more than outside "experts" do. Some of the accepted criteria for selecting
appropriate technologies in the contemporary situation are considered below:
 It should primarily aim at meeting the basic needs of rural people; it should
be capable of absorbing large labour force, preserve existing traditional
jobs, low cost and require low levels of skills;
 It should provide viable means for small scale production operations;
 It should consume lesser energy;
 It should be capable of using indigenous raw materials and services;
 It should provide for waste recycling and should be non-polluting;
 It should be consistent with local culture and be compatible with social
system;
 It should be acceptable to the political system.
Disruptive Technology
Disruptive technology’ is a term coined by Harvard Business School professor
Clayton M. Christensen to describe a new technology that unexpectedly displaces
an established technology. In his 1997 best-selling book, "The Innovator's
Dilemma," Christensen separates new technology into two categories: sustaining
and disruptive. Sustaining technology relies on incremental improvements to an
already established technology. Disruptive technology lacks refinement, often has
performance problems because it is new, appeals to a limited audience, and may
not yet have a proven practical application.
A disruptive technology or disruptive innovation is a technological innovation,
product, or service that eventually overturns the existing dominant technology or
status quo product in the market. Disruptive innovations can be broadly classified
into lower-end and new-market disruptive innovations. A new-market disruptive
innovation is often aimed at non-consumption, whereas a lower-end disruptive
innovation is aimed at mainstream customers who were ignored by established
companies. Sometimes, a disruptive technology comes to dominate an existing
market by either filling a role in a new market that the older technology could not
78
fill or by successively moving up-market through performance improvements until

finally displacing the market incumbents. The term disruptive technology was
coined by Clayton M. Christensen and introduced in his 1995 article ‘Disruptive
Technologies: Catching the Wave’ which he co-authored with Joseph Bower. He
describes the term further in his 1997 book ‘The Innovator's Dilemma’. In his
sequel, ‘The Innovator's Solution’, Christensen replaced ‘disruptive technology’
with the term ‘disruptive innovation’ because he recognized that few technologies
are intrinsically disruptive or sustaining in character. It is the strategy or business
model that the technology enables that creates the disruptive impact. The
concept of disruptive technology continues a long tradition of the identification of
radical technical change in the study of innovation by economists, and the
development of tools for its management at a firm or policy level.
Christensen distinguishes between "low-end disruption" which targets customers
who do not need the full performance valued by customers at the high-end of the
market and "new-market disruption" which targets customers who could
previously not be served profitably by the incumbent. "Low-end disruption" occurs
when the rate at which products improve exceeds the rate at which customers
can adopt the new performance. Therefore, at some point the performance of the
product overshoots the needs of certain customer segments. At this point, a
disruptive technology may enter the market and provide a product which has
lower performance than the incumbent but which exceeds the requirements of
certain segments, thereby gaining a foothold in the market.
Technology Management in India
The development of Science and Technology (S&T) has been receiving continuing
attention of the government at the highest level in India. However, this
development has been based more on science than technology. On the industrial
scene, the Indian industry accounting for almost one-third of total production, has
been generally operating under controlled and regulated economy, in other
words, assured markets. The industry did not generally realize the real need for
international competitiveness in most of the sectors. It, therefore, did not give
adequate attention and also did not make adequate investments in technology.
The technology management at enterprise level in India has therefore been
practically lacking except in a few cases. There have, however, been several
instances where Indian companies have been able to develop and produce
products for internationally competitive markets. Punjab Tractors, Tata
Automobiles, Amul Food, certain drugs and chemicals produced by some firms,
are some examples where Indian companies have excelled. Similarly, some of the
R&D institutions have developed and commercialized technologies in areas such
as drugs and Pharmaceuticals, chemicals, food technology, computer software
etc.
The Indian industrial production has been substantially based on imported
technologies, accompanied by import substitution efforts through indigenous
sources. It is recognized that a large number of industrial products today are
based on obsolete technologies which are not cost-effective and consume lot of
energy. Further, they are not friendly to the environment, and their quality is not
of desired level. Since Indian industry has largely enjoyed monopolistic markets,
their interactions with S&T based institutions, R&D laboratories, and academic
institutions have been rather limited, and their R&D expenditures have also been
much less than the desired levels (when compared to investments in R&D by
industry in developed or industrially advanced countries). In fact, there appears to
be a technology paradox in India as far as S&T is concerned. On the one hand, we
have developed capabilities of high order in hi-tech areas such as space, atomic
energy, defence and computer software; on the other hand, our manufacturing
capabilities are limited to products ranging from needles or paper pins to
electronic products, the quality levels are low and prices are not competitive. We
have imported technologies for almost everything that we use. With the
announcement of the New Industrial Policy and other fiscal measures by the
Government in July 1991, the emphasis was more on international
79
competitiveness, quality, efficiency and exports. Foreign investments and

technologies are being encouraged. These policies have appreciably changed the
operating environment for the Indian industry and would now call for well laid
down technology policy at enterprise level. It is expected that companies will now
pay more attention to technology management in order to remain competitive.
Small scale sector contributes substantially to the total industrial production and
exports of the country, but often does not have adequate appreciation for
technology issues and investments in R&D. The rate of sickness is also higher in
this sector. The new policy envisages a variety of measures to support this sector,
including the technology related support. It must be stressed that technology
management is also important for small enterprises.
2. Discuss various Technology Acquisition alternatives. List the important
points to be kept in mind while managing an acquisition of technology.
With regard to the integrated framework for technology choice, explain
the three stages used for carrying out the study.
Ans. Technology Acquisition Alternatives
1. Develop Technology in-house The company has to estimate the financial
costs of the required R&D and its opportunity cost of that choice. Its impact on
the direction of, and the commitment to, other research projects is also
relevant. In addition to this, the company has to assess the suitability of its
staff and equipment for the new project. Among the risks, it has to face are
blocking patents. However, the developed technology can be customized to its
precise requirements.
2. Buy the firm that has the Technology The investment here could be
substantial and great care is needed in the evaluation of the prospective
acquisition. Also, it is important that following the purchase, that the
operations can be effectively integrated and that there is no undue loss of key
staff.
3. Enter into joint ventures The costs are shared but so are the benefits of the
new technology. Where the risks are high and the costs heavy, membership of
a research consortium becomes a more attractive option. There is also the co-
development of new products or processes, such as between a key supplier
and a major customer.
4. Enter into research contract R&D contracts can be placed with research
associations, universities or consultants. The company has to consider the
costs and the nature of control of the project. There is the risk of know-how
loss.
5. Obtain license for use of Technology This is essentially the purchase of
access to proprietary technology. It can be anything from the right to use a
particular patent to a complete package, which includes know-how
agreements, commissioning assistance for new plant and processes and the
provision of updated designs and other technical information.
6. Education and training Soft technologies with a strong management
dimension e.g. JIT, Quality circles, or Kaizen can be acquired through training
programmes. However, the underlying experience, which makes these
techniques more effective, is often achieved through personal contacts
between companies.
Management of Technology Acquisition
The following are important points in this regard:
1. The role and management of technology within the company needs to be
assessed, especially its capability of managing the transfer activity.
2. The allocation of appropriate staff to the transfer and application of the
technology. The project manager must be at senior level while his colleagues
need to have engineering application and change management skills.
80
3. The corporate objectives, capability and the technology transfer track

record of the prospective transferor need to be considered. Effective
technology acquisition is often based on a longer-term relationship.
4. Clear technical and contract specifications are essential. Because of the
nature of the technology and its integration in intellectual property, the
transfer constituents vary in type and character. Where the transfer is from a
different culture, special attention has to be given to detail and the meaning
of language.
5. Contract negotiations can be onerous. They require diplomatic skills and
careful record-keeping.
6. Because of the nature of its acquisition, transferred process technology
needs to be handled with even more care than indigenous technological
change. It is important that all affected company staff appreciate the nature
and reasons for the acquisition.
Integrated framework for technology choice, study is carried out in three stages,
namely (i) Decision factors identification, (ii) Alternative technologies evaluation,
(iii) Alternative policy analysis and final decision making.
1. Decision Factors Identification In this stage, different alternative
technologies and evaluation criteria are to be identified. The following are
various steps to identify the decision factors related to technology choice of
the given process.
Step 1: Verify the need for new technology Technology has to be tailored
to the needs of the industry. Need can bedefined in terms of suitability,
urgency, and benefits that a company hopes to gain from the new technology.
The need of the new technology is to be assessed based on the internal
strengths, weaknesses, opportunities, and constraints. Based on the analysis,
the objectives of technology choice making are to be identified. One can go for
technology choice for any of the following reasons:
 To start up a new Industry
 To expand existing plant capacity to meet future demand (capacity
expansion)
 To modernize existing plant to meet competition (Modernization /
Technology upgradation)
Step 2: Define the objectives of technology choice decision making
The management must clearly define their objectives and constraints related
to acquiring a new technology. The constraints are as follows: 'amount of
capital that can be spend on the new technology', 'allowable limits of
production capacity', 'technical skills and knowledge levels of local
manpower', etc. The objectives are as follows: 'utilization of local available
manpower and raw materials', 'technology self-reliance', 'technology
leadership or follower-ship', 'ambition to enter into global markets', 'future
growth' , etc. The objectives and the constraints are governed by external and
internal factors. The external factors are market competition and government
regulations. For example, based on the market competition, the permissible
limits for productivity and quality of production are to be fixed. And to take the
advantage of local government incentives, the allowable limits for production
capacity and the preferable locations for plant site are to be decided. The
internal factors are 'resources availability', 'skills and knowledge availability',
'raw materials availability', etc. For example, based on the type and the
amount of natural resource reserves, the permissible raw materials are to be
decided. And based on the technical skills and the knowledge levels of local
manpower, the allowable limits for training requirements are to be decided.
81
Step 3: Form a committee of experts A committee of experts, who have

knowledge / experience in operation and maintenance of related industry, is to
be formed to evaluate the priorities of the alternative technologies. The
number of experts in the group may depend upon their availability. It is always
better to choose experts from different backgrounds, i.e., economists,
academicians, researchers, production and operation people,
environmentalists, policy makers of government, etc.
Step 4: Identify the alternative technologies Alternative technologies are
different combinations of techniques/ processes used for production of a single
product. The alternatives may be at various stages of development, i.e.,
conceptualization, laboratory research and testing, pilot plant, and
commercialization stages. There are certain risks and benefits in choosing a
technology at each stage. For the commercialized technologies, expertise on
the production and maintenance problems is readily available. Therefore to
minimize the risks, commercial technologies are preferable for any new
entrepreneur or for locations where availability of technical expertise is
limited. The technologies which are in the other stages of development
regularly require an in-house R&D support to overcome the day to day
operational problems. As such the selection of technologies in those stages
involves high risk. However anyone who wants to take advantages of the
latest developments, and aspires to be among the leaders of that technology
can only consider the technologies in the above stages of development, as
alternatives.
Step 5: Short-list the alternatives Alternatives are to be short-listed based
on whether an alternative's characteristics are with in the specified objectives
and constraints or not. For example, if the amount of capital required for any
alternative exceeds the maximum limits specified in the objectives and
constraints or if the pollutant levels from the emissions of an alternative
exceeds the government regulations norms or if a particular raw material
required for any alternative falls in the list of government banned materials,
such alternatives must be eliminated from further analysis. Similarly
alternatives are verified whether they are with in the specified characteristics
of other objectives and constraints. Short-listing of the alternatives will reduce
the extra calculation burden. The short-listed alternatives are called potential
alternatives. Only the potential alternatives are to be considered for
evaluation of the priorities.
Step 6: Identify the evaluation criteria Depending upon the objectives,
and based on the technical structure of the alternatives, various key elements
related to alternatives are to be identified to compare the alternatives. The
key elements should include various factors related to economic, social,
political, technical, and environmental aspects of those alternatives. The
following are some of the factors related to each of the above categories.
 Economic: capital cost, royalty or technology know-how cost, operation
and maintenance cost, etc.
 Social: employment potential, safety associated with that technology, etc.
 Political: Government regulations.
 Technical: quality of production, productivity, operational flexibility, type
and quantity of raw materials, amount of energy requirement, amount of
training requirement for employees, waste recycling possibilities, etc.
 Environmental: amounts of each of the solid, liquid, gaseous, and noise
pollution levels.
2. Alternative Technologies Evaluation Different multi-criteria decision
making (MCDM) methods are available to evaluate alternative technologies,
each of the methods have certain limitations. In view of this, Fuzzy
Hierarchical Decision Making (FHDM) methodology is developed synthesizing
82
the advantages of MCDM methods and fuzzy analysis, and is proposed for
evaluating the alternative technologies. In the proposed methodology, the
importance weights of each criterion are to be determined based on the
subjective opinion of the experts, the appropriateness of alternatives based on
each criterion are to be evaluated using the performance and specification
data of alternative technologies. Next, by aggregating the appropriateness
weights of alternatives with the importance weights of criteria, the priorities of
alternatives are to be calculated.
3. Alternative Policy Analysis and Final Decision Making At this stage, the
influence of change in importance of various criteria, technology choice
perspectives, future uncertainty on the priorities of alternatives are to be
studied. After the management is satisfied with the results, final decision is
made regarding the technology selection. The following are the steps of this
stage.
Step 1: Sensitivity analysis The sensitivity of priority rankings of
alternatives is to be analyzed by changing the importance weights of each
factor. This enables to understand how each criterion is influencing the priority
rankings of alternative technologies.
Step 2: Study the influence of technology choice perspective
Introduction of new technology into a particular place may influence the socio-
economic development of that place. Usually the private sector firms look for
technology which helps the commercial success of their business. Whereas,
the public sector firm, particularly in developing countries, in addition to the
commercial success of the business, also look for the region's overall socio-
economic growth prospects while choosing a technology .Therefore, a clear
characterization is to be made of different perspective of the technology
choice making, For example, the views of the private and the public firms can
be represented with different perspectives and the preference of alternatives
be evaluated with each perspective and the influence of each perspective be
explored.
Step 3: Study the influence of future uncertainties The future
uncertainties that may prevail in the places where technology is being chosen,
may influence the success of the technology in the future, Different future
scenarios are to be generated based on the extreme possible conditions that
may prevail in the future. The preference of alternatives is to be evaluated
with each scenario situation, and the influence of future uncertainty on
preference of alternatives is to be analyzed.
Step 4: Discuss the results with the management and select the best
technology The results of the study have to be communicated to the top
management as they are the final decision makers, illustrating how their
objectives and importance of factors are influencing the preferences. If the
management wants to change some of their objectives or importance of
factors, again analysis is to be carried out and preferences of alternatives are
to be calculated. After the management agrees with the results, then most
appropriate technology is to be selected finally.
3. Discuss the role of Technology Transfer and its key factors as applicable
to an organization? What do you understand by a technology package
and what are its features? List the initiatives of India Government in
improving technology absorption?
Ans. Basically there are two ways of acquiring new technology: develop it or purchase
it. The second way of acquiring new technology is commonly called "technology
transfer". The important reasons for purchasing technology are: (i) It involves little
or no R&D investment; (ii) Technology can be used quickly; and (iii) Technical and
financial risks are often quite low. There are also good reasons for selling
technology such as (i) Increasing return on R&D investments; (ii) Technology may
83
not have immediate use; and (iii) Technology has already been utilized up to its
limit.
Therefore, technology transfer occurs because of the existence of "buyers" and
"sellers". The sellers are called "transferees" or "licensors" and the buyers are
called "transferees" or "licensees" in the technology transfer process.
Meaning of Technology Transfer:
Transfer, as defined, means the acquiring through purchase and use of
technology. Therefore, the definition of technology transfer is the acquisition and
use of knowledge. There is no transfer of technology unless and until the technical
knowledge is put to use. Technology transfer is not restricted here only to
scientific or engineering items. The manufacturing, marketing, distribution and
customer service are among the factors that are included in technology transfer.
The key factors in technology transfer include:
 Transplantation of technology involves shift from one set of well-defined
conditions to another set in which at least one key variable may differ.
Secondly, the recipient may apply the technology to a different purpose
from that of the supplier.
 A sense of opportunism prevails in technology transfer, whether justified or
not.
 The transfer process embraces a rich variety of mechanisms and
relationships between recipient and donor (supplier of technology) .The
process can vary from a routine peopleless passive transfer to turnkey
contract where the donor takes the full responsibility for all phases of the
contract.
 The nature of the transferred technology and how it is transferred are
critical to the success of the technology transfer process.
Features of Technology Package
The technology package consists of three principal elements namely, product
design, production technique and management systems. Product design may
range from simple items to highly complex (e.g., automotive) parts. Production
techniques and plant layout include blueprints and flowcharts, formulas and
recipes, process sheets, fabrication instructions, tools and fixture designs,
operational procedures and material specifications. Management Systems consist
of various plans, layouts and technical control systems (along with related
marketing and financial controls). Included are plant design and layout, quality
control and testing, material procurement, inventory control, equipment
maintenance and repair and machine loading techniques. The three principal
categories of technical information or -know-how inherent in technological
systems are general knowledge, system-specific and firm-specific knowledge.
These various categories of knowledge may be in the form of written fabricating
or processing equipment. General Knowledge refers to information common to
industry such as blueprint reading, tool and fixture design and fabrication,
welding techniques etc.
Government Initiatives
Government has, over the years, directed the industry to take necessary steps to
set up R&D units for up-gradation and absorption of imported technology. There is
also a stipulation with respect to this in the terms and conditions of foreign
collaborations. However, it has not been very effective While formal extensions of
collaborations have not been numerous in comparison to the number of new
collaborations, Indian industry has quite often gone in for further collaborations to
avail of technologies for higher ranges/ capabilities or improved process/
production techniques. The newer grass-root plants have used later technologies,
but they are also likely to become obsolete as the years pass by unless necessary
84
efforts to catch up with technical changes are made. Industry, in general, stays at
a particular level for a number of years and then considers a jump in product
range or volume of production through further technology induction. Pursuant to
the Technology Policy Statement, the Government had stipulated that industries
using technologies costing more than a payment of Rs.2 cr. should bring out
comprehensive Technology Absorption, Adaptation and Improvement (TAAI)
plans. Government has also directed industry to submit annual returns for
technology implementation and absorption.
1 Technology Absorption and Adaptation Scheme (TAAS) The Technology
Absorption and Adaptation Scheme (TAAS) was initiated by the Government
(DSIR) as a pilot scheme during the 7thplan. TAAS aims at stimulating and
accelerating the efforts of Indian industry in technology absorption and
upgradation. About 30 public and state sector units have so far been partially
supported for undertaking identified RDDE (Research, Design, Development
and Engineering) projects to absorb and upgrade specific elements in
imported technology. The support is for accelerated indigenization /import
substitution/ know-why exercises/ product improvement and optimisation. An
amount of over Rs.20 cr. has been marshalled through a partial support in
various major sectors such as electricals /electronics, metallurgy, industrial
machinery and chemicals. The projects are overviewed by Evaluation
Committees. Under the scheme, other initiatives such as workshops,
technology absorption/ profile studies of different states and technology
evaluation studies of critical sectors have been undertaken. All these have
encouraged the participation of industry, national institutions/laboratories and
Government in dealing with issues of technology absorption.
TAAS activities have resulted in stimulating and speeding up the R&D work in
absorption of technology. The scheme, therefore, is in a good position to
encompass larger areas, to demonstrate the beneficial effects of organised
and target-oriented absorption of technology projects. TAAS has brought out
the need for enhancing the activities to catalyse and assist the industry in
technology absorption.
TAAS is expected to extend partial support to the following:
 Core sector users in absorption and upgradation of products/ equipment
from ancillaries /equipment manufacturers/vendors whose technologies
are based on foreign collaborations.
 'Cub' or co-operative projects of interest to the sector, involving a group of
manufacturers, users, and national institutions, in identified areas of
technology gaps.
 Industry-sponsored projects with national laboratories/institutions.
 Projects of small and medium enterprises, in priority areas such as energy
saving, accelerated indigenisation, efficiency and technology upgradation.
 Skill utilisation in technology absorption projects by hiring of research
experts and NRI specialists as well as training in national
laboratories/institutions/ international organisations for identified areas of
absorption.
2. Technology Evaluation Studies In order to assess the performance of
technology in the major sectors of Indian industry, and to assess the gaps in
technology and to suggest possible programmes for R&D and technology
upgradation, the Government has initiated studies in various important areas
such as fertilizers, steel, cement, ministeel, forgings, foundry, aluminium, etc.
Over 50 sectors have been identified and in about 30 sectors, studies have
.been commissioned. The reports whenever they come are widely discussed in
industry, Government departments and other concerned organisations, and
disseminated. The reports bring out the need for accelerated effort in
technology generation and absorption. 'Technology demonstration' is also
85
envisaged in some important identified areas in order to speedily introduce

new technologies. National Register of foreign collaborations in DSIR has also
commissioned technology status studies for over 100 items for which
repetitive import of technology has taken place. These studies bring out
technology gaps and needed thrusts for technology absorption.
Other Initiatives
To promote technology generation and up-gradation, financial institutions like
IDBI, ICICI, IFCI have introduced loan schemes to support R&D projects by
Industrial entrepreneurs.
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MI0031- Technology Management

Set- 2
1. What is Technology Forecasting? Classify the Technology Forecasting

Approaches in brief? Discuss in detail the Product Development Process
Phase in Technology Management?
Ans. Technology forecasting is defined ''as a collection of formalized processes or
methods of future technology evolution caused by developments in science and
society, and the interactions between these developments."
Classification of Technology Forecasting Approaches There are two approaches to
technology forecasting, namely, Exploratory, and Normative. The formal
forecasting techniques are standard components that are described in many
textbooks on forecasting techniques (see specific techniques). Specific techniques
for forecasting fall into two main categories, exploratory and normative.
Information about each technique is available in various references. Exploratory
techniques are primarily concerned with the analysis of historical data. Selected
attributes such as functional performance, technical parameters, economic
performance etc. are plotted against time. Since it is usually assumed that
progress is evolutionary and that technological progress is not random, it is
possible to generate characteristic curves or patterns from the data and from
these patterns forecasts can be made with varying degrees of certainty.
Examples of relevant exploratory techniques are:
 S-curves
 Cycles
 Trend extrapolation
 Technology substitution
all of which rely on a large amount of statistical data, which may or may not be
available freely. Normative techniques start by proposing a desired or possible
state, such as the satisfaction of a market need or the achievement of a
technological development, and work backwards from this to determine the steps
necessary to reach the required outcome. The number of foreseeable paths of
development from the present position to the objective could range from 'none',
implying a completely new technology, to 'several'. Each feasible path to the
objective is analysed for its relevance and difficulty. Unlike exploratory
forecasting, normative approach begins from the future and works out desired
landmarks backwards to the present state. In other words, the mind is projected
into the future by postulating a desired or possible state of technological
development to satisfy a specific need. The forecaster then works backwards to
identify the steps or landmarks necessary to be achieved, with assessed level of
probability, in order to reach the end point or goal set henceforth. However, it
must be appreciated that exploratory and normative methods are not competitive
nor do they substitute for one another. Essentially they are complementary to
each other and have to be used together.
Examples of relevant normative techniques are:
 Relevance trees
 Morphological analysis
 Technology watch and technology monitoring
 Delphi analysis
 Trend impact analysis
 Technology substitution
Information needed for these techniques is likely to be more firm-specific than
that needed for exploratory techniques. Technology-watch in particular needs a
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proactive role to help the organisation identify and establish links with the most
useful sources of information and opinion; typically these will be at the forefront
of innovative activity.
Product Development Process Phase In most manufacturing firms the critical
product development steps are similar. These functional steps include
 A product proposal
 Design of the product with its relevant technologies
 Capabilities of the manufacturing or software processes to build and
support the product
 The marketing (and servicing) of the product to potential customers
These steps constitute the major rating factors for delivering products and
services. These steps, like the ones in the research and technology phase
described in previous section, constitute the major checkpoints for delivering
technologies to product development or for process implementation of the
product.
1. Product or Technology Proposal A product proposal is a common
instrument used by management to review and consider new products or
major enhancements in the product line. This proposal is best described with
the following content: An opportunity analysis which analyzes the
characteristics of demand and competition
 The socio-technical environment which assists in defining the opportunity
 The feasibility and capability requirements of the firm's engineering,
manufacturing, and marketing resources which relate to the potential
product solution
 A market structure and market segmentation evaluation of the competitive
economics, and the design and communication alternatives
 The overall firm's line of business policies and strategies as they relate to
the new product opportunity Using this as the background of the proposal,
the outline of key parts to its contents must be a part of the business case
and include
• The product's business objectives such as revenue and customer
demand from benefits derived from the product or technology
• A description of the product or technology
• The market channel to be used
• The segment(s) of the marketplace being addressed
• Preliminary market tests with their results to determine the
usefulness for the product, if possible
• A description of the market opportunity, e.g., what the market is
and who the competitors are
• A description of the product opportunity from the firm's viewpoint
• The opportunity sizing, e.g., how large is the opportunity in the
market sought after and how much is anticipated for this product
• The financial risk and summary of measurements such as return on
investment, customer value, and return on assets
• Work schedules, resources required, and expected time for
completion and delivery.
On review and acceptance of the proposal the product is funded, dropped, or
returned to the "drawing board." The positive response to the business case to
the proposal is the payoff. If the analysis of the opportunity shows a potential
for the proposed product, then a reasonable business case can be developed
and a proposal accepted.
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2. Product Design and Technology In this step, the design specifications,

which include the technologies to be incorporated, are developed. Design and
product engineering reviews and modifies these specifications for
manufacturing implementation. The acceptance of the design and technology
is reached after the models of the product design and the technology are
developed and the product is stress tested for design limitations and in
compliance with customer requirements. Shortcomings to that compliance
must be assessed to determine the impact to anticipated demand. To arrive at
the best design point, the design and technology of a product must respond to
customer requirements. Managing the technology, for instance, in computer-
assisted design or in the packaging of a product with human factors is the
payout to customer wants and needs.
3. Manufacturing and Software Development On completion of the
verification for design, manufacturability must be assured through stress
testing for capability of assuring function objectives, volumes, performance,
and quality objectives. Software, as required, must be in place and fully
tested. At this point, these actions must be capable of achieving the proper
return on assets and intended minimal cost and capital expenditures
compared to expected revenues. The payoff from return on assets is not
realized, for example, in managing technology in a computer integrated
manufacturing (CIM) environment unless it is cost-effective in relationship to
the revenues that result.
4. Market Release, Marketing and Servicing of Products The final step that
leads the product to the marketplace is a market release process and the
implementation of the marketing plan to market the product or technology.
Final plans to market a new product through marketing programs and selected
market channels are put into place. A marketing program, for example, can
include advertising in the press, TV exposure, or promotions using trade
journals. Market channels can range from mail order to selling the product
directly to companies. The sales strategy for the product should be in place. A
program to service the product through either direct installation or installation
aids, as required, should be developed. In addition, a program to service and
maintain the product may also be part of a firm's objectives.
2. Describe in detail the Technology Life Cycle? What is the influence of IT

revolution on technological changes? Explain what is meant by
Generation & Development of Technologies? What is Technology
Strategy and what is its importance at the corporate level?
Ans. Technology Life Cycle
The life span of various technologies can be conveniently identified as consisting
of four distinct stages, all of which taken together form the ‘Technology Life
Cycle’. The stages of technology life cycle are innovation, syndication, diffusion,
and substitution.
Innovation stage: This stage represents the birth of a new product, material or
process resulting from R&D activities. In R&D laboratories, new ideas are
generated by ‘need pull’ and ‘knowledge push’ factors. Depending upon the
resource allocation and also the change element, the time taken in the innovation
stage as well as in the subsequent stages varies widely. You will recall we had
discussed the terms “innovation” and “invention” in the previous Unit.
Syndication stage: This stage represents the demonstration (pilot production)
and commercialization of a new technology (product, material or process) with
potential for immediate utilization. Many innovations are shelved in R&D
laboratories. Only a very small percentage of these are commercialized.
Commercialization of research outcomes depends on technical as well as non-
technical (mostly economic) factors.
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Diffusion stage: This represents the market penetration of a new technology

through acceptance of the innovation by potential users of the technology. But
supply and demand side factors jointly influence the rate of diffusion.
Substitution stage: This last stage represents the decline in the use and
eventual extension of a technology due to replacement by another technology.
Many technical and non-technical factors influence the rate of substitution. The
time taken in the substitution stage depends on the market dynamics.
Information Technology Revolution
Information Technology synthesizes the convergence of previously distinct and
separate technologies. As is understood by now, developments in computer
Technology, electronic components technology and the communications
technology along with appropriate software have converged and are now known
by the catchword ‘Information Technology’ (IT). Information Technology refers to
‘a very wide range of elements which are utilized to create, transfer, transform
and convey information through means, irrespective of whether these elements
are in the form of equipment, services or know-how. Developments in information
technology have already produced vast gains in productivity resulting in counter-
inflationary trends in prices as well as substantial improvements in technical
performance of many products and services. Information technology is all-
pervasive as it affects all activities that contain some form of logical function. The
source of the activity could be mechanical, electrical, pneumatic, hydraulic or
even intellectual. Information technology cuts horizontally across clerical,
supervisory, managerial and communication activities which are common to all
sectors of industry and also affects the design of products and services, processes
and organizations producing the same. We shall now discuss some of the major
changes brought about by developments in information technology.
Changes in Products:
Information technology brings about changes in products by replacing mechanical
(e.g. watches), electromechanical (e.g. calculators) or older electrical or electronic
(e.g. computers) parts or components, by upgrading traditional products by
enhancing their capability. It includes functions involving, for example, logic and
decision-making (auto focus in cameras) and even by creating entire new
products (e.g., video games). The product changes mentioned above have three
major consequences. The first is that the value addition is transferred from the
manufacture and assembly of parts to the production of the electronic
assemblies/subassemblies with associated software. Juxtaposed is the fact that
the manufacture of electronic component-based systems can have very low
labour intensity (labour per unit of capital). The picture that emerges suggests
that the labour intensity of such products decreases with further consequences in
terms of employment as well as location of the manufacturing plants.
The second effect relates to shortening of product life cycles. Product designs of
many products get linked to developments in information technology in general
and to developments in electronic technology in particular. Because there are
very fast developments in these technologies, they have their effect on the design
of newer products, thus shortening their product life cycles. As a convergence
technology, IT acquires the ability to condition developments in an ever
increasing number of sectors of the economy. The ability to create, store,
retrieve, transfer, transform and convey information/data efficiently and
economically (imparted to products by developments in information technology)
allows the products to the integrated into larger systems so that the products are
compatible with the larger systems for enhanced capability. For example,
electronic-typewriters cannot only type but also store the typed information for
later processing on a microcomputer and so compatibility with microcomputers
will be one more feature to be built into electronic typewriters.
Changes in Services:
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We use the term “services” in its broadest sense as bundles of benefits some of
which may be intangible and others tangible, and they may be accompanied by
facilitating goods. This sector has the highest growth rate in most economies of
the world and has the largest single share of employment in the world GDP. It is
said that in USA services account for over 70% of total income. In developing
countries the share of services estimated is around 40% but with technological
developments taking place it is likely to grow further. Information technology is
already affecting the productivity of service production as well as increasing their
transportability. In order to understand these changes better, we present a
classification scheme for services as proposed by Baumol (and modified by Buffa
and Sarin) and classify services into the following four broad categories.
Substitutable Personal Services: These services also require direct personal
contact but it is possible to substitute these services with technological
alternatives. For example, guards can be substituted or helped by electronic
security and surveillance equipment and domestic servants by a variety of
household appliances like washing machines, ovens, mixers, etc. Information
technology has played a big role in improving the productivity and the
performance of these equipment substituting services. Centrally controlled
computer devices or gadgets incorporating programming facilities have been
developed to operate the domestic appliances in accordance with the consumers’
needs or desires. Progressive Services: These services require the use of some
equipment and also direct personal contact with the receiver of the service.
Technological change affects the productivity of the equipment more directly and
significantly than the personnel offering the personal contact-based service. For
example, air transportation requires the use of the airplane as well as that of the
ground and cabin crew; and broadcasting requires the use of studio and
transmitting equipment as well as the “personal” contact established by the
broadcaster(s). In a way, there is some hardware and some software required to
render the service and information technology is affecting the productivity of the
hardware more than that of the software.
Explosive Services: Services that do not require personal contact belong to this
category such as telecommunications. Information technology is bringing about
significant productivity increases in these services thereby reducing the unit cost
and setting counter inflationary trends in prices. Developments in information
technology are also contributing to the generation of new services in this
category. E.g., facsimile transmission (FAX), Videotext and Electronic Mail.
Transportability of services has brought about at least three major effects in its
wake. It has led to internationalization of services in many fields bringing out
cross border flows of messages, information and data. Many of the services
traditionally catering to local markets are now being offered to the global market.
The second effect relates to changes in barriers to entry in services. In many
services the barriers to entry are getting lower as the cost of entry is practically
limited to the cost of equipment which itself is falling e.g. desktop publishing. On
the other hand, the barriers to entry in some other services, where an integrated
network of services is offered, are getting higher. This can be seen in some
banking operations as well as development of software requiring satellite data
transfers (since the cost involved in developing infrastructure is very high).
Transportability of services has also increased the transparency of market due to
widespread availability of information.
Changes in Processes:
Information technology changes processes in two major ways: it allows the
incorporation of higher levels of skills and functions into equipment (as in
computer controlled machine tools and robots) and it increases the flexibility of
many processes to achieve economies of scope involving almost continuous
production of individualized products. This can be seen in Figure 4.7 below ere
different stages of manufacturing automation are plotted against volume and
variety. Process automation has the general characteristic of replacing direct
labour (unskilled and semi-unskilled) with capital in conformity with the long-term
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shift in prices. Consequently, direct labour cost as a fraction of the product cost is
declining. This phenomenon is wiping out the comparative advantage of
developing countries in terms of low labour cost. Training and retraining of labour,
including technicians/ operators, have almost become a necessity in the existing
enterprises.
The second effect is the combination of lower labour cost with higher automation.
Automation seems to be removing the primary reasons for locating assembly
operations in off-shore locations. It is now widely known that in Japanese
enterprises inventories are operated on hourly basis, while in India and other
developing countries inventories are still carried on monthly basis which increases
the overall costs of operations and products. These changes also affect the skill-
mix of personnel required for the changed process. As production processes
become more sophisticated, the number of direct workers would perhaps show a
decline whereas more engineers and technicians would be required to carry out
reprogramming, installing, repairing and even developing newer processes. This
would also call for extensive retraining at all levels, especially those skills which
are likely to become scarce.
Changes on Organization:
The changes in products, services and processes discussed above may, in many
cases, require new forms of management structure and business organization.
This may be seen happening in many industries but perhaps not fast enough, thus
acting as a constraint in the institutionalization of other changes. The organization
structure can no more be static but should be capable of absorbing changes fast
enough, at least in those organizations where changes in products and processes
are occurring very fast, as as not to constrain, further changes. To be successful
with new technologies, an organization must be able to innovate and produce
competitively. This shows up in the form of flatter organizations where the
number of hierarchical levels gets reduced significantly. This also gives rise to
higher dependence on task groups, expert committees and other forms of
temporary working groups.
Information technology also allows higher integration of suppliers, vendors and
subcontractors into the network of manufacturing companies. Specialist suppliers,
in many cases, are better placed to adapt changes in products and processes and
many large firms are finding it easier and more economical to “buy” than “make”.
In the case of many large manufacturers in developed countries, this has given
rise to a hierarchical structure of subcontractors6 akin to the organization
structure (with the subcontractors being part of the extended organization).
Ancillarisation of large manufacturing units in India is a step in this direction.
Technology Generation
Technology generation and development is often synonymous with the term
"Research and Development (R&D)". However, technology generation involves
R&D efforts while technology development involves further stages of translating
R&D efforts into marketable products, processes and services. Basically, one can
consider the R&D process as having four distinct stages Recognition of a need for
innovation is one of the motivations for R&D. "Research" on existing knowledge
for satisfying identified need helps in idea generation – this is the "need push".
The other primary motivation for R&D is to find potential applications for
advances in knowledge. “Research" on existing activity for introducing new
knowledge also helps in idea generation - this is the "technology-push".
"Development" includes engineering (creation, design and production) and
marketing (first use and diffusion) of the generated idea. Through the entire
process it is ideas and knowledge which are being pursued, and the process is not
complete until the new idea is converted into a marketable product or service (a
hardware or software intensive technology).
Technology Development
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Though, broadly speaking, the 'D' of R&D covers Technology Development, the
latter has much wider connotation. For better understanding, more elaboration of
various factors that determine technology development is called for shows the
determinants and their interrelationship in technology development from R&D to
technology diffusion and substitution. Natural resources are mobilised and
processed through the succeeding stages. The supply factors include natural
resources, human resources, fund allocation, and produced resources. The
demand side factors include market potential venture capital and enterprise
profitability. The coordinating organisations, supporting facilities and government
policies and systems have a major role to play in the success of the technology
development process. Figure 5.4 shows various stages of technology
development cycle, starting from the generation of ideas in the R&D department,
to estimating market and inputs required, to executing projects, to field trials and
modifications. It may be observed that this process is tedious and requires top
management commitment and support from outside. Risk factor is large and the
success rate depends upon the quality of inputs provided to the R&D department.
Technology Strategy
the term 'strategy' is commonly used as an antonym of 'tactics', it actually implies
long-term, purposeful and interconnected efforts, while tactics imply action to
deal with immediate specific problems. 'Technology Strategy" may accordingly be
defined as a strategy to deal with the technology and related issues at macro and
micro levels, with respect to set objectives.
Importance of Technology Strategy
Mark Dodgson has identified the following five issues which bear on the
importance of corporate strategy for technology:
i) The need to cope with technological uncertainty;
ii) Complexity and discontinuous nature of technological development;
iii) The need for technology to be viewed in a global context;
iv) The need to attain complementarities, and
v) The relationship between corporate strategy technology and public technology
policies.
3. What is value chain & what are the activities? List & explain the factors
that influence the successful management of innovation process. Explain
the five stages of innovation process which is based on the pioneering
work of Edward B. Roberts.
Ans. Value Chain
The value chain is "a systematic way of examining all the activities a firm
performs and how they interact....for analyzing the sources of competitive
advantage."
Value chain activities
Activities are processes, things that are done in a firm. In order to be identified
and labeled, they must be distinct-have a beginning and an end which
distinguishes them from other activities or operations. In using the value-chain
tool to analyze sources of competitive advantage in a firm, one would first identify
its nontrivial activities and assign them to the most appropriate category. A
second useful step would be to examine specific activities from an input/output
perspective.
Input / Output Analysis Input/output analysis can be used at various levels of
an organization including the organization as a whole-to get a better idea of what
the entity is and does. The organizational unit of analysis-in this case, the specific
activity-is represented as a black box, with inputs going in and outputs coming
out .The amounts and types of inputs will vary from organization to organization
and activity to activity, and in addition to the intended output there will always be
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other outputs, some portion of which will be waste. One more piece of information
is needed to finish this input/output analysis:
Technology. In this context it is useful to know technology as a way to do
something, a way to perform a value-chain activity. This process view of
technology allows one to carefully distinguish between technology and products
or hardware-technology is not a product, a tangible entity. But when a product is
used to do something, it is that use which defines it as technology for the user.
Thus a computer is a product, a thing. Computer users, however, may regard it
as, for example, a data-processing technology, a text editing technology, a
scheduling technology. Indeed, what makes the computer so powerful a tool is the
ubiquitous and wide range of uses to which it can be put.
Alternative Technologies For any given value-chain activity, then, there are
alternative technologies alternative ways of doing it. There are new and old,
labor-intensive and capital-intensive, appropriate and inappropriate, and unknown
technologies yet to be developed. For example, let us take the inbound logistics
activity known as inbound materials handling-the movement of material goods
from where the supplier gives them over to the firm to when they enter into
operations. There are a wide range of alternative ways to do these activities
alternative technologies that might be used, including manual labor, manual labor
supplemented by tools (hand carts), conveyor systems, forklift trucks, automated
guided vehicles, robotic loaders/unloaders, stacking cranes, and pneumatic hoses.
Ubiquitousness of Technology The power of using this definition of technology
is that it applies to every value-chain activity, not just the activities in
manufacturing or engineering that we usually associate with the term. Thus there
are technologies involved in accounting and cost management activities (the
traditional direct labor plus overhead; activity-based costing or management), in
personnel selection activities (psychological and aptitude testing, personal
interviews), in market research activities (focus groups, consumer surveys, test
marketing), and even in R&D activities (computer-aided molecular design,
electron microscopes, gene-splicing equipment).
Factors for Successful Management of Innovation Process
The following factors should be taken into consideration if the innovation process
is to be successfully managed.
Customer Focus All R&D projects, which have been taken up either on account
of a felt customer need or with the involvement of a customer, have greater
chances of commercial success. In fact, the most profitable ideas for innovations
are derived from market needs. Speed of execution of R&D projects is an
essential factor for satisfying customer needs and perceptions about product
developments.
Climate of Change Innovation is the job of everybody in the company. An
innovative climatecalls for motivation and challenge on the part of the employees
which alone can foster creativity. Innovation thrives in companies where the
desire climate and environment are encouraged and spearheaded by the top
management.
Committed Style All R&D activities commit costs today, in one part of the
organisation, with possibilities of benefits to accrue in future in some other part of
the organisation. This cannot be effectively carried out unless there is top
management commitment to pursue R&D to its logical conclusion and take well
calculated risks on account of the very nature of uncertainty of R&D activities.
Organisation culture in innovative companies is result-oriented with full realisation
of the fact that R&D is an activity which is input deterministic but output
probabilistic.
Combined Operations and Structures As mentioned earlier, effective
industrial R&D management calls for multifunctional and multi disciplinary
approach to problem solving. It therefore requires the creation of R&D project
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teams and matrix form of organisation which do not fall in line with the normal,
hierarchical patterns. The continuous cross-fertilisation of innovative ideas
through different groups/functions in the company is necessary. Large R&D
projects are, in fact, implemented by teams functioning as mini company
organisations. Thus, combined operations and structures are essential features of
industrial R&D management.
Creativity and Communication Skills Management of innovation process
requires (i) creative skills in an organisation, removal of mental blocks, rewards
for taking risks and facing challenges and (ii) capability to communicate
effectively across various functions and disciplines. Rotation of experts from one
function to another to improve such skills should be encouraged, which is not
feasible without the active support of the top management.
Control Systems Innovation process by its very nature requires creativity which
is anti-control. However, to gain competitive advantage, the R&D projects must
be completed (if not killed) within the specified time and cost parameters. This
calls for some form of monitoring and control, without losing sight of the fact that
excessive control may be counter-productive; it may kill creativity and retard
innovation process. Thus, the control systems for management of R&D must be
designed with the delicate balance between freedom to innovate and control to
reach the market in time.
The key issue for know-how development of technology is that while many
companies are successful in developing new products, yet they fail to secure
competitive advantage in market due to several reasons:
i) There may be lack of marketing focus in R&D activities,
ii) The distribution systems of the company may not be adapted to the level of
services required for the new product,
iii) The production systems adapted from previous products may not have been
changed, even though the competitive conditions for the new product are
different,
iv) There may be inability or lack of willingness to effect the change required for
new product introduction within the organisation itself,
v) The strategies in response to change may have been followed piecemeal.
The process model of innovation that evolved with this mode, is based on the
pioneering work of Edward B. Roberts. This model shows that innovation is a
multistage process which is strongly influenced by the prevailing market,
technology, and administrative processes. Specifically, figure 10.1 presents the
innovation process in five stages, described in the following paragraphs. The
precise number and labeling of these stages may depend on the specific business
and organizational settings. Managers by and large use the model to recognize
and control the factors that influence the process and the linkages among the
stages.
Stage 1: Recognition of Opportunity. In most cases, the innovative process is
prompted by an opportunity to fill a market need (market-pull) and/or exploit a
technology (technology-push). These opportunities could be for new or improved
products, processes, or services. The potential customer could be internal or
external to the organization.
Stage 2: Idea Generation, Evaluation, and Selection. This stage is
dominated by the search for ideas to capture the opportunity identified instage I.
This might include formal RD&E processes or informal thinking. Results may vary
from an orally communicated idea to formal concept papers, designs, prototypes,
and feasibility studies. Further, the idea generation process may vary, depending
on company culture and management philosophy. They range from incremental
to breakthrough innovation and from top-down direction to bottom-up innovative
efforts, typical for continuous productivity improvements.
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Stage 3: Product Development. This stage involves transfer of the new

concept to the market. It is a problem-solving stage which takes the advanced
concepts and ideas generated in stage 2 and develops them into a working
prototype or pilot production run. Strong cross-functional linkages must be
established and maintained among all functions engaged in this stage 3
technology transfer which usually involves highly co-ordinated efforts among
R&D, product development and engineering, prototyping, manufacturing,
marketing, and a host of support functions such as finance, product assurance,
field services, and subcontractors.
Stage 4: Full-Scale Development, Volume Production, and
Commercialization. This stage takes a proven concept from stage 3 and
transforms it into a final product according to predefined specifications, reliability,
cost, production volume, and schedules. Well-established organizational linkages
are crucial to transferring technology into the market and to leveraging an
organization's production capabilities, as well as to integrating all company
resources into the total innovation process, throughout its five stages.
Stage 5: Technology Utilization and Diffusion into the Marketplace. This
stage involves the manufacturing, market promotion, distribution, and technical
support of the new product or service. This stage usually requires the largest
investment of resources, often far exceeding the combined cost of stages 1
through 4. It is also associated with a large risk factor, as demonstrated by the
statistical realities that, on average, only one-third of products entering this state
ever achieve a break-even return on their investment. Successful companies
recognize the complexity and multifunctionality of the underlying process.
Successful companies also understand that such complex business processes do
not perform well by themselves, but must be managed carefully. This includes the
continuous study of these processes, defining measurements, documentation,
comparison, standardization, and control toward continuous improvement.
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MI0032 –Java and Web Designing

Set- 1
1. Explain different types of control statements. [10 Marks]

Ans: Following statements are used to control the flow of execution in a program.
1. Decision Making Statements
 If-else statement
 Switch – case statement
2. Looping Statement
 For loop
 While loop
 Do-while loop
3. Other statement
 Break
 Continue
 Label
1 If-else statement The statement is Java's conditional branch statement. It
can be used to route program execution through two different paths. Here is
the general form of the statement:
if (condition) statement1;
else, statement2;
Here, each statement may be a single statement or a compound statement
enclosed in curly braces (that is, a block). The condition is any expression that
returns a boolean value. The else clause is optional. The works like this: If the
condition is true, then statement1 is executed.
Otherwise, statement2 (if it exists) is executed. In no case will both
statements be executed. For example, consider the following: Most often, the
expression used to control the will involve the relational operators. However,
this is not technically necessary.
2 Switch Statement The switch statement is Java's multiway branch
statement. It provides an easy way to dispatch execution to different parts of
your code based on the value of an expression. As such, it often provides a
better alternative than a large series of if-else-if statements.
Here is the general form of a switch statement:
switch (expression) {
case value1:
// statement sequence
break;
case value2:
break;
.
.
case valueN:
break;
default:
// default statement sequence
}
The expression must be of type byte, short, int, or char; each of the values
specified in the case statements must be of a type compatible with the
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expression. Each case value must be a unique literal (that is, it must be a
constant, not a variable). Duplicate case values are not allowed. The switch
statement works like this: The value of the expression is compared with each
of the literal values in the case statements. If a match is found, the code
sequence following that case statement is executed. If none of the constants
matches the value of the expression, then the default statement is executed.
However, the default statement is optional. If no case matches and no default
is present, then no further action is taken.
The break statement is used inside the switch to terminate a statement
sequence. When a break statement is encountered, execution branches to the
first line of code that follows the entire switch statement. This has the effect of
"jumping out" of the switch. The break statement is optional. If you omit the
break, execution will continue on into the next case.
3. ‘For’ Loop The usage of for loop is as follows for (initial statement;
termination condition; increment instruction) Statement; When multiple
statements are to be included in the for loop, the statements are included
inside flower braces.
for (initial statement; termination condition; increment instruction)
{
statement1;
statement2;
}
4. While StatementThe while loop is Java's most fundamental looping
statement. It repeats a statement or block while its controlling expression is
true. Here is its general form:
while (condition) {
// body of loop
}
The condition can be any Boolean expression. The body of the loop will be
executed as long as the conditional expression is true. When condition
becomes false, control passes to the next line of code immediately following
the loop. The curly braces are unnecessary if only a single statement is being
repeated.
5. ‘do….while’ statementAs you just saw, if the conditional expression
controlling a while loop is initially false, then the body of the loop will not be
executed at all. However, sometimes it is desirable to execute the body of a
while loop at least once, even if the conditional expression is false to begin
with. In other words, there are times when you would like to test the
termination expression at the end of the loop rather than at the beginning.
Fortunately, Java supplies a loop that does just that: the do-while. The do-
while loop always executes its body at least once, because its conditional
expression is at the bottom of the loop. Its general form is
do {
// body of loop
} while (condition);
Each iteration of the do-while loop first executes the body of the loop and then
evaluates the conditional expression. If this expression is true, the loop will
repeat. Otherwise, the loop terminates. As with all of Java's loops, condition
must be a boolean expression.
6. ‘Break’ statement By using break, you can force immediate termination of a
loop, bypassing the conditional expression and any remaining codfse in the
body of the loop. When a break statement is encountered inside a loop, the
loop is terminated and program control resumes at the next statement
following the loop. Here is a simple example:
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// Using break to exit a loop.

class BreakLoop {
public static void main(String args[]) {
for(int i=0; i<100; i++) {
if(i == 10) break; // terminate loop if i is 10
System.out.println("i: " + i);
}
System.out.println("Loop complete.");
}
}
This program generates the following output:
i: 0
i: 1
i: 2
i: 3
i: 4
i: 5
i: 6
i: 7
i: 8
i: 9
Loop complete.
As you can see, although the for loop is designed to run from 0 to 99, the
break statement causes it to terminate early, when i equal 10.
7. ‘Continue’ Statement Sometimes it is useful to force an early iteration of a
loop. That is, you might want to continue running the loop, but stop processing
the remainder of the code in its body for this particular iteration. This is, in
effect, a goto just past the body of the loop, to the loop's end. The continue
statement performs such an action. In while and do-while loops, a continue
statement causes control to be transferred directly to the conditional
expression that controls the loop. In a for loop, control goes first to the
iteration portion of the for statement and then to the conditional expression.
For all three loops, any intermediate code is bypassed. Here is an example
program that uses continue to cause two numbers to be printed on each line:
// Demonstrate continue.
class Continue {
public static void main (String args[]) {
for (int i=0; i<10; i++) {
System.out.print (i + " ");
if (i%2 == 0) continue;
System.out.println ("");
}
}
}
This code uses the % operator to check if i is even. If it is, the loop continues
without printing a newline. Here is the output from this program:
0 1
2 3
4 5
6 7
8 9
As with the break statement, continue may specify a label to describe which
enclosing loops to continue. Here is an example program that uses continue to
print a triangular multiplication table for 0 through 9.
Q.2 a. What is the difference between errors and exceptions?

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b. Explain different types of error handling techniques with a suitable

example.
Ans. a. Errors and exceptions both inherit from Throwable, but they differ in these
ways:
Errors:
1. Any departure from the expected behavior of the system or
program, which stops the working of the system is an error.
2. Are always unchecked
3. Usually indicate a system error or a problem with a low-level
resource
4. Should be handled at the system level, if possible.
5. Errors should never be created, thrown, caught, or repaired. They
are usually beyond the scope of your application code such as 'out of
memory'. Even if you caught an out of memory error, you wouldn't likely
be in a better place than the system garbage collector to fix this (and
you'd have to fix it while allocating no new memory) so its better to let the
system crash and repair the root cause.
6. Error is related to the enviroment in which the application is
running.
Exception:
1. Any error or problem which one can handle and continue to work
normally.
2. Can be checked or unchecked
3. Indicate an error caused by the programmer
4. Should be handled at the application level.
5. Exceptions are things you can create/throw yourself or that might
be thrown because of an obvious run-time error such as trying to access a
null object or reading an array out of bounds. They can also be caught and
repaired by a developer.
6. Exceptions are related to the application
b. Exception Handling Techniques
When an unexpected error occurs in a method, Java creates an object of the
appropriate exception class. After creating the exception objects, Java passes
it to the program, by an action called throwing an exception. The exception
object contains information about the type of error and the state of the
program when the exception occurred. You need to handle the exception
using exception-handler and process the exception. You can implement
exception-handling in your program by using following keywords:
 try
 catch
 finally
The try Block You need to guard the statements that may throw an
exception in the try block. The following skeletal code illustrates the use of the
try block
try
{
// statement that may cause an exception
}
The try block governs the statements that are enclosed within it and defines
the scope of the exception handlers associated with it. In other words, if an
exception occurs within try block, the appropriate exception-handler that is
associated with the try block handles the exception. A try block must have at
least one catch block that follow it immediately.
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Nested try Statements The try statement can be nested. That is, a try
statement can be inside the block of another try. Each time a try statement is
entered, the context of that exception is pushed on the stack. If an inner try
statement does not have a catch handler for a particular exception, the stack
is unwound and the next try statement's catch handlers are inspected for a
match. This continues until one of the catch statements succeeds, or until all
of the nested try statements are exhausted. If no catch statement matches,
then the Java run-time system will handle the exception. Here is an example
that uses nested try statements:
// An example of nested try statements.
class NestTry {
try {
int a = args.length;
/* If no command-line args are present,
the following statement will generate
a divide-by-zero exception. */
int b = 42 / a;
System.out.println("a = " + a);
try { // nested try block
/* If one command-line arg is used,
then a divide-by-zero exception
will be generated by the following code. */
if(a==1) a = a/(a-a); // division by zero
/* If two command-line args are used,
then generate an out-of-bounds exception. */
if(a==2) {
int c[ ] = { 1 };
c[42] = 99; // generate an out-of-bounds exception
}
} catch(ArrayIndexOutOfBoundsException e) {
}
} catch(ArithmeticException e) {
System.out.println("Divide by 0: " + e);
}
}
}
As you can see, this program nests one try block within another. The program
works as follows. When you execute the program with no command-line
arguments, a divide-by zero exception is generated by the outer try block.
Execution of the program by one command-line argument generates a divide-
by-zero exception from within the nested try block. Since the inner block does
not catch this exception, it is passed on to the outer try block, where it is
handled. If you execute the program with two commandline arguments, an
array boundary exception is generated from within the inner try block. Here
are sample runs that illustrate each case:
C:\\>java NestTry
Divide by 0: java.lang.ArithmeticException: / by zero
C:\\>java NestTry One
a=1
Divide by 0: java.lang.ArithmeticException: / by zero
C:\\>java NestTry One Two
a=2
Array index out-of-bounds:
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java.lang.ArrayIndexOutOfBoundsException: 42
Nesting of try statements can occur in less obvious ways when method calls
are involved. For example, you can enclose a call to a method within a try
block. Inside that method is another try statement. In this case, the try within
the method is still nested inside the outer try block, which calls the method.
Here is the previous program recoded so that the nested try block is moved
inside the method nesttry( ):
/* Try statements can be implicitly nested via
calls to methods. */
class MethNestTry {
static void nesttry(int a) {
try { // nested try block
/* If one command-line arg is used,
then a divide-by-zero exception
will be generated by the following code. */
if(a==1) a = a/(a-a); // division by zero
/* If two command-line args are used,
then generate an out-of-bounds exception. */
if(a==2) {
int c[ ] = { 1 };
c[42] = 99; // generate an out-of-bounds exception
}
} catch(ArrayIndexOutOfBoundsException e) {
System.out.println("Array index out-of-bounds: " + e);
}
}
try {
int a = args.length;
/* If no command-line args are present,
the following statement will generate
a divide-by-zero exception. */
int b = 42 / a;
System.out.println("a = " + a);
nesttry(a);
} catch(ArithmeticException e) {
System.out.println("Divide by 0: " + e);
}
}
}
The output of this program is identical to that of the preceding example.
The catch Block
You associate an exception-handler with the try block by providing one or
more catch handlers immediately after try block. The following skeletal code
illustrates the use of the catch block.
try
{
//statements that may cause an exception
}
catch ()
{
// error handling code
}
The catch statement takes an object of an exception class as a parameter. If
an exception is thrown, the statements in the catch block are executed. The
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scope of the catch block is restricted to the statements in the preceding try
block only.
The finally Block
When an exception is raised, the rest of the statements in the try block are
ignored. Sometimes, it is necessary to process certain statements irrespective
of whether an exception is raised or not. The finally block is used for this
purpose.
try
{
openFile();
writeFile(); //may cause an exception
}
catch (…)
{
//process the exception
}
In the above example, the file has to be closed irrespective of whether an
exception is raised or not. You can place the code to close the file in both the
try and catch blocks. To avoid duplication of code, you can place the code in
the finally block. The code in the finally block is executed regardless of
whether an exception is thrown or not. The finally block follows the catch
blocks. You have only one finally block for an exception-handler. However, it is
not mandatory to have a finally block.
finally
{
closeFile ();
}
3. What is InterThread communication in Java? Explain with an example.

Ans. Interthread Communication
The preceding examples unconditionally blocked other threads from
asynchronous access to certain methods. This use of the implicit monitors in Java
objects is powerful, but you can achieve a more subtle level of control through
interprocess communication. As discussed earlier, multithreading replaces event
loop programming by dividing your tasks into discrete and logical units. Threads
also provide a secondary benefit: they do away with polling. Polling is usually
implemented by a loop that is used to check some condition repeatedly. Once the
condition is true, appropriate action is taken. This wastes CPU time. For example,
consider the classic queuing problem, where one thread is producing some data
and another is consuming it. To make the problem more interesting, suppose that
the producer has to wait until the consumer is finished before it generates more
data. In a polling system, the consumer would waste many CPU cycles while it
waited for the producer to produce. Once the producer was finished, it would start
polling, wasting more CPU cycles waiting for the consumer to finish, and so on.
Clearly, thissituation is undesirable.
To avoid polling, Java includes an elegant interprocess communication mechanism
via the wait( ), notify( ), and notifyAll( ) methods. These methods are
implemented as final methods in Object, so all classes have them. All three
methods can be called only from within a synchronized method. Although
conceptually advanced from a computer science perspective, the rules for using
these methods are actually quite simple:
 wait( ) tells the calling thread to give up the monitor and go to sleep until
some other thread enters the same monitor and calls notify( ).
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 notify( ) wakes up the first thread that called wait( ) on the same object.
 notifyAll( ) wakes up all the threads that called wait( ) on the same
object. The highest priority thread will run first.
These methods are declared within Object, final void wait( ) throws
InterruptedException final void notify( )
final void notifyAll( ) Additional forms of wait( ) exist that allow you to specify a
period of time to wait. The following sample program incorrectly implements a
simple form of the producer/consumer problem. It consists of four classes: Q, the
queue that you're trying to synchronize; Producer, the threaded object that is
producing queue entries; Consumer, the threaded object that is consuming queue
entries; and PC, the tiny class that creates the single Q, Producer, and Consumer.
// An incorrect implementation of a producer and consumer.
class Q {
int n;
synchronized int get() {
System.out.println("Got: " + n);
return n;
}
synchronized void put(int n) {
this.n = n;
System.out.println("Put: " + n);
}
}
class Producer implements Runnable {
Q q;
Producer(Q q) {
this.q = q;
new Thread(this, "Producer").start();
}
public void run() {
int i = 0;
while(true) {
q.put(i++);
}
}
}
class Consumer implements Runnable {
Q q;
Consumer(Q q) {
this.q = q;
new Thread(this, "Consumer").start();
}
public void run() {
while(true) {
q.get();
}
}
}
class PC {
Q q = new Q();
new Producer(q);
new Consumer(q);
System.out.println("Press Control-C to stop.");
}
}
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Although the put( ) and get( ) methods on Q are synchronized, nothing stops the
producer from overrunning the consumer, nor will anything stop the consumer
from consuming the same queue value twice. Thus, you get erroneous output
shown here (the exact output will vary with processor speed and task load):
Put: 1
Got: 1
Got: 1
Got: 1
Got: 1
Got: 1
Put: 2
Put: 3
Put: 4
Put: 5
Put: 6
Put: 7
Got: 7
As you can see, after the producer put 1, the consumer started and got the same
1 five times in a row. Then, the producer resumed and produced 2 through 7
without letting the consumer have a chance to consume them. The proper way to
write this program in Java is to use wait( ) and notify( ) to signal in both directions,
as shown here:
// A correct implementation of a producer and consumer.
class Q {
int n;
boolean valueSet = false;
synchronized int get() {
if(!valueSet)
try {
wait();
} catch(InterruptedException e) {
System.out.println("InterruptedException caught");
}
System.out.println("Got: " + n);
valueSet = false;
notify();
return n;
}
synchronized void put(int n) {
if(valueSet)
try {
wait();
} catch(InterruptedException e) {
System.out.println("InterruptedException caught");
}
this.n = n;
valueSet = true;
System.out.println("Put: " + n);
notify();
}
}
class Producer implements Runnable {
Q q;
Producer(Q q) {
this.q = q;
new Thread(this, "Producer").start();
}
public void run() {
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int i = 0;
while(true) {
q.put(i++);
}
}
}
class Consumer implements Runnable {
Q q;
Consumer(Q q) {
this.q = q;
new Thread(this, "Consumer").start();
}
public void run() {
while(true) {
q.get();
}
}
}
class PCFixed {
Q q = new Q();
new Producer(q);
new Consumer(q);
System.out.println("Press Control-C to stop.");
}
}
Inside get( ), wait( ) is called. This causes its execution to suspend until
theProducer notifies you that some data is ready. When this happens, execution
inside get( ) resumes. After the data has been obtained, get( ) calls notify( ). This
tells Producer that it is okay to put more data in the queue. Inside put( ), wait( )
suspends execution until the Consumer has removed the item from the queue.
When execution resumes, the next item of data is put in the queue, and notify( )
is called. This tells the Consumer that it should now remove it. Here is some
output from this program, which shows the clean synchronous behavior:
Put: 1
Got: 1
Put: 2
Got: 2
Put: 3
Got: 3
Put: 4
Got: 4
Put: 5
Got: 5
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107
MI0032 –Java and Web Designing–

Set- 2
1. What are various parameters of an applet tag.

Ans. The Applet tag is used to embed an applet in an HTML document the Applet tag
takes zero or more parameters.
The Applet Tag
The Applet tag is written the Body tag of an HTML document.
Syntax
<APPLET
CODE = “name of the class file that extends java.applet.Applet”
CODEBASE = “path of the class file “
HEIGHT = “maximum height of the applet, in pixels “
WIDTH = “maximum width of the applet, in pixels “
VSPACE = “vertical space between the applet and the rest of the HTML
“
HSPACE = “horizontal space between the applet and the rest of the
HTML “
ALIGN = “alignment of the applet with respect to the rest of the web
page “
ALT = “alternate text to be displayed if the browser does not support
applets “
>
<PARAM NAME=”parameter_name” value=”value_of_parameter”>
……..
</APPLET>
The most commonly used attributes of the Applet tag are CODE, HEIGHT,
WIDTH, CODEBASE and ALT. You can send parameters to the applet
using the PARAM tag. The PARAM tag must be written between
<APPLET> and </APPLET>
Example
<Applet
Code = “clock. class”
Height = 200
Width = 200 >
</applet>
2. Write a short note on following topic:

a. Knock Knock Protocol
b. Datagram
Ans. a. The Knock Knock Protocol
The KnockKnockProtocol class implements the protocol that the client and
server use to communicate. This class keeps track of where the client and the
server are in their conversation and serves up the server's response to the
client's statements. The KnockKnockServer object contains the text of all the
jokes and makes sure that the client gives the proper response to the server's
statements. It wouldn't do to have the client say "Dexter who?" when the
server says "Knock! Knock!" All client/server pairs must have some protocol by
which they speak to each other; otherwise, the data that passes back and
forth would be meaningless. The protocol that your own clients and servers
use depends entirely on the communication required by them to accomplish
the task.
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The Knock Knock Client The KnockKnockClient class implements the client
program that speaks to the KnockKnockServer. KnockKnockClient is based on
the EchoClient program in the previous section, Reading from and Writing to a
Socket and should be somewhat familiar to you. But we'll go over the program
anyway and look at what's happening in the client in the context of what's
going on in the server.
When you start the client program, the server should already be running and
listening to the port, waiting for a client to request a connection. So, the first
thing the client program does is to open a socket that is connected to the
server running on the hostname and port specified:
kkSocket = new Socket("taranis", 4444);
out = new PrintWriter(kkSocket.getOutputStream(), true);
in = new BufferedReader(new InputStreamReader(
kkSocket.getInputStream()));
When creating its socket, KnockKnockClient uses the host name taranis, the
name of a hypothetical machine on our network. When you type in and run
this program, change the host name to the name of a machine on your
network. This is the machine on which you will run the KnockKnockServer. The
KnockKnockClient program also specifies the port number 4444 when creating
its socket. This is a remote port number--the number of a port on the server
machine--and is the port to which KnockKnockServer is listening. The client's
socket is bound to any available local port--a port on the client machine.
Remember that the server gets a new socket as well. That socket is bound to
local port number 4444 on its machine. The server's socket and the client's
socket are connected.
Next comes the while loop that implements the communication between the
client and the server. The server speaks first, so the client must listen first.
The client does this by reading from the input stream attached to the socket. If
the server does speak, it says "Bye." and the client exits the loop.
Otherwise, the client displays the text to the standard output and then reads
the response from the user, who types into the standard input. After the user
types a carriage return, the client sends the text to the server through the
output stream attached to the socket.
while ((fromServer = in.readLine()) != null) {
System.out.println("Server: " + fromServer);
if (fromServer.equals("Bye."))
break;
fromUser = stdIn.readLine();
if (fromUser != null) {
System.out.println("Client: " + fromUser);
out.println(fromUser);
}
}
The communication ends when the server asks if the client wishes to hear
another joke, the client says no, and the server says "Bye." In the interest of
good housekeeping, the client closes its input and output streams and the
socket:
out.close();
in.close();
stdIn.close();
kkSocket.close();
b. Datagram
Clients and servers that communicate via a reliable channel, such as a TCP
socket, have a dedicated point-to-point channel between themselves, or at
least the illusion of one. To communicate, they establish a connection,
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transmit the data, and then close the connection. All data sent over the
channel is received in the same order in which it was sent. This is guaranteed
by the channel. In contrast, applications that communicate via datagrams
send and receive completely independent packets of information. These
clients and servers do not have and do not need a dedicated point-to-point
channel. The delivery of datagrams to their destinations is not guaranteed.
Nor is the order of their arrival.
Definition: A datagram is an independent, self-contained message sent over
the network whose arrival, arrival time, and content are not guaranteed. The
java.net package contains three classes to help you write Java programs that
use datagrams to send and receive packets over the network:
DatagramSocket, DatagramPacket, and MulticastSocketAn application can
send and receive DatagramPackets through a DatagramSocket. In addition,
DatagramPackets can be broadcast to multiple recipients all listening to a
MulticastSocket.
Writing a Datagram Client and Server The example featured in this
section consists of two applications: a client and a server. The server
continuously receives datagram packets over a datagram socket. Each
datagram packet received by the server indicates a client request for a
quotation. When the server receives a datagram, it replies by sending a
datagram packet that contains a one-line "quote of the moment" back to the
client. The client application in this example is fairly simple. It sends a single
datagram packet to the server indicating that the client would like to receive a
quote of the moment. The client then waits for the server to send a datagram
packet in response. Two classes implement the server application:
QuoteServer and QuoteServerThread. A single class implements the client
application: QuoteClient.
Running the Server and Client After you've successfully compiled the
server and the client programs, you run them. You have to run the server
program first. Just use the Java interpreter and specify the QuoteServer class
name. Once the server has started, you can run the client program.
Remember to run the client program with one command-line argument: the
name of the host on which the QuoteServer is running.
After the client sends a request and receives a response from the server, you
should see output similar to this: Quote of the Moment: Good programming is
99% sweat and 1% coffee.
3. What are the different access specifiers in Java? How can we call a
superclass constructor? Explain with a suitable example.
Ans. Access Specifiers
An access specifier determines which features of a class (the class itself, the data
members, and the methods) may be used by other classes. Java supports three
access specifiers.
 public.
 private.
 protected.
The public Access Specifiers All classes except inner class (class within
classes) can have the public access specifier. You can use a public class, a data
member, or a method from any object in any Java program
The private Access Specifier Only objects of the same class can access a
private variable or method. You can declare only variables, methods, and inner
classes as private.
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The protected Access Specifier The variables, methods, and inner classes that
are declared protected are accessible to the subclasses of the class in which they
are declared.
A subclass can call a constructor method defined by its superclass by use of the
following form of super: super(parameter-list);
Here, parameter-list specifies any parameters needed by the constructor in the
superclass. super( ) must always be the first statement executed inside a
subclass' constructor. To see how super( ) is used, consider this improved version
of the BoxWeight( ) class:
// BoxWeight now uses super to initialize its Box attributes.
class BoxWeight extends Box {
double weight; // weight of box
// initialize width, height, and depth using super()
BoxWeight(double w, double h, double d, double m) {
super(w, h, d); // call superclass constructor
weight = m;
}
}
Here, BoxWeight( ) calls super( ) with the parameters w, h, and d. This causes the
Box( ) constructor to be called, which initializes width, height, and depth using
these values. BoxWeight no longer initializes these values itself. It only needs to
initialize the value unique to it: weight. This leaves Box free to make these values
private if desired. In the preceding example, super( ) was called with three
arguments. Since constructors can be overloaded, super( ) can be called using
any form defined by the superclass. The constructor executed will be the one that
matches the arguments. For example, here is a complete implementation of
BoxWeight that provides constructors for the various ways that a box can be
constructed. In each case, super( ) is called using the appropriate arguments.
Notice that width, height, and depth have been made private within Box.
// A complete implementation of BoxWeight.
class Box {
private double width;
private double height;
private double depth;
// construct clone of an object
Box(Box ob) { // pass object to constructor
width = ob.width;
height = ob.height;
depth = ob.depth;
}
// constructor used when all dimensions specified
Box(double w, double h, double d) {
width = w;
height = h;
depth = d;
}
// constructor used when no dimensions specified
Box() {
width = -1; // use -1 to indicate
height = -1; // an uninitialized
depth = -1; // box
}
// constructor used when cube is created
Box(double len) {
width = height = depth = len;
}
// compute and return volume
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double volume() {
return width * height * depth;
}
}
// BoxWeight now fully implements all constructors.
class BoxWeight extends Box {
double weight; // weight of box
BoxWeight(BoxWeight ob) { // pass object to constructor
super(ob);
weight = ob.weight;
}
// constructor when all parameters are specified
BoxWeight(double w, double h, double d, double m) {
super(w, h, d); // call superclass constructor
weight = m;
}
// default constructor
BoxWeight() {
super();
weight = -1;
}
// constructor used when cube is created
BoxWeight(double len, double m) {
super(len);
weight = m;
}
}
class DemoSuper {
BoxWeight mybox1 = new BoxWeight(10, 20, 15, 34.3);
BoxWeight mybox2 = new BoxWeight(2, 3, 4, 0.076);
BoxWeight mybox3 = new BoxWeight(); // default
BoxWeight mycube = new BoxWeight(3, 2);
BoxWeight myclone = new BoxWeight(mybox1);
double vol;
vol = mybox1.volume();
System.out.println("Volume of mybox1 is " + vol);
System.out.println("Weight of mybox1 is " + mybox1.weight);
System.out.println();
vol = myclone.volume();
System.out.println("Volume of myclone is " + vol);
System.out.println("Weight of myclone is " + myclone.weight);
vol = mycube.volume();
System.out.println("Volume of mycube is " + vol);
System.out.println("Weight of mycube is " + mycube.weight);
}
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}
This program generates the following output:
Volume of mybox1 is 3000.0
Weight of mybox1 is 34.3
Volume of mybox2 is 24.0
Weight of mybox2 is 0.076
Volume of mybox3 is -1.0
Weight of mybox3 is -1.0
Volume of myclone is 3000.0
Weight of myclone is 34.3
Volume of mycube is 27.0
Weight of mycube is 2.0
Pay special attention to this constructor in BoxWeight( ):
BoxWeight(BoxWeight ob) { // pass object to constructor
super(ob);
weight = ob.weight;
}
Notice that super( ) is called with an object of type BoxWeight – not of type Box.
This still invokes the constructor Box(Box ob). As mentioned earlier, a superclass
variable can be used to reference any object derived from that class. Thus, we are
able to pass a BoxWeight object to the Box constructor. Of course, Box only has
knowledge of its own members. Let's review the key concepts behind super( ).
When a subclass calls super( ), it is calling the constructor of its immediate
superclass. Thus, super( ) always refers to the superclass immediately above the
calling class. This is true even in a multileveled hierarchy. Also, super( ) must
always be the first statement executed inside a subclass constructor.

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Page 1 Ritesh Lad | R.

N : 520947644 | LC : 2844 | MBA Semester 4| Sikkim Manipal University

MB0036 – Strategic Management & Business Policy

1. Explain the different circumstances under which a suitable growth

mail, laundry washers can be designed to send an instant message to the

7. Risks and their mitigation

communicating the most important elements of your business plan to the

3. You wish to start a new venture to manufacture auto components.

process, be sure to consult an attorney experienced in corporation law. As a non-

4. Explain the process of due Diligence and why it is necessary.

• Cash Flow statements

5. Is Corporate Social Responsibility necessary and how does it benefit a

In this context, an increasing number of firms have embraced a culture of CSR.

6. Distinguish between a Financial Investor and a Strategic Investor

Ans. Financial Investor vs. Strategic Investor

correspondingly limited. People invested in industries they were acquainted with

6. To coordinate an educational campaign to ensure the voluntary collaboration

proprietary trademarks and brand names. Above all, it accumulated years of

MB0036 – Strategic Management & Business Policy

1. What is the purpose of a Business Plan? Explain the features of the

2. Write short notes on : a) sales projections b) importance of creativity in

3. What factors are to be taken into account in a crisis communications

4. What elements should be included in a Marketing Plan under Due

• The pricing strategy (how is pricing decided)

5. Distinguish between Joint Ventures and Licensing, explaining the

need to make good commercial decisions to benefit financially from your

6. You wish to commercialize your invention. What factors would you

MB0037 – International Business Management

Q.1 a. How has liberalizing trade helped international business?

 Reduce dependence on existing markets Exploit international trade

2. Discuss the impact of culture on International Business.

publication of Industrialism and Industrial Man by Kerr et al. (1960), researchers

contributes to a convergence of consumption patterns and leisure activities

might exhibit strong tendencies toward cultural convergence, as is found in

views individual psychological characteristics in a population as adaptive to their

3. a. Explain the brief structure of WTO.

Below this is the General Council (normally ambassadors and heads of

taken from the informal name of the director-general’s conference room. It is

Q.4. a. Give a short note on the regional economic integration.

b. Mention the benefits of WTO.

served important economic interests, however, driving the rapid development

 Increased certainty about trading conditions (commitments to lower

information on trade regulations), other aspects of “trade facilitation”, clearer

5. a. Explain five-element product wave model.

6. Give some examples of companies doing international business and

MB0037 – International Business Management

1. Evaluate the monetary system and currency markets in international

2. a. Mention the different entry strategies to enter international

 Direct entry strategies, where the firm either acquires a firm or

b. Electronic Commerce – Cutting edge

3. a. Explain Bill of Lading and Letters of credit.

 A payment undertaking given by a bank (issuing bank)

4. Explain the importance of STP in international markets.

5. a. Write a short note on branding and trademarks.

legitimately bought overseas; it also actually builds up consumer resistance to

6. Discuss the various International product and pricing decisions.

In decisions on producing or providing products and services in the international

necessary to keep exploring the implications of alternative pricing structures in

MI0029 - Enterprise Resource Planning

1. Write a scenario to explain the failure of ERP implementation.

2. a. What is the use of transparency and information access?

b. ERP is an abbreviation for Enterprise Resource Planning and means, the

3. What is the use of JIT approach to any organization