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Vishal Bibekar 510915951

MBA (IS) Semester- 4

Roll No:

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Vishal Bibekar 510915951

MBA (IS) Semester- 4

Roll No:

Assignment (Set-1)
Subject code: MB0036

Strategic Management and Business Policy


Q1. 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. Answer Strategies to Improve Sales 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 companys 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 higher-end 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. Gramophone Records to Musical Productions to CDs) as part of a Diversifications strategy. Study the following example to understand what Product Development Strategy is. MICROSOFTs 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 electronics are 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-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 theres no more milk. Microsoft plans to give

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Vishal Bibekar 510915951

MBA (IS) Semester- 4

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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 companys 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 companys 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 computerized 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 centers or Call Centers with new service clients. Situation Analysis Sales Improvement Strategies: a) A supplier of computer stationery invests in a computer stationery manufacturing unit. b) A vendor supplying engine boxes to Maruti decides to supply the same with modifications to Hyundai. c) A company dealing in computer floppies plans to set up a Software Technology Park Q2. What are the components of a good Business Plan and briefly explain the importance of each? Answer The format of a Business Plan is something that has been developed and refined over the years and is something that should not be changed. Like a good recipe, a business plan needs to include certain ingredients to make it work. When you create a business plan, don't attempt to recreate its format. Those reviewing this type of document have expectations you must meet. If they do not see those crucial decision-making components, they'll see no reason to proceed with their review of your business plan, no matter how great your business idea. Executive Summary Section Every business plan must begin with an Executive Summary section. A well-written Executive Summary is critical to the success of the rest of the document. Here is where you need to capture the attention of your audience so that they will be compelled to read on. Remember, it's a summary, so each and every word must be carefully selected and presented. Use the Executive Summary section of your business plan to accurately describe the nature of your business venture including the need that you plan to fill. Show the reasons why people need your product or service. Show this by including a brief analysis of the characteristics of your potential market. Describe the organization of your business including your management team. Also, briefly describe your sales and marketing plan or approach. Finally include the numbers that those

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Vishal Bibekar 510915951

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reviewing your business plan want to see - the amount of capital you seek, the carefully calculated sales projections and your plan to repay the loan. If you've captured your audience so far they'll read on. Otherwise, they'll close the document and add your business plan to the heap of other rejected ideas. Devote the balance of your business plan to providing details of the items outlined in the Executive Summary. The Business Section Be sure to include the legal name, physical address and detailed description of the nature of your business. It's important to keep the description easy to read using common terminology. Never assume that those reading your business plan have the same level of technical knowledge that you do. Describe how you plan to better serve your market than your competition is currently doing. Market Analysis Section An analysis of the market shows that you have done your homework. This section is basically a summary of your Marketing Plan. It needs to show the demand for your product or service, the proposed market, trends within the industry, a description of your pricing plan and packaging and a description of your company policies. Financing Section The Financing section must show that you are as committed to your business venture as you expect those reading your business plan to be. Show the amount of personal funds you are contributing and their source. Also include the amount of capital you need and your plan to repay this debt. Include all pertinent financial worksheets in this section: annual income projections, a break-even worksheet, projected cash flow statements and a balance sheet. Management Section Outline your organizational structure and management team here. Include the legal structure of your business whether it is a partnership, corporation or limited liability corporation. Include resumes and biographies of key players on your management team. Show staffing projection data for the next few years. By now you're probably thinking that you don't need Business Plan just yet. Well you do, and there is business plan building software that can help you through this immense project. These software packages are easy to use and affordable. Use one today and produce a professionalquality Business Plan - including all critical components - tomorrow! Q3. You wish to start a new venture to manufacture auto components. Explain different stages in the process of starting this new business. Answer Every business starts out as an idea. This idea usually involves the invention of a new product, or revolves around a better way of making and marketing an existing one. While many would argue that the idea stage is not a stage at all, it is actually a turning point, as business adviser Mike Pendrith points out. After this, you as a business builder must refine this idea into a moneymaking reality. Here in this case supposing we are to start a new venture of manufacturing auto components and also to market them. We will see here in the following paragraphs different stages of achieving the same goal. 1. Idea Researching In this stage, you are researching your idea. The object of your research is to find out who is marketing the same product or service in your area, and how successful the marketer has been. You can accomplish this by a Google search on the Internet, launching a test- marketing campaign, or conducting surveys. Also, you are attempting to find what the level of interest is in the products (or services) you wish to market. Here as the main goal is to start a company that manufactures the auto components, we are to make a research on all the auto companies which are procuring the spares from the outside vendors. And also the competitors who are all marketing that, their existence and also how successful they are. As part of the initial research process, it is important to consider the legal requirements of selling your product or service. According to the Biz Ed website, examine the legal ramifications of your business. Know the tax laws governing your business. If insurance is a requirement, prepare to

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budget for it. Also, be aware of any safety laws governing you as an employer. Hence we are also to make a research on the feasible area where we can start our organization and licenses that we need to take keeping in mind the environmental factors as well. 2. Business Plan Formulation You must write a business plan. As Pendrith points out, this is crucial if you want funding, such as a small business loan or grant, or if you wish to lease a building. At this stage, Pendrith advises, you need to consult with an attorney or business adviser for assistance. In the business plan you typically include following heads: i) Executive Summary ii) Company and Product Description iii) Market Description iv) Equipment and Materials v) Operations vi) Management and Ownership vii) Financial Information and Start-Up Timeline viii) Risks and Their Mitigation 3. Financial Planning Financial planning involves thinking about the financial costs of starting and maintaining your business. According to the Biz Ed website, you should consider such issues as the costs of running the business; the prices you wish to charge your customers; cash flow control; and how you wish to set up financial reserves in case of an emergency or an event causing significant loss to the business. This includes the planning of whether to take any loans or make personal investments in the company. 4. Advertising Campaign Decide how you will market your product. Consider your budget and your target audience. Make up business cards with your logo on it, your name and the name of your business. Make sure that they are of the most professional quality. Utilizing print, the newspaper, the Internet, radio or TV is also wise, considering, of course, the size of your advertising budget. Here in this case more than TV, a better advertising media will be road side sign boards placed close to the auto companies for getting the deals to manufacture their spares. As TV is useful only to reach the common man and he is not our target customer. Hence sign boards are the feasible solution and also pamphlets circulated across the pioneers. This apart personal marketing is much more suggested. 5. Preparing for Launch Advertise for employees. This also requires adequate planning. Think about what you look for in an employee. Be specific about the requisite skills and experience you are seeking. Then begin requesting resumes and setting up interviews, making hiring decisions based on the standards you have set. In this case we will be looking for a few candidates in managerial position who must be good in managing things apart from minimal technical knowledge. Lower level people at the shop floor people. They need to have real time experience in the shop floor activities. The employees apart, one needs to plan on the plant and machinery as well. Thus these are all the stages that I would consider performing if incase I plan to start a manufacturing unit producing automobile components. Q4. Explain the process of due Diligence and why it is necessary. Answer Due diligence Of course, your commercial partner will need some reassurance about the quality of the offer you are making to them. If you are involved in licensing technology or seeking commercial support for your research you are likely to hear of due diligence. When a future partner is considering whether or not to license technology, to buy a share of patent rights, or to support your research, they will need to satisfy themselves that it is a viable proposition. The process of assessing the viability, risk, potential liabilities and commercial prospects of a project is known as due diligence. Indeed, if a potential partner seems not to be interested in this kind of issues, it may actually raise questions about their commitment to the project or the credibility of their business

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Vishal Bibekar 510915951

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plan, particularly if the relationship assumes some degree of risk and investment on their part. Generally, due diligence will involve assessing the overall commercial operations, cash flow, assets and liabilities of a business that is being purchased or otherwise financially supported. You would think twice about purchasing a business if you found that it was burdened with debts, or was about to be involved in difficult litigation, or if there were doubts about whether it really owned its assets. The same applies to a potential investment involving intellectual property. For instance, a potential commercial partner would not want to invest in patented technology only to find out that patent renewal fees have not been paid and the patent has lapsed, or to find out that the patent was being opposed by another company, or to find that there is prior art available that calls into question its validity. It may transpire that a student, a contractor or a visiting researcher could actually be legally entitled to some or all of the patent rights. Even a serious level of uncertainty or doubt could be enough to deter a potential partner, especially if they have run into this kind of difficulty before. Due diligence may also involve searching for information about the full range of IP rights that might impact on the relevant technology for instance, to check whether you have later filed patent applications on improvements to the original patented technology, that may limit the value of their investment in the original technology. Other intellectual property rights such as related trade mark or design registrations, or key trade secrets or copyright material (such as manuals or software) may also need to be identified or located, as these may also affect the commercial partners interests in the technology. For example, they may be unwilling to take out a licence for your patent without getting access to the software you have developed for a related process. They may want the right to use your trade mark in association with the patented technology. So in a due diligence process, your commercial partner may undertake a range of checks and need various forms of information. These may include: Checks on external records, such as patent registers and patent databases, including foreign patents; Searches of patent databases for conflicting technology; Independent advice from patent attorneys on issues such as patent ownership, patent validity and scope of patent claims; Checks on employment contracts, confidentiality arrangements, and contracts with other parties that may interfere with the exercise of IP rights; Details of the patent prosecution such as examiners reports and other opinions; Details of any legal challenges to the patent, and the way the proceedings were resolved; Checks on laboratory notebooks in the event that the validity of US patents is of concern to the commercial partner (this also provides reassurance as to claims of ownership of the patent); Surveys of the activity of competitors and owners of competing technology, and possibilities of conflict; and Analysis of freedom to operate issues. In preparing to licence your technology, you should consider in advance these kind of due diligence issues. If you can anticipate and provide comprehensive answers to these questions, you will be able more effectively to reassure your commercial partner, and you will be in a stronger negotiating position in negotiating licence terms. It should also speed up the licensing negotiations, and ultimately the commercialization of your intellectual property. Q5. Is Corporate Social Responsibility necessary and how does it benefit a company and its shareholders? Answer Corporate social responsibility (CSR), also known as corporate responsibility, corporate citizenship, responsible business, sustainable responsible business (SRB), or corporate social performance, is a form of corporate self-regulation integrated into a business model. Ideally, CSR policy would function as a built-in, self-regulating mechanism whereby business would monitor and ensure its support to law, ethical standards, and international norms. Consequently, business would embrace responsibility for the impact of its activities on the environment, consumers, employees, communities, stakeholders and all other members of the

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public sphere. Furthermore, CSR-focused businesses would proactively promote the public interest by encouraging community growth and development, and voluntarily eliminating practices that harm the public sphere, regardless of legality. Essentially, CSR is the deliberate inclusion of public interest into corporate decision-making, and the honoring of a triple bottom line: people, planet, profit. The practice of CSR is much debated and criticized. Proponents argue that there is a strong business case for CSR, in that corporations benefit in multiple ways by operating with a perspective broader and longer than their own immediate, short-term profits. Critics argue that CSR distracts from the fundamental economic role of businesses; others argue that it is nothing more than superficial window-dressing; others yet argue that it is an attempt to pre-empt the role of governments as a watchdog over powerful multinational corporations. Corporate Social Responsibility has been redefined throughout the years. However, it essentially is titled to aid to an organization's mission as well as a guide to what the company stands for and will uphold to its consumers. Development business ethics is one of the forms of applied ethics that examines ethical principles and moral or ethical problems that can arise in a business environment. In the increasingly conscience-focused marketplaces of the 21st century, the demand for more ethical business processes and actions (known as ethicism) is increasing. Simultaneously, pressure is applied on industry to improve business ethics through new public initiatives and laws (e.g. higher UK road tax for higher-emission vehicles). Business ethics can be both a normative and a descriptive discipline. As a corporate practice and a career specialization, the field is primarily normative. In academia, descriptive approaches are also taken. The range and quantity of business ethical issues reflects the degree to which business is perceived to be at odds with non-economic social values. Historically, interest in business ethics accelerated dramatically during the 1980s and 1990s, both within major corporations and within academia. For example, today most major corporate websites lay emphasis on commitment to promoting non-economic social values under a variety of headings (e.g. ethics codes, social responsibility charters). In some cases, corporations have re-branded their core values in the light of business ethical considerations (e.g. BP's "beyond petroleum" environmental tilt). The term "CSR" came in to common use in the early 1970s, after many multinational corporations formed, although it was seldom abbreviated. The term stakeholder, meaning those on whom an organization's activities have an impact, was used to describe corporate owners beyond shareholders as a result of an influential book by R Freeman in 1984. ISO 26000 is the recognized international standard for CSR (currently a Draft International Standard). Public sector organizations (the United Nations for example) adhere to the triple bottom line (TBL). It is widely accepted that CSR adheres to similar principles but with no formal act of legislation. The UN has developed the Principles for Responsible Investment as guidelines for investing entities. Potential business benefits The scale and nature of the benefits of CSR for an organization can vary depending on the nature of the enterprise, and are difficult to quantify, though there is a large body of literature exhorting business to adopt measures beyond financial ones (e.g., Deming's Fourteen Points, balanced scorecards). Orlitzky, Schmidt, and Rynes found a correlation between social/environmental performance and financial performance. However, businesses may not be looking at short-run financial returns when developing their CSR strategy. The definition of CSR used within an organization can vary from the strict "stakeholder impacts" definition used by many CSR advocates and will often include charitable efforts and volunteering. CSR may be based within the human resources, business development or public relations departments of an organization, or may be given a separate unit reporting to the CEO or in some cases directly to the board. Some companies may implement CSR-type values without a clearly defined team or program. The business case for CSR within a company will likely rest on one or more of these arguments: Human resources A CSR program can be an aid to recruitment and retention, particularly within the competitive graduate student market. Potential recruits often ask about a firm's CSR policy during an

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interview, and having a comprehensive policy can give an advantage. CSR can also help improve the perception of a company among its staff, particularly when staff can become involved through payroll giving, fundraising activities or community volunteering. See also Corporate Social Entrepreneurship, whereby CSR can also be driven by employees' personal values, in addition to the more obvious economic and governmental drivers. Risk management Managing risk is a central part of many corporate strategies. Reputations that take decades to build up can be ruined in hours through incidents such as corruption scandals or environmental accidents. These can also draw unwanted attention from regulators, courts, governments and media. Building a genuine culture of 'doing the right thing' within a corporation can offset these risks. Brand differentiation In crowded marketplaces, companies strive for a unique selling proposition that can separate them from the competition in the minds of consumers. CSR can play a role in building customer loyalty based on distinctive ethical values. Several major brands, such as The Co-operative Group, The Body Shop and American Apparel are built on ethical values. Business service organizations can benefit too from building a reputation for integrity and best practice. License to operate Corporations are keen to avoid interference in their business through taxation or regulations. By taking substantive voluntary steps, they can persuade governments and the wider public that they are taking issues such as health and safety, diversity, or the environment seriously as good corporate citizens with respect to labour standards and impacts on the environment Stakeholder priorities Increasingly, corporations are motivated to become more socially responsible because their most important stakeholders expect them to understand and address the social and community issues that are relevant to them. Understanding what causes are important to employees is usually the first priority because of the many interrelated business benefits that can be derived from increased employee engagement (i.e. more loyalty, improved recruitment, increased retention, higher productivity, and so on). Key external stakeholders include customers, consumers, investors (particularly institutional investors), and communities in the areas where the corporation operates its facilities, regulators, academics, and the media. 6. Distinguish between a Financial Investor and a Strategic Investor explaining the role they play in a Company. (10 marks). Answer In the not so distant past, there was little difference between financial and strategic 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 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

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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 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.

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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, non-payment 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. 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: 1. The selection of infrastructure, equipment, raw materials, industrial processes, etc.; 2. Negotiations and agreements with providers and suppliers; 3. Minimizing the costs of infrastructure by deploying proprietary components and planning; 4. The provision of corporate guarantees and letters of comfort to suppliers; 5. The planning and erecting of the various sites, structures, buildings, premises, factories, etc.; 6. The planning and implementation of line connections, computer network connections, protocols, solving issues of compatibility (hardware and software, etc.); 7. 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 brandname 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 brandname, its recognition and

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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 analysing 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 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

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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.

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Assignment (Set-2)
Subject code: MB0036

Strategic Management and Business Policy


Q1. 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? Answer 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. 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

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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 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.

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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.

Creating Ones Own Business Plan 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 groups facilitation needs. Now that you have decided who will put together your business plan and have set a timeline for its completion, you are ready to begin assembling the elements of the plan. Your business plan should contain the following sections: Executive summary Company and product description Market description Operations Management and ownership Financial information and timeline Risks and their mitigation 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. 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

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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).

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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. 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

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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 products or services 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 teams 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 companys equity is available. Success is often due to ones contacts, so fully describe your business relationships with attorneys, accountants and advertising or public relations agencies, and any industry-specific services such as suppliers and distributors. 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, Page 18

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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 businesss 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 Page 19

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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. 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. Executive Summary As mentioned earlier, this section should be written last. However, if you have already written the executive summary, review it to make sure it embodies the following characteristics. Because it is the first and possibly the only section of the plan that many readers may see, the executive summary should provide an overview of the plan and entice the reader to read the whole plan or to agree to meet with you. The executive summary should be no more than three pages and should briefly describe the most important elements of the plan. Review the Executive Summary section of this manual for more tips on this critical introduction to your business. @2. Write short notes on: a) Sales projections Answer 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. Steps for Developing Sales Projections Your business plan is not just a funding tool, but also a blueprint for how your business should operate. The following are steps for developing sales projections. Step I: Estimate For each product or service, estimate the number of people who are likely to buy and when they will buy it. You can get this information from asking your likely customers about their possible use of your business, or you can base your estimates on your knowledge of the market. Step 2: Use a Calendar Estimate your sales and number of customers served during one week. Using the totals for a week, make projections for each month. For the first few months, keep in mind that business will start off slowly before people become more aware of your business. Use will most likely increase as people learn about your products and services. Seasonal variations may affect your business

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as well. You will use these numbers to project your equipment, supply and staffing needs, as well as income. Cost Account Heads: Organizational Start up Costs Product Design/Development Research & Development Legal/Licensing Expenses Property & Facilities Land/Building Purchase Initial Lease Deposit Building Repairs/Improvements Equipment/Machinery Production-related Administrative/Office Equip. Materials & Supplies Personnel Key Employees Contract Labour/Temps Training Expenses Marketing Expenses Advertisements Brochures/Literature/Other Insurance Premiums Distributor Contracts Contingency (5%) Expenses: Costs of Goods Sold Materials/Supplies Labor Rent Utilities Insurance Admin. Exp. (PT Sec.) Legal & Accounting Marketing Equipment Maintenance/Supplies Facility Maintenance Fees/Miscellaneous Debt / Equity Investment: Equipment Loan Building Rehabilitation Loan Grants Owner Equity Expenses Cost of Goods Sold Wages & Benefits Materials Supplies Overhead Expenses: Rent Utilities

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Building Maintenance/Security Marketing Accounting Legal Administrative Expense Interest Expense Depreciation The Business Priorities are based upon six top-level objectives; these are: To make Business data available both to decision-makers and as much as possible available in the public domain; To ensure all holders of Business information are able to participate. To ensure that the data available through the NETWORK are of known quality; To ensure that the NETWORK Gateway gives access to data on Location and species used to inform decisions affecting Business at local, regional, national and international levels; To promote knowledge, use and awareness of the NETWORK; To enhance the skills base and expertise needed to support and develop the NETWORK. i) The objectives have cross-cutting themes which are: A. Infrastructure development B. Data standards and tools C. Capacity building D. Working with the wider public E. Co-ordination and promotion i) In addition, the partners will contribute to the overall realization of the objectives through work that they initiate on their own account, but which does not necessarily fall under the focused objectives for the Network. ii) A series of assumptions have been made in formulating the Business Priorities and their associated work programme. These are: It is assumed that the present way of working, i.e. a lead partner approach for each project will be retained; The plan is not intended to represent all the work that could be undertaken; It is anticipated that other work towards the principal aim of adding content and providing a fully functional gateway will be adopted by the NETWORK as part of its programme, but this work would have to be prioritised against this core activity and separately resourced; To give additional focus to the challenging nature of the task that the NETWORK is setting itself, a series of principle drivers have been recognised. The drivers are: Processes This driver relates to facilitated targeted action on the ground through providing knowledge of resource location, extent, pattern of distribution, data quality and gaps. It also has the potential for engaging more partners in the NETWORK; Environmental Impact Assessment (EIA) and Strategic Environmental Assessment This driver is concerned with providing ready access to data on location, extent, pattern and quality of Business. Data contributor engagement This driver is concerned with accessing sources of data for the NETWORK enabling the assessment of actions and continual improvement in the targeting of actions from the two previous drivers; Operational use This relates to the use of the NETWORK within the day to day business of agencies as a source of data relevant to local reporting or casework; Generic enhancement This driver encompasses capacity building and Recording Schemes and other contributing organisations and user groups, in order to ensure the continued and enhanced supply and use of information. These lead naturally to three broad areas of work:

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Developing the recording network; Enhancing the Internet Gateway in terms of its functionality and the data it accesses; Ensuring that the benefits already secured through the earlier work are maintained. The plan also acknowledges the need to co-ordinate activity between the members of the NETWORK and their partners, and to communicate the progress and successes of the work programme. b) Importance of creativity in Business Answer Creativity Everyone in business is creative. Some of most creative people are in manufacturing. They actually CREATE products that change the world. Some of the least creative people perhaps are in advertising. They spend most of their creative energy telling manufacturers that theyarent creative! Salespeople Are Creative They are natural born story-tellers. Accountants are creative. Best Creative Exercise Ever Write down your ideas. You have a ton every day. But most of the time, you cant remember them by the days end. Dont let spelling and grammar issues or relentless self-editing stop you. Get your ideas on paper (Let someone else edit it.) Go retro: Carry a notebook, pen, and calendar into your meetings. Look up at people. Story First, Technology Last. Dont invest in a presentation class called How to Use PowerPoint.until youve taken a class called How to Tell Stories and Connect with Your Audience. 2 A Simple Creative Exercise Simplify everything. Your life, your home, your office, your desk, your processes, vision, policy, procedures. Everything. Fixing Problems is Creative. Your job is to fix problems, not to complain. Brainstorming Dont tell people that their ideas are bad, especially if you dont have a better one. Its only your lifes work. Never say, Its not my job to be creative. How to Lose an Audience Show your audience slides with columns of numbers. Refuse to tell them a story about the meaning of the numbers. Do not read your speech or presentation. Instead, read your audience. How about a Show? Try giving a performance instead of merely giving a presentation. Everyone in Sales Knows Tell stories. Dont just provide data. Avoid Meetings. Do not attend more than two meetings a day, or else you will never get any real creative work done. Get Fresh Ideas. Leave the office building at least once a day.

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Another Lame Excuse Designers should put more of their passion into designing great work, instead of endless (boring) discussions about thes up eriority of the Macintosh over the PC! The Lame Excuse I cant [write/design/create] because I dont have the latest [software/hardware/ upgrade]. You cant let a machine take credit for your creativity. And you cant blame a machine for your creative failures, either. Dont Blame the Tool! The more you become a master of your particular creative form. .the fewer tools you will use. Master carpenters use fewer tools than novices. So do cooks. Use what works. Creativity: Use it or Lose it. Create something every day. Creativity takes place every day, not once in a while. Its not rare. Its just been mystified Own your creativity. Facts and observations Giga-investments made in the paper and pulp industry, in the heavy metal industry and in other base industries, today face scenarios of slow growth (2-3 % p.a.) in their key markets and a growing over-capacity in Europe. The energy sector faces growing competition with lower prices and cyclic variations of demand. Productivity improvements in these industries have slowed down to 1-2 % p.a . Global financial markets make sure that capital cannot be used non-productively, as its owners are offered other opportunities and the capital will move (often quite fast) to capture these opportunities. The capital markets have learned the American way, i.e. there is a shareholder dominance among the actors, which has brought (often quite short-term) shareholder return to the forefront as a key indicator of success, profitability and productivity. There are lessons learned from the Japanese industry, which point to the importance of immaterial investments. These lessons show that investments in buildings, production technology and supporting technology will be enhanced with immaterial investments, and that these are even more important for re-investments and for gradually growing maintenance investments. The core products and services produced by giga-investments are enhanced with life-time service, with gradually more advanced maintenance and financial add-on services. New technology and enhanced technological innovations will change the life cycle of a gigainvestment. Technology providers are involved throughout the life cycle of a giga-investment. Giga-investments are large enough to have an impact on the market for which they are positioned: A 3,00,000 ton paper mill will change the relative competitive positions; smaller units are no longer cost effective. A new technology will redefine the CSF:s for the market. Customer needs are adjusting to the new possibilities of the giga-investment. The proposition that we can describe future cash flows as stochastic processes is no longer valid; neither can the impact be expected to be covered through the stock market. Types of options Option to Defer Time-to-Build Option Option to Expand Growth Options Option to Contract Option to Shut Down/Produce Option to Abandon

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Option to Alter Input/Output Mix Fuzzy numbers (fuzzy sets) are a way to express the cash flow estimates in a more realistic way. This means that a solution to both problems (accuracy and flexibility) is a real option model using fuzzy sets. Q3. What factors are to be taken into account in a crisis communications strategy? Answer 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: o Face-to-face meetings (individual and group) o News conferences o Voice mail/email o Company Intranet and Internet sites o Toll-free hotline o Special newsletter o 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. Official Spokesperson The organization should designate a single primary spokesperson, with back-ups identified, who will manage/disseminate crisis communications to the media and others. This individual should be trained in media relations prior to a crisis. All information should be funneled through a single source to assure that the messages being delivered are consistent. It should be stressed that personnel should be informed quickly regarding where to refer calls from the media and that only authorized company spokespeople are authorized to speak to the media. In some situations, an appropriately trained site spokesperson may also be necessary. Q4. What elements should be included in a Marketing Plan under Due Diligence while seeking investment in for your Company? (10 marks). Answer The Process of Due Diligence 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. Page 25

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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 companys 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: 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 firms 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 customers 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, salesrelated 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

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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 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. Q5. Distinguish between Joint Ventures and Licensing, explaining the relative advantages and disadvantages of each. Answer 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

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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 licence 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 anon-exclus ive 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 anexclus ive 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 in force. 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 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. Licensing Advantages An Inventive Incentive

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"Licensing", tried and true Fair and Balanced Product Exclusivity Inventions of interest to you You are free to view our inventions An informed business decision A production head start We are vitally committed to your success A resource for future projects 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 institutes 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 longterm 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 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 isnt 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 partnerships operations create. In other words, a partnership which is not a corporation, a company or a specific institution doesnt 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 spinoff 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 start-up 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 institutes capacity to do scientific research.

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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 companys worth, as their shares proportionately rise in value, and to receive a portion of any profits produced by the companys 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 companys 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 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. Advantages of Joint ventures: Provide companies with the opportunity to gain new capacity and expertise Allow companies to enter related businesses or new geographic markets or gain new technological knowledge Access to greater resources, including specialised staff and technology Sharing of risks with a venture partner Joint ventures can be flexible. For example, a joint venture can have a limited life span and only cover part of what you do, thus limiting both your commitment and the business' exposure. In the era of divestiture and consolidation, JVs offer a creative way for companies to exit from non-core businesses. Companies can gradually separate a business from the rest of the organisation, and eventually, sell it to the other parent company. Roughly 80% of all joint ventures end in a sale by one partner to the other. Q6. You wish to commercialize your invention. What factors would you weigh in choosing an appropriate course? Answer Following are the ways to commercialize my invention. Licensing and Assignment - Defined The difference between licensing and selling your invention is comparable to leasing vs. selling house. When you sell your house, you transfer your title, making someone else in charge of and liable for the house from that point on. When you sell your invention, the scenario is the same, except that the process is called assigning rather than selling. You, the inventor would be the

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assignor and the person receiving the title or ownership of the patent would be the assignee. Instead of selling, though, you may choose to rent out your house. In this case, you retain the title to the house and give someone permission to use it for a limited period of time. In consideration for this, they pay you on a monthly, yearly or other basis. The terms of this lease are entirely up to you and the person leasing your house. It is up to you to negotiate within the boundaries of the law. When you license an invention, its nearly the same as leasing. Youre offering a manufacturer, for example, the right to manufacture and sell your invention for a period of time, and in consideration for this they pay you on a quarterly basis. In this case you are the licensor and the company is the licensee. It is up to the parties to negotiate the terms of the license within the boundaries of antitrust laws and other regulations that would affect licenses and similar business arrangements. Should I Sell or License? You will generally have a better chance of licensing your invention instead of assigning (selling) your rights for two reasons: First, it is initially hard to ascertain what the eventual value of an invention will be. This will almost invariably result in a win/lose situation. If the value is estimated high, the inventor wins and the company loses. On the other hand, if the estimates are low, the inventor loses out. Second, companies dont like to pay cash up front unless they absolutely have to. Generally, when a company makes a commitment to manufacture and promote an invention, they are already anticipating a substantial financial commitment for tooling, manufacturing setup, engineering expenses, advance purchases of raw materials, marketing, and promotional expenses. A company that is savvy with licensing negotiations will state that the more money they pay the inventor up front, the fewer resources they will have available to put into the promotion. This is a hard point to argue against, particularly if youre interested in the long- range commercial success of your invention. At this point, Inventors have often already incurred substantial initial expenses for patenting, prototyping and research, and need to be reimbursed as soon as possible. Therefore, the inventor can argue that the potential licensees should at least reimburse them for these out-ofpocket expenses. After all, these are expenses the company would have normally paid if they had developed such a product on their own. At that point, the company may very well come back to the table and agree to reimburse you for such initial expenses. However, they may want to make it an advance against future royalties. Bear in mind that all negotiations are unique and this is just an example. When you assign (sell) your invention, you will typically lose control of it. Although you may have cash in hand from the sale of your invention, the company has the prerogative to ditch your technology and simply sit on it unless youve made other arrangements. In some cases it is just as important to the inventor to see his invention commercialized as it is to receive the cash from it. Having an invention commercialized can give an inventor a substantial head start in attracting interest in his additional inventions. This may eventually be worth more to an inventor than the initial cash he would receive from his first commercialized invention. Should I Go It Alone? Some inventors prefer to keep their inventions close and go into business for themselves, which comes with its own set of risks and rewards. There are several different elements at play during the commercialization of an invention: the company, the management, the technology, the market, and the marketing team. Each of these is a variable. The more variables you introduce, the greater the risk of failure. If you start with a new company under new management with a new product, your chance of success is obviously much slimmer than an existing company already in the field with experience and knowledge in a similar product line. Even when you look at an experienced company like 3-M, which brings many new products to market, youll find that the companys new products fail often. With all its resources, 3Ms success rate is said to be only 30%. Unless you have greater resources, your success rate may be even less. Because there are significant startup risks, its important to seriously investigate the distinct advantages of having your invention introduced by an existing company with experience in your field can promote your product effectively and already has a skilled sales force with an existing

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client base. These factors can greatly reduce the amount of time it takes to introduce your invention to the marketplace. What you lose in control when you license can be gained tenfold from a timing standpoint, and in reducing your risk. Licensing offers another strong advantage when it is time to sell your manufactured invention to customers. Manufacturers who introduce only one invention or a very small product line often have a hard time selling to large accounts. Large retail outlets prefer to deal with companies where they can do one-stop shopping. Buyers (or purchasing agents) for the big outlets want to reduce the number of bills they get and the number of vendors they see each week. This is why the introduction of a new invention to retailers by a new company is particularly challenging. Licensing also has advantages over starting your own company because few products have an unlimited life cycle. In time, your invention may be replaced by new technology. What will your company sell then? Most single-item companies that are still around after five years have done so by introducing new products and expanding their product line. Companies need new products to survive. Sometimes starting your own company is the only way to go. If youve attempted the licensing route and no manufacturer is interested in your invention at its current stage of development, you may need to do a small market test with a limited production run to prove your invention has sales potential. Then if your sales results are positive, you may pique the interest of a potential licensee who can take your invention to the next step. It is easy to get upside down financially with invention projects. This is especially true since inventors have a tendency to overestimate the ultimate value of their inventions. Get some realistic market research as early in the game as possible. If you find that you must make a substantial investment to actually manufacture an invention to prove its commercial viability and to interest potential licensees, keep careful track of your expenses and constantly weigh these expenses against any royalty potential that may result. There are too many sad stories of inventors pouring money into inventions that can never provide a return on their investment. Inventors always take a risk when they spend time and money on an idea and if theyre lucky, itll pay off quite well. The lesson is to minimize your risks so you can bail out or put the project on hold if warranted. It will save you time, money, and the personal energy youll need for future successes.

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Assignment (Set-1)
Subject code: MB0037

International Business Management


Q1. A. How has liberalizing trade helped international business? Answer The Benefits of Trade Liberalization 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. What are the merits and demerits of international trade? (4 marks) Answer Advantages and Disadvantages of International Trade Advantages to consider: Enhance your domestic competitiveness Increase sales and profits Gain your global market share

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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 Disadvantages to keep in mind: 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 traveling Wait long for payments Apply for additional financing Deal with special licenses and regulations Q2. Discuss the impact of culture on International Business. Answer The following can be looked as the various aspects of the cultural dichotomies.

Table 2.1: 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. It is 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

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our attempt to highlight their importance rather than their coherence as elements of an integrative framework. 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 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), IBrelated 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 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 knowhow (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 skeptical of globalization (Greider, 1997). In fact, less than 10% of the worlds 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 worlds important international institutions, many of the worlds governments, and a great majority of the worlds economic and military capabilities, the cultural

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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 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. 3 Role of multiculturalism and cultural identity The 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. 4 Implications of convergence and divergence issues One 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.

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IB scholars need to understand that although some countries 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 society to 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 the issue 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. 5 Processes of cultural changes In 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 the fit 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 20th century 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 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

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static entity. This system view suggests that each persons psychological processes are organized through the active effort to coordinate ones 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, Van de 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 worlds 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-levels of 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. 6 The dynamics of culture as a multi-level, multi-layer construct The proposed model consists of two building blocks. One is a multi-level approach, viewing culture as a multi-level construct that consists of various levels nested within each other from the most macro-level of a global culture, through national cultures, organizational cultures, group cultures, and cultural values that are represented in the self at the individual level, as portrayed in Figure 2.1. The second is based on Scheins (1992) model viewing culture as a multi layer construct consisting of the most external layer of observed artefacts and behaviours, the deeper level of values, which is testable by social consensus, and the deepest level of basic assumption, which is invisible and taken for granted. The present model proposes that culture as a multi layer construct exists at all levels from the global to the individual and that at each level change first occurs at the most external layer of behaviour, and then, when shared by individuals who belong to the same cultural context, it becomes a shared value that characterizes the aggregated unit (group, organizations, or nations). In the model, the most macro-level is that of a global culture being created by global networks and global institutions that cross national and cultural borders. As exemplified by the effort of the Davos group discussed earlier, global organizational structures need to adopt common rules and procedures in order to have a common language for communicating across cultural borders (Kostova, 1999; Kostova and Roth, 2003; Gupta and Govindarajan, 2000).

Figure 2.1: The dynamic of top-downbottom-up processes across levels of culture.

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Given the dominance of Western MNCs, the values that dominate the global context are often based on a free market economy, democracy, acceptance and tolerance of diversity, respect of freedom of choice, individual rights, and openness to change (Gupta and Govindarajan, 2000). Below the global level are nested organizations and networks at the national level with their local cultures varying from one nation or network to another. Further down are local organizations, and although all of them share some common values of their national culture, they vary in their local organizational cultures, which are also shaped by the type of industry that they represent, the type of ownership, the values of the founders, etc. Within each organization are sub-units and groups that share the common national and organizational culture, but that differ from each other in their unit culture on the basis of the differences in their functions (e.g., R&D vs manufacturing), their leaders values, and the professional and educational level of their members. At the bottom of this structure are individuals who through the process of socialization acquire the cultural values transmitted to them from higher levels of culture. Individuals who belong to the same group share the same values that differentiate them from other groups and create a group level culture through a bottom-up process of aggregation of shared values. For example, employees of an R&D unit are selected into the unit because of their creative cognitive style and professional expertise. Their leader also typically facilitates the display of these personal characteristics because they are crucial for developing innovative products. Thus, all members of this unit share similar core values, which differentiate them from other organizational units. Groups that share similar values create the organizational culture through a process of aggregation, and local organizations that share similar values create the national culture that is different from other national cultures. Both top-down and bottom-up processes reflect the dynamic nature of culture, and explain how culture at different levels is being shaped and reshaped by changes that occur at other levels, either above it through top-down processes or below it through bottom-up processes. Similarly, changes at each level affect lower levels through a top-down process, and upper levels through a bottom-up process of aggregation. The changes in national cultures observed by Inglehart and Baker (2000) could serve as an example for top-down effects of economic growth, enhanced by globalization, on a cultural shift from traditional values to modernization. However, in line with Schein (1992), the deep basic assumptions still reflect the traditional values shaped by the broad cultural heritage of a society. Global organizations and networks are being formed by having local-level organizations join the global arena. That means that there is a continuous reciprocal process of shaping and reshaping organizations at both levels. For example, multinational companies that operate in the global market develop common rules and cultural values that enable them to create a synergy between the various regions, and different parts of the multinational company. These global rules and values filter down to the local organizations that constitute the global company, and, over time, they shape the local organizations. Reciprocally, having local organizations join a global company may introduce changes into the global company because of its need to function effectively across different cultural boarders. A study by Erez-Rein et al. (2004) demonstrated how a multinational company that acquired an Israeli company that develops and produces medical instruments changed the organizational culture of the acquired company. The study identified a cultural gap between the two companies, with the Israeli company being higher on the cultural dimension of innovation and lower on the cultural dimension of attention to detail and conformity to rules and standards as compared with the acquiring company. The latter insisted on sending the Israeli managers to intensive courses in Six Sigma, which is an advanced method of quality improvement, and a managerial philosophy that encompasses all organizational functions. Upon returning to their company, these managers introduced quality improvement work methods and procedures to the local company, and caused behavioural changes, followed by the internalization of quality oriented values. Thus, a top-down process of training and education led to changes in work behaviour and work values. Sharing common behaviours and values by all employees of the local company then shaped the organizational culture through bottomup processes. The case of cultural change via international acquisitions demonstrated the two building blocks of our dynamic model of culture: the multi-level structure explains how a lowerlevel culture is being shaped by top-down effects, and that the cultural layer that changes first is

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the most external layer of behaviour. In the long run, bottom up processes of shared behaviours and norms shape the local organizational culture. 7 Factors that facilitate cultural change Culture itself influences the level of resistance or acceptance of change. Harzing and Hofstede (1996) proposed that certain cultural values facilitate change, whereas others hinder it. The values of low power distance, low uncertainty avoidance, and individualism facilitate change. Change threatens stability, and introduces uncertainty, and resistance to change will therefore be higher in cultures of high rather than low uncertainty avoidance (Steensma et al., 2000). Change also threatens the power structure, and therefore will be avoided in high power distance cultures. Finally, change breaks the existing harmony, which is highly valued in collectivistic cultures, and therefore will not be easily accepted by collectivists (Levine and Norenzayan, 1999). A recent study by Erez and Gati (2004) examined the effects of three factors on the change process and its outcomes: the cultural value of individualism collectivism; the reward structure and its congruence with the underlying cultural values and the degree of ambiguity in the reward structure. The change process examined was a shift from choosing to work alone to a behavioural choice of working as part of a team, and vice versa. Working alone is more prevalent in individualistic cultures, whereas working in teams dominates the collectivistic ones. 8 Understanding when culture matters: increasing the precision of cultural models Beyond exploring new cultural constructs and the dynamic nature of culture, we also argue for the importance of examining contingency factors that enhance or mitigate the effect of national culture. Consider the following scenario. A senior human resource manager in a multinational firm is charged with implementing an integrative training program in several of the firms subsidiaries around the globe. Over the term of her career, the manager has been educated about differences in national culture and is sensitive to intercultural opportunities and challenges. At the same time, she understands the strategic need to create a unified global program that serves to further integrate the firms basic processes, creating efficiencies and synergies across the remote sites. She approaches the implementation with trepidation. A key challenge is to determine whether the program should be implemented in the same manner in each subsidiary or modified according to the local culture at each site. Put another way, in this complex circumstance, does culture matter? Q3. A. Explain the brief structure of WTO. Answer Structure of World Trade Organization (WTO) The WTOs 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 WTOs predecessor, GATT. The WTOs agreements have been ratified in all members parliaments. The WTOs 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 directorgeneral. 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 Secretariats 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.

Figure 5.1: Structure of 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 organizations 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 countrys policy by threatening to withhold credit.

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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 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 to the 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 thep lu ral-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 Councils 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

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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 taken from the informal name of the directorgenerals 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 directorgeneral. 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. Highlight the drawbacks of GATT. Answer Given its provisional nature and limited field of action, the success of GATT in promoting and securing the liberalization of much of world trade over 47 years is incontestable. Continual reductions in tariffs alone helped spur very high rates of world trade growth around 8 per cent a year on average during the 1950s and 1960s. And the momentum of trade liberalization helped ensure that trade growth consistently out-paced production growth throughout the GATT era. The rush of new members during the Uruguay Round demonstrated that the multilateral trading

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system, as then represented by GATT, was recognized as an anchor for development and an instrument of economic and trade reform. The limited achievement of the Tokyo Round, outside the tariff reduction results, was a sign of difficult times to come. GATTs success in reducing tariffs to such a low level, combined with a series of economic recessions in the 1970s and early 1980s, drove governments to devise other forms of protection for sectors facing increased overseas competition. High rates of unemployment and constant factory closures led governments in Europe and North America to seek bilateral market-sharing arrangements with competitors and to embark on a subsidies race to maintain their holds on agricultural trade. Both these changes undermined the credibility and effectiveness of GATT. Apart from the deterioration in the trade policy environment, it also became apparent by the early 1980s that the General Agreement was no longer as relevant to the realities of world trade as it had been in the 1940s. For a start, world trade had become far more complex and important than 40 years before: the globalization of the world economy was underway, international investment was exploding and trade in services not covered by the rules of GATT was of major interest to more and more countries and, at the same time, closely tied to further increases in world merchandise trade. In other respects, the GATT had been found wanting: for instance, with respect to agriculture where loopholes in the multilateral system were heavily exploited and efforts at liberalizing agricultural trade met with little success and in the textiles and clothing sector where an exception to the normal disciplines of GATT was negotiated in the form of the Multi-fibre Arrangement. Even the institutional structure of GATT and its dispute settlement system were giving cause for concern. Together, these and other factors convinced GATT members that a new effort to reinforce and extend the multilateral system should be attempted. That effort resulted in the Uruguay Round Q4. A. Give a short note on the regional economic integration. Answer 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. B. Mention the benefits of WTO. (5 marks) Answer Ten Benefits of WTO 1. The system helps to keep the peace

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The system allows disputes to be handled constructively A system based on rules rather than power makes life easier for all Freer trade cuts the cost of living It gives consumers more choice and a broader range of qualities to choose from Trade raises incomes Trade stimulates economic growth and that can be good news for employment The basic principles make the system economically more efficient, and they cut costs The system shields governments from narrow interests The system encourages good government

Q5 A. Explain five-element product wave model. Answer The Five-Element Product Wave As illustrated in Figure 4.5, 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. For example, a product with strong sales may be redesigned in a preemptive strike against competitors, further distancing that product from the competition, such as with Caterpillars innovative high-drive bulldozers. 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 speed with which they bring their

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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. (Note that the authors have taken a great deal of artistic license here! No meaning should be attached to the actual measure of overlap area in Figure 4.6.) 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. Fords 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 todays 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 firms 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. What do you mean by globalization? Answer 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 the policies needed, and in the case of the poorest countries may need the support of the international community as they do so.

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Q6. Give some examples of companies doing international business and discuss how they have they have managed their business in the international markets. Answer 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 Irelands Training & Employment Agency (T&EA) with helping place the companys staffing on the fast track. "The T&EA not only has helped us to identify and recruit qualified software graduates from Northern Irelands 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 regions 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 not computer software graduates, but who are equally welleducated 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 Irelands computer graduates," McFerrin said. Recruitment research by IMR indicates that traditionally, nearly half of the regions 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 regions 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 Mutual Group, Seagate Technology, STB Systems and UniComp. These companies cite Northern Irelands work force and favorable cost base in their decisions to locate in the region. "The availability of high-quality graduates combined with the regions competitive operating costs and attractive incentives made Northern Ireland the best possible location for STB," said Richard W. Cooke, STBs 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

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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 Irelands 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.

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Assignment (Set-2)
Subject code: MB0037

International Business Management


Q1. Evaluate the monetary system and currency markets in international business management. Answer The IMF is an international organization of 185 member countries. It was established to promote international monetary cooperation, exchange stability, and orderly exchange arrangements; to foster economic growth and high levels of employment; and to provide temporary financial assistance to countries to help ease balance of payments adjustment. The International Monetary Fund (IMF) is the intergovernmental organization that oversees the global financial system by following the macroeconomic policies of its member countries, in particular those with an impact on exchange rate and the balance of payments. It is an organization formed with a stated objective of stabilizing international exchange rates and facilitating development through the enforcement of liberalising economic policieson other countries as a condition for loans, restructuring or aid.[3] It also offers highly leveraged loans, mainly to poorer countries. Its headquarters is in Washington, D.C., United States. Organization and purpose IMF "Headquarters 1" in Washington, D.C. The International Monetary Fund was created in July 1945, originally with 45 members,[with a goal to stabilize exchange rates and assist the reconstruction of the world's international payment system. Countries contributed to a pool which could be borrowed from, on a temporary basis, by countries with payment imbalances (Condon, 2007). The IMF was important when it was first created because it helped the world stabilize the economic system. The IMF works to improve the economies of its member countries.[ The IMF describes itself as "an organization of 187 countries (as of July 2010), working to foster global monetary cooperation, secure financial stability, facilitate international trade, promote high employment and sustainable economic growth, and reduce poverty". With the exception of Cuba (left in 1964), Taiwan (expelled in 1980),North Korea, Andorra, Monaco, Liechtenstein, Tuvalu and Nauru, all UN member states participate directly in the IMF. Member states are represented on a 24-member Executive Board (five Executive Directors are appointed by the five members with the largest quotas, nineteen Executive Directors are elected by the remaining members), and all members appoint a Governor to the IMF's Board of Governors. Data dissemination systems In 1995, the International Monetary Fund began work on data dissemination standards with the view of guiding IMF member countries to disseminate their economic and financial data to the public. The International Monetary and Financial Committee (IMFC) endorsed the guidelines for the dissemination standards and they were split into two tiers: The GDDS and the SDDS. The International Monetary Fund executive board approved the SDDS and GDDS in 1996 and 1997 respectively and subsequent amendments were published in a revised "Guide to the General Data Dissemination System". The system is aimed primarily at statisticians and aims to improve many aspects of statistical systems in a country. It is also part of the World Bank Millennium Development Goals and Poverty Reduction Strategic Papers. The IMF established a system and standard to guide members in the dissemination to the public of their economic and financial data. Currently there are two such systems: General Data Dissemination System (GDDS) and its superset Special Data Dissemination System (SDDS), for those member countries having or seeking access to international capital markets. The primary objective of the GDDS is to encourage IMF member countries to build a framework to improve data quality and increase statistical capacity building. This will involve the preparation of meta data describing current statistical collection practices and setting improvement plans. Upon building a framework, a country can evaluate statistical needs, set priorities in improving the timeliness, transparency, reliability and accessibility of financial and economic data.

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Q2. A. Mention the different entry strategies to enter international markets. Answer Entry Strategies Methods of entry With rare exceptions, products just dont 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. 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. How has E-commerce helped in international marketing? Answer Electronic Commerce 1 Prospects for electronic commerce Electronic commerce usually in the form of sales, promotion, or support through the Internet is a hot topic at the moment, evidenced by the high market capitalization of firms involved in this kind of business. Growth rates have been considerable over the last two years and are expected to persist, at least to some extent, for at least the next several years. Yet, it should be recognized that so far, sales over the Internet account for only a small portion of sales especially outside the U.S. 2 Obstacles to diffusion Obstacles to the diffusion of Internet trade come both from enduring sources and temporary roadblocks which may be overcome as consumer attitudes change and technology is improved.

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Currently, Internet connections are slower than desired so that downloading pictures and other information may take longer than consumers are willing to wait. "Glitches" in online ordering systems may also frustrate consumers, who are unable to place their orders at a given time or have difficulty navigating through a malfunctioning site. The lack of non-English language sites in some areas may also be off-putting to consumers, and registering domain names in some countries is difficult. Further, shipping small packages across countries may be inefficient due to high local postage rates and inefficiencies in customs processing. Most of these obstacles may be overcome within next few years. Other obstacles may, however, have considerably greater staying power. First, there are legal problems, as several different countries may seek to impose their jurisdiction on advertising and laws of product assortment and business practices. Further, the maintenance of databases, which are essential to delivering on the promises of e-commerce, may conflict with the privacy rules of some countries this is currently a hot issue of contention between the United States and the European Union. Finally, there are issues of taxation and collection. While the Clinton Administration has sought to get the WTO to go along with a three year tax "moratorium" on Internet purchases much like the one observed in the U.S., strong opposition is expected. A great attraction of e-commerce in Europe is that people may order from other countries and thus evade local sales taxes, which can be prohibitive (e.g., 25% in Denmark and 16% in Germany). Some firms will ship to customers in neighbouring countries without collecting sales taxes or duties, with the responsibility of paying falling on the consumer. Although most consumers who order and do not arrange to pay for these taxes get away with it, fines for those caught through random checks can be severe. 3 Locus of the site Some firms have chosen to maintain a global site, with reference only to local sales or support offices; others, in contrast, have unique sites for each country. In some cases, global sites will hyperlink surfers to a country or region relevant to the site. Note that some confusion exists since many sites outside the U.S. maintain the ".com" designation rather than their countries respective suffix (e.g., ".de" for Germany, ".se" for Sweden, and ".au" for Australia). Some firms have experienced problems getting their banks to accept credit card charges in more than one currency, and thus it may be difficult to indicate precise prices in more than one denomination (one site based in Britain offered its American customers to be as accurate as possible, based on current exchange rates, although the charge could be off "by a few pennies.") 4 Lifecycle stages across the World It has been suggested that Europe runs some five years behind the U.S. in electronic commerce, but some sources dispute this, suggesting that lack of success among American retailers may have other origins, such as inadequate adaptation (for example, some British users are put off by American English). There are, however, some factors which cause most countries run behind. Even in Europe, Internet access penetration rates are lower than they are in the U.S., and the slower speed associated with downloading Asian characters is discouraging. In some countries, credit card penetration is lower, and even in European countries with high penetration rates, consumers are reluctant to use them. Further, the fact that consumers in most countries have to pay a per minute phone charge discourages the essential casual and relaxed browsing common in the U.S. so long as unlimited cable or hardwired access is not offered. Q3. A. Explain Bill of Lading and Letters of credit. Answer A bill of lading (sometimes referred to as a BOL, or B/L) is a document issued by a carrier to a shipper, acknowledging that specified goods have been received on board as cargo for conveyance to a named place for delivery to the consignee who is usually identified. A thorough 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 verb "to lade" which means to load a cargo onto a ship or other form of transportation. A bill of lading can be used as a traded object. The standard short form bill of lading is evidence of the contract of carriage of goods and it serves a number of purposes:

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It is evidence that a valid contract of carriage, or a chartering contract, exists, and it may incorporate the full terms of the contract between the consignor and the carrier by reference (i.e. the short form simply refers to the main contract as an existing document, whereas the long form of a bill of lading (connaissement intgral) issued by the carrier sets out all the terms of the contract of carriage); It is a receipt signed by the carrier confirming whether goods matching the contract description have been received in good condition (a bill will be described as clean if the goods have been received on board in apparent good condition and stowed ready for transport); and It is also a document of transfer, being freely transferable but not a negotiable instrument in the legal sense, i.e. it governs all the legal aspects of physical carriage, and, like a cheque or other negotiable instrument, it may be endorsed affecting ownership of the goods actually being carried. This matches everyday experience in that the contract a person might make with a commercial carrier like FedEx for mostly airway parcels, is separate from any contract for the sale of the goods to be carried; however, it binds the carrier to its terms, irrespectively of who the actual holder of the B/L, and owner of the goods, may be at a specific moment. A standard, commercial letter of credit is a document issued mostly by a financial institution, used primarily in trade finance, which usually provides an irrevocable payment undertaking. The letter of credit can also be source of payment for a transaction, meaning that redeeming the letter of credit will pay an exporter. Letters of credit are used primarily in international trade transactions of significant value, for deals between a supplier in one country and a customer in another. They are also used in the land development process to ensure that approved public facilities (streets, sidewalks, storm water ponds, etc.) will be built. The parties to a letter of credit are usually a beneficiary who is to receive the money, the issuing bank of whom the applicant is a client, and the advising bank of whom the beneficiary is a client. Almost all letters of credit are irrevocable, i.e., cannot be amended or canceled without prior agreement of the beneficiary, the issuing bank and the confirming bank, if any. In executing a transaction, letters of credit incorporate functions common to giros and Traveler's cheques. Typically, the documents a beneficiary has to present in order to receive payment include a commercial invoice, bill of lading, and documents proving the shipment were insured against loss or damage in transit. However, the list and form of documents is open to imagination and negotiation and might contain requirements to present documents issued by a neutral third party evidencing the quality of the goods shipped, or their place of origin.

B. What is UNCITRAL and what it does? Answer The United Nations Commission on International Trade Law (UNCITRAL) was established by the United Nations General Assembly by its Resolution 2205 (XXI) of 17 December 1966 "to promote the progressive harmonization and unification of international trade law. When world trade began to expand dramatically in the 1960s, national governments began to realize the need for a global set of standards and rules to harmonize national and regional regulations, which until then governed Q.4. Explain the importance of STP in international markets. Answer 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, ones distribution strategy should consider where ones target

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market is most likely to buy the product, and a promotional strategy should consider the targets 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.

Q5. A. Write a short note on branding and trademarks. (6 marks) Answer Branding and trademarks As mentioned in chapter four, 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 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. Cotton Production/Marketing Interface Spinners Machines are highly flexible, that is they can usually switch to a variety of yarn requirements. The machines are geared to high production, are automated and are of a precision for constant quality provision. There are strict process controls and built in quality control. Poor raw material, especially when contaminated with metal particles, damages opening mills, grid knives, fans and card clothing. Previous devices employed to remove these (magnets) are becoming less effective. The consequences are damage in the blow room and carding and danger of fire. Quality is therefore defined as properties of the end use (clothing etc.), efficiency of weaving and knitting and the efficient running of the spinning plant. Spinners require raw cotton which is free of trash; dust, sugar and honey dew contamination, seed coats, bark and foreign fibres and, will not nep the cloth. Further requirements are a certain length (could be short, medium or long), uniformity of length, strength, fineness, maturity and a certain elongation and colour. Suppliers In order to meet these high quality demands, the growers have to ensure that the production, picking and ginning is of a very high standard. Cotton grading The Liverpool Cotton exchange, for one, relied on the skills of its experts to manually classify raw fibre purchases for its clients. It still holds the "standards" for length, colour and trash content. As well as the demands of modem machinery, the lack of standardised measuring and cotton classification procedures has resulted in commercial conflict and legal disputes about the true nature of traded cotton. Now, computer based high volume instrument listing systems of raw cotton (HVI systems) are available. The system can handle large numbers of bales, reduce variation in classification and the need for highly trained bate classifiers.

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For cotton exporters the system offers the following advantages: enhanced objectivity in classification improve communication if similar systems are used by sellers or buyers reduced conflict and need for arbitration enhanced competitiveness against synthetic fibres improved integration with modern spinning machines reduced costs on training of experts and in measuring time. The system can process 2000 bales per day and give a printout on the seven parameters of grading. These include length and length uniformity, strength and elongation, micronaire or fineness, leaf and colour. Manufacturers include SPINLAR INC. of Knoxville, USA. Service In agricultural machinery, processing equipment and other items which are of substantial value and technology, service is a prerequisite. In selling to many developing countries, manufacturers have found their negotiations at stake due to the poor back-up service. Often, this is no fault of the agent, distributor or dealer in the foreign country, but due to exchange regulations, which make obtaining spare parts difficult. Many organisations attempt to get around this by insisting that a Third World buyer purchases a percentage of parts on order with the original items. Allied to this problem is the poor quality of service due to insufficient training. Good original equipment manufacturers will insist on training and updating as part of the agency agreement. In order to illustrate the above points, cotton can be used as an example. Cotton is a major foreign exchange earner for Zimbabwe. In 1990/91, 52,000 tons were sold overseas at a value of Zim $ 238 million. As the spinners, particularly those in the export market are in a highly competitive industry, it is essential that the raw material is as clean as possible. Also todays spinning equipment is highly technical and the spinner wishes to avoid costly breakdowns by all means. Product strategies There are five major product strategies in international marketing. Product communications extension This strategy is very low cost and merely takes the same product and communication strategy into other markets. However it can be risky if misjudgements are made. For example, CPC International believed the US consumer would take to dry soups, which dominate the European market. It did not work. Extended product communications adaptation If the product basically fits the different needs or segments of a market it may need an adjustment in marketing communications only. Again this is a low cost strategy, but different product functions have to be identified and a suitable communications mix developed. Product adaptation communications extension The product is adapted to fit usage conditions but the communication stays the same. The assumption is that the product will serve the same function in foreign markets under different usage conditions. Product adaptation communications adaptation Both product and communication strategies need attention to fit the peculiar need of the market. Product invention This needs a totally new idea to fit the exclusive conditions of the market. This is very much a strategy which could be ideal in a Third World situation. The development costs may be high, but the advantages are also very high. The choice of strategy will depend on the most appropriate product/market analysis and is a function of the product itself defined in terms of the function or need it serves, the market defined in terms of the conditions under which the product is used, the preferences of the potential customers and the ability to buy the product in question, and the costs of adaptation and manufacture to the company considering these product communications approaches. b. What are the features of exchange and currency markets? Answer

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The exchange rate regimes adopted by countries in todays international monetary 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). 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

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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). Q6. Discuss the various International product and pricing decisions. Answer Production decisions 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" (sub-contractor) 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 producercurrency 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 buyers 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 consumers 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 producers 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

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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 necessary to keep exploring the implications of alternative pricing structures in open-economy models. 1 Some Evidence on Real Exchange Rates I first review some empirical evidence on the behaviour of real exchange rates using aggregate data. I then turn to a review of the evidence on the sources of movements in real exchange rates. The real exchange rate between two countries represents the relative cost of a common reference basket of goods. For two countries, say the United States and Japan, the real exchange rate is given by where P^sub US^ and P^sub JP^ represent the American and Japanese price levels (measured in terms of dollars and yen, respectively) and where e denotes the nominal exchange rate (defined as the dollar price of one yen). The theory of purchasing power parity (PPP) predicts that real exchange rates should equal one, or at least show a strong tendency to quickly return to one when they differ from this value. The fundamental building block of PPP is the law of one price: due to arbitrage in goods markets, and absent barriers to trade, similar products should sell in different countries for the same price (when converted in the same currency). Large international price differentials would be only temporary, as profit-maximizing traders would quickly drive international goods prices back in line. Therefore, if arbitrage in goods markets ensures that the law of one price holds for a sufficiently broad range of individual goods, then aggregate price levels (when expressed in a common currency) should be highly correlated across countries. Because aggregate prices are reported as indices rather than levels, most empirical work has tested the weaker hypothesis of relative PPP, which requires only that the real exchange rate be stable over time. Figure 1 show the log changes in the CPI-based dollar-yen real and nominal exchange rates and the relative price level. In thisfigure, which is typical for countries with floating exchange rates and moderate inflation, it clearly stands out that short-run deviations from PPP are large and volatile.(Delete) In the short run, movements in the real exchange rate mimic those in the nominal exchange rate, with no offsetting movements in the relative price level. Not surprisingly, early empirical work based on simple tests of short-run PPP produced strong rejections of this hypothesis for moderate inflation countries. However; these studies did not allow for any dynamics of adjustment to PPP and therefore did not address the validity of PPP as a medium- or long-run proposition. The conventional explanation for the failure of short-run PPP is the presence of nominal price rigidities. If the short-term volatility of nominal exchange rates were due mostly to monetary and financial disturbances, then nominal price stickiness would translate these disturbances into short-run fluctuations in the real exchange rate. If this were true, however, we should observe a substantial convergence to PPP in one to two years, as the adjustment of prices and wages takes place. Purchasing power parity, therefore, would be re-established in the medium to long run. An extensive body of empirical literature has tested the hypothesis of long run PPP by looking at the mean-reverting properties of real exchange rates. As is well known, it has proved rather difficult to find evidence supporting convergence of real exchange rates to PPP even in the long run. Earlier empirical studies, which used only post-Bretton Woods data, found it difficult to reject the hypothesis that bilateral real exchange rates for industrialized countries follow a random walk under floating exchange rates. But if PPP deviations are very persistent, then it may be difficult to distinguish empirically between a random walk model and a slow mean-reversion model for the real exchange rate, especially when this variable is highly volatile. As shown in Frankel (1986), the post-Bretton Woods period may simply be too short to reliably reject the random walk hypothesis. To overcome this problem of low power in tests of the random walk hypothesis, Frankel used an extended data set (annual data for the dollar-pound exchange rates from 1869 to 1984) and rejected the random walk model in favour of a mean-reverting model for the real exchange rate. His point estimate for the rate of decay of real exchange rate deviations was 14 percent per year, which implies a half-life of PPP deviations of 4.6 years. Other studies that test convergence to PPP using long-horizon data sets tend to find values for the half-life of PPP deviations between three to five years.

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An alternative way to increase the power of unit root tests is to expand the number of countries in the sample and to perform panel tests of convergence to PPP. Frankel and Rose (1996), for example, use a panel set of annual data from 1948 to 1992 for 150 countries. They estimate halflives for PPP deviations of about four years. Other studies using panel data sets report similar estimates. Interestingly, these estimates are also similar to those obtained using long-time series data sets. In brief, studies using aggregate data provide strong evidence that deviations from PPP are highly volatile and persistent. Consensus estimates suggest that the speed of convergence to PPP is roughly 15 percent per year, implying a half-life of PPP deviations of about four years. As we shall see next, a look at disaggregated data will provide us with a much richer analysis of the sources of PPP deviations. The Law of One Price: Market Segmentation and International Pricing As I pointed out earlier, the idea underlying PPP is that the law of one price holds for a wide range of individual goods. It has long been recognized, however, that even for highly tradable goods and at different levels of aggregation, deviations in the law of one price are large, persistent, and highly correlated with movements in the nominal exchange rate. One possible explanation for the failure of the law of one price is that international markets are segmented by physical distance, like different markets within a country. Engel and Rogers (1996), however, show that both the distance and the physical border between countries are significant in explaining the variation in prices of similar goods across different U.S. and Canadian cities. They find that price dispersion is much higher for two cities located in different countries than for two equidistant cities in the same country. In fact, the effect of the border is estimated to be equivalent to a distance of 1780 miles between cities within one country. Engel and Rogers also show that nominal price stickiness accounts for a large portion of the border effect, suggesting that prices are sticky in the local currency and that changes in the exchange rate lead to deviations in the law of one price. Not only are failures of the law of one priced significant but, as recent evidence suggests, they also play a dominant role in explaining the behaviour of real exchange rates. Engel (1999) measures the proportion of U.S. real exchange rate movements that can be accounted for by movements in the relative prices of non-traded goods. Engel decomposes the CPI real exchange rate into two components: a weighted difference of the relative price of non-traded to tradedgoods prices in each country, and the relative price of traded goods between the countries. If tradable, as a category, closely followed the law of one price, then all variability in the real exchange rate would be explained by movements in the first component. However, Engel finds that movements in the relative price of non-traded goods appear to account for almost none of the movement in U.S. real exchange rates, even at long time horizons. Instead, nearly all the variability can be attributed to movements in the relative price of tradable. This finding strongly suggests that consumer markets for tradable goods are highly segmented internationally and that movements in the international relative price of consumer tradable are very persistent. Moreover, given the high volatility of nominal exchange rates, these findings indicate that consumer prices of most goods (either imported or domestically produced) seem to be sticky in domestic currency terms. An alternative approach to studying the relationship between exchange rates and goods prices is examining how firms in an industry (or country) pass through changes in exchange rates to export prices. Knetter (1989, 1993) measures the degree of price discrimination across export destinations that is associated with exchange rate changes for U.S., U.K., German, and Japanese industry-level data. He finds that the amount of exchange rate pass-through differs considerably depending on the country and industry. Goldberg and Knetter (1997) provide an extensive survey of the literature and find that local currency prices of foreign products do not respond fully to exchange rate changes. While the response varies by industry, on average exchange rate pass- through to U.S. import prices is only about 50 percent after one year, mainly reflecting changes in destination-specific markups on exports. In brief, there is strong evidence that international markets for tradable goods remain highly segmented and that deviations from PPP are largely accounted for by movements in the relative price of tradable goods across countries. At the consumer level, exchange rate pass-through to import prices is virtually zero (suggesting that consumer prices are sticky in domestic currency).

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At the producer level, however, exchange rate pass-through is generally positive, but substantially below one. Transaction Costs and the Adjustment of PPP and Law of One Price Deviations Some recent empirical tests of long-run PPP and the law of one price have abandoned the conventional framework, which assumes a linear autoregressive process for the price differential. Instead, these studies have started to look into nonlinear models of price adjustment, where the speed at which price differentials die out depends on the size of the deviation itself. This alternative framework for the empirical analysis of price differentials is motivated by the observation that commodity trade is not costless. Persistent deviations from the law of one price are implied as an equilibrium feature of models with transaction costs, for deviations will be left uncorrected as long as they are sufficiently small relative to the shipping cost. The simplest econometric model that implements the notion of a nonlinear adjustment for price differentials assumes that the process is well described by a random walk for small deviations (that is, when deviations are within a "band of inaction") and an autoregressive process for large deviations (that is, when deviations are outside the band). Taylor (2001) shows that the improper use of linear models when the true model is nonlinear may produce a large bias towards finding a low speed of convergence. Intuitively, a linear model will fail to support convergence to PPP if the true model is nonlinear and the process spends most of the time in the random-walk band. Using both monthly data from the 1920s and annual data spanning two centuries, Michael, Nobay, and Peel (1997) reject the linear adjustment model in favour of a nonlinear model and provide strong evidence of mean-reverting behaviour for PPP deviations for every exchange rate considered. 2 International Pricing in New Open-Economy Macroeconomic Models The common starting point for most of the recent research in open-economy models with price rigidities is the model developed in Obstfeld and Rogoff (1995). This model explores the international monetary transmission mechanism in a general equilibrium setup characterized by nominal price rigidities, imperfect competition, and incomplete asset markets. Obstfeld and Rogoffs model does not generate deviations from the CPI based purchasing power parity. This feature reflects the fact that preferences are identical across countries and that all goods are freely tradable, with prices set in the sellers currency. In this model, there is complete pass-through of exchange rate changes to import prices, implying that the law of one price always holds for all goods and that the real exchange rate is constant. Motivated by the empirical evidence on the sources of real exchange rate fluctuations, several recent papers have extended Obstfeld and Rogoffs framework in order to allow for pricing-tomarket and deviations from the law of one price. This class of models assumes that home and foreign markets are segmented, which allows imperfectly competitive firms to price discriminate between home and foreign consumers. Consumers inability to arbitrage price differentials between countries is exogenous, possibly reflecting arbitrarily high transportation costs at the consumer level. In addition to market segmentation, this class of models also assumes that prices are sticky in each countrys local currency. That is, firms set prices in advance in the buyers currency, as opposed to the standard assumption that prices are set in the sellers currency.

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Assignment (Set-1)
Subject code: MI0029

Enterprise Resource Planning


Q1. What do you mean by Enterprise Resource Planning? Also Discuss the advantages of ERP? Answer: Enterprise Resource Planning (ERP) is an integrated computer-based system used to manage internal and external resources, including tangible assets, financial resources, materials, and human resources. Its purpose is to facilitate the flow of information between all business functions inside the boundaries of the organization and manage the connections to outside stakeholders. Enterprise Resource Planning (ERP) covers the techniques and concepts employed 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 packages are integrated (covering all business functions) software packages that support the above ERP concepts. Originally, ERP packages were targeted at the manufacturing industry, and consisted mainly of functions for planning and managing core businesses such as sales management, production management, accounting and financial affairs, etc. However, in recent years, adaptation not only to the manufacturing industry, but also to diverse types of industry has become possible and the expansion of implementation and use has been progressing on a global level. ERP software is designed to model and automate many of the basic processes of a company, from finance to the shop floor, with the goal of integrating information across the company and eliminating complex, expensive links between computer systems that were never meant to talk to each other.

Above figure shows how information is integrated within an organisation using an ERP system. The Advantages of ERP Installing an ERP system has many advantages both direct and indirect. The direct advantages include improved efficiency, information integration for better decision making, faster response time to customer queries, etc. The indirect benefits include better corporate image, improved customer goodwill, customer satisfaction, and so on. The following are some of the direct benefits of an ERP system: Business Integration Flexibility Better Analysis and Planning Capabilities Use of Latest Technology Business Integration The first and most important advantage lies in the promotion of integration. The reason why ERP packages are considered to be integrated is the automatic data updating (automatic data exchange among applications) that is possible among the related business components. Since conventional company information systems were aimed at the optimization of independent Page 60

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business functions in business units, almost all were weak in terms of the communication and integration of information that transcended the different business functions. In the case of large companies in particular, the timing of system construction and directives differs for each product and depart-ment/function and sometimes, they are disconnected. For this reason, it has become an obstacle in the shift to new product and business classification. In the case of ERP packages, the data of related business functions is also automatically updated at the time a transaction occurs. For this reason, one is able to grasp business details in real time, and carry out various types of management decisions in a timely manner, based on that information. Flexibility The second advantage of ERP packages is their flexibility. Different languages, currencies, accounting standards and so on can be covered in one system and and functions that comprehensively manage multiple locations of a company can be packaged and implemented automatically. To cope with company globalization and system unification, this flexibility is essential, and one can say that it has major advantages, not simply for development and maintenance, but also in terms of management. Better Analysis and Planning Capabilities Yet another advantage is the boost to the planning functions. By enabling the comprehensive and unified management of related business and its data, it becomes possible to fully utilize many types of decision support systems and simulation functions. Furthermore, since it becomes possible to carry out, flexibly and in real time, the filing and analysis of data from a variety of dimensions, one is able to give the decision-makers the information they want; thus enabling them to make better and informed decisions. Use of Latest Technology The fourth advantage is the utilization of the latest developments in Information Technology (IT). The ERP vendors were very quick to realize that in order to grow and to sustain that growth; they had to embrace the latest developments in the field of Information Technology. Therefore, they quickly adapted their systems to take advantage of the latest technologies like open systems, client/server technology, Internet/Intranet, CALS (Computer-Aided Acquisition and Logistics Support), electronic-commerce, etc. It is this quick adaptation to the latest changes in Information Technology that makes the flexible adaptation to changes in future business environments possible. It is this flexibility that makes the incorporation of the latest technology possible during system customization, maintenance and expansion phases. As has been stated above, ERP includes many of the functions that will be necessary for future systems. However, undertaking reforms to company structures and business processes, so as to enable the full use of these major features, is the greatest task for companies that will use them. It is necessary to take note that casually proceeding with the implementation of ERP, merely for reasons of system reconstruction or preparation for the year 2000, is likely to result in turning the above mentioned advantages into disadvantages. Q2. Discuss the Concept of Quality Management in concept with Module Function? Answer: A quality management system (QMS) can be expressed as the organizational structure, procedures, processes and resources needed to implement quality management. With product quality under the microscope in all industries today, every company strives for superior quality in its products and services. All manufacturing modules track quality control activities across the enterprisefrom intermediate producers to finished goods. These systems allow a wide variety of characteristics and parameters to be specified in test and inspection operations and maintain an extensive history to improve product quality and identify recurring problems. Elimination of defects in standard product designs and manufacturing methods, before production, is just as important as eliminating defects during production. In fact, to achieve quality levels, manufacturers must focus on identifying and correcting defects in underlying product designs and production methods and not simply inspect the in-coming material and finished goods. The Quality Management Systems usually support the bench-marking and use of optimal product design, process engineering and quality assurance data by all functional departments within the manufacturing enterprise, thereby facilitating definition of control decisions are made and leave

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an audit trail of decisions for compliance purposes. Capabilities include automated material review and approval, automated material dispositioning, sub-lot control, optional automatic second dispositioning, optional automatic repeat testing, grading, redesignation, and implementation of user-defined policies and procedures for authorisation and control. Production Reporting supports complete production reporting. Both employee and crew labour reporting is possible, with crew reporting automatically allocating efficiencies between crew members. Userdefined shift teams can be entered to support quality circles and subsequent reporting of results. Employee/clock maintenance provides for designation of employees and teams. Both labour grades and labour rates can be designated. Labour grades entered by employees override those designated for the work centre. Labour rates enable the entry of actual cost data, even when labour grades have not been established. The Shop Floor Control system is fully integrated with Cost Accounting and Control. Both production reporting and employee/clock maintenance contribute data that is summarised at the time of shop order close with full variance analysis reporting made available to the user. Shop Floor Control also makes use of a powerful and flexible shop calendar facility, which can be global with overrides reflecting each facility and each work centre within the facility. Q3. Explain SAPs ERP Packages in detail? Answer: SAP designed the enhancement package for SAP ERP to easily deliver business- and industryspecific functionality, enterprise services bundles, and other functions that enhance and simplify the use of the SAP ERP application through improvements to the user interface and processes. SAP is the first software provider to use SOA to deliver new functionality, enterprise services bundles, and simplified user interfaces through enhancement packages. Enterprise services are one of the ways that SAP is implementing a program of service as part of our strategy to provide SOA across all products. SAP customers and partners can suggest ideas for new services and help develop them by participating in the Enterprise Services Community program. 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 companys 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), and some important points to be kept in mind while evaluating ERP software includes: Functional fit with the companys business processes Degree of integration between the various components of the ERP system Flexibility and scalability Complexity User friendliness Quick implementation Ability to support multi-site planning and control

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Technologyclient/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, maintenance, 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 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.

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Assignment (Set-2)
Subject code: MI0029

Enterprise Resource Planning


Q1. What are the different phases of ERP implementation lifecycle? Answer: The different phases of the ERP implementation are given below: 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. Hence, the company should do a pre-evaluation screening to limit the number of packages that are to be evaluated by the committee. Not all packages are equaleach has its own strengths and weakness. The pre-evaluation process should eliminate those packages that are not at all suitable for the companys 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 experience 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. For example, PeopleSoft is strong in HR and less so in manufacturing; Baan, on the other hand, is historically stronger in manufacturing than in finance and so on. 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 companys needs, or in other words, software that could be customised to obtain a good fit. Once the packages to be evaluated are identified, the company needs to develop 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. 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

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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 beheaded 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 companys needs, meets only 80% of the companys functional requirements. The remaining 20% of these requirements present a problematic issue for the companys 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 highlevel 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. 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 emphasizes 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 inan 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 cant just shut down their operations while the mapping processes take place. Hence the prototypea simulation of the actual business processes of the companywill 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 companys system reveals not only the strengths of a companys

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business process but alsoand perhaps more importantlyits weaknesses. Its 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 wont fit into the package, and where the gaps in functionality occur. For example, a company might have an accounting practice that cannot be configured into the system or some shipping process that wont conform to the package. The company obviously needs to know which processes have to change in the process of implementation. Finding out what will work and what wont requires a knowledge of the business process itself, and an ability to work with people throughout the company. So, people with such skills should be assigned to these tasks. As a rule, in most large implementations, the functional configurations are split between the different areas within the company, so some will attend to HR, some will be involved in financials and so forth. ERP vendors are constantly striving to lower configuration costs. Strategies currently being pursued include automation and pre-configuration. Baan for instance, has developed Org ware, an automated configuration tool, while SAP has pre-configured industry-specific templates that can be tweaked for each individual company (Accelerated SAP Solutions). 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 selfsufficient 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 and selects those employees who have the right attitudepeople who are willing to change, learn new things and are not afraid of technologyand 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 extremecase scenariossystem 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 completedata 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 sometime. 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 is 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 enduser training. Post-Implementation (Maintenance Mode)

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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 process; new people will always be coming in, and new functionality will always be entering the organization. Q2. What is CAD/CAM and what are its advantages? Answer: CAD/CAM is the other major focus area for the manufacturing sector. Traditionally, the automotive and aerospace industries are the largest consumers of CAD/CAM. With the automotive sector in the doldrums, vendors were not able to meet their expectations from this industry. On the other hand, the farm auto sector did better in comparison. Mahindra & Mahindra (Tractor Division) has grown considerably in the last three years and their manufacturing capacity has doubled. This is accompanied with significant enhancement in design capacity. Increasing design capacity is also a competitive edge for a company. For example, Tata Johnson Controls, which makes seating systems, started off by designing seats solely for Ford and then, with increased design capacity using advanced CAD/CAM, went on to supply seating systems to many other auto majors. The major focus area in CAD /CAM is on design analysis, development, and manufacturing. Styling and ergonomics are there finement areas to achieve design excellence. There were only marginal investments in modeling. There is also a trend towards reverse engineering, especially in the engineering and appliances industry. Manufacturing, companies in the BPL Group have taken up reverse engineering. Product data management (PDM) is another leading edge of the CAD/CAM philosophy. TELCO and Mahindra Ford have integrated many of their suppliers. For the supplier, it means enhanced competence and improved competitiveness. Many of these suppliers, with their improved design capacity and integration with OEMs, have also started exporting. Brakes India is supplying brakes to many of the European auto manufacturers. Another reason, which prompts a company to make design an imperative is the improved alignment that many manufacturing organizations have acquired due to business process reengineering. An important trend is the integration of tier 1 and tier 2 suppliers with OEMs, for standard product information. In the heavy engineering sector, many companies have signed up multi year contracts with global majors like SDRC and PTC. BHEL has a five-year CAD/CAM contract across all units with SDRC. Similarly Siemens, L&T, and Lakshmi Machine Works are investing in CAD/CAM to beef up their research capability. Computer-Aided-Design/Computer-Aided-Manufacturing (CAD/CAM) advantages are following: Graphics Capabilities: CAD systems allow the designer to view a product from different perspectives, including three-dimensional rotations, and various cross-sections. The designer can also make proportional changes in scale, or change the angle of an arc with the click of a computer mouse rather than having to redraw the entire product. Design, storage and retrieval: Some CAD systems can store the design characteristics of existing products and components. Then, for example, if a company needs a gear for a new product, the designer can enter the relevant information about the gear, such as its diameter, tooth pattern, and required hardness, into the CAD system. The CAD system

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determines whether the company is already using an identical or sufficiently similar gear, in which case a new one is unnecessary. If not, a gear that has similar properties may exist. The designer can then use the design of this similar gear as a starting point for the new gear. This capability not only promotes the use of common components but also reduces design time. Automatic evaluation of specifications: One of the most time-consuming aspects of design for highly technical products is calculating whether or not product specifications, such as strength, heat resistance or aerodynamic drag, are satisfied. These calculations can be programmed into some CAD systems so that whenever the designer changes the design (by altering the shape or material to be used), these performance characteristics are recalculated automatically and compared to the product requirements. This is sometimes called Computer-Aided-Engineering (CAE).The overall benefits of CAD systems can be substantial. The features described above reduce development time and cost, and they improve product quality because more design options can be evaluated in greater detail more quickly. For example, Motorola used three-dimensional CAD to produce its award-winning Micro Tac pocket sized cellular phone two years ahead of the competition. It is not uncommon for CAD systems to reduce product cycle times by 1050%.Even greater time and cost reductions have resulted from recent advances whereby, CAD-engineered designs are converted automatically into software programs for computerised production machines. These are called Computer-AidedDesign/Computer-Assisted-Manufacturing (CAD/CAM) systems. This automatic conversion eliminates the costly and time consuming steps of having a person convert design drawings into a computer program for computer-controlled production equipment, such as robots or machine tools. CAD and CAD/CAM systems are not used by large automotive or electronics companies alone. Future Enterprises, the largest maker of wedding jewellery in the United States, reported that its CAD/CAM system reduced the time required to design and make jewellery from five months to one week.

Q3. What are the major steps towards total quality Management? Answer: Total Quality Management is a structured system for managing the quality of products, processes, and resources of an organization in order to satisfy its internal and external customers, as well as its suppliers. Its main objective is sustained (if not progressive) customer satisfaction through continuous improvement, which is accomplished by systematic methods for problem solving, breakthrough achievement, and sustenance of good results (standardization). There is no standard or hard-line procedure for implementing TQM. Every company can practice TQM in a manner it sees best for its organization. However, a companys TQM program must always be structured and internally standardized, i.e., everyone within an organization must practice TQM in the structured manner set forth by management. TQM may be considered as a collection of principles and processes that have been proven to be effective in business quality management overtime. It goes back to the teachings of Drucker, Juran, Deming, Ishikawa, etc, who each have studied and developed ideas for improving organizational management. A Major Step toward Total Quality Management By introducing a coherent set of audited processes to the product development cycle, a PDM system goes a long way towards establishing an environment for ISO9000 compliance and Total Quality Management (TQM). Man} the fundamental principals of TQM, such as empowerment of the individual to identify and solve problems, are inherent in the PDM structure. The form controls, checks, change management processes and defined responsibility also ensure that the PDM system you select, contributes to the organization conformance with international quality standards. Make-to-Order (MTO) and Make-to-Stock (NITS) One way to classify the manufacturing operations is by the amount of processing the product requires, after the company receives an order from customer. At one end of the processing spectrum is the make-to-order (MTO) company. This company does not begin processing the

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material for the component or product until it has received an order from the customer. In some cases, the company may not even procure the material and components until after it receives the order. This type of manufacturing operations is practiced when the company competes on the basis of product customisation and serves its customer base by providing unique and/or highly specialised items. The MTO company also bases its production planning on firm customer orders. At the opposite end of the spectrum is the make-to-stock (MTS) company, which manufactures products and places them in inventory before it receives customers orders. Either the customer purchases the products directly from the inventory at a retail outlet, or the company ships the product off-the-shelf from the finished goods inventory at the factory or at a distribution centre. MTS companies rely heavily on market analysis and demand forecasting in planning the production of their products with respect to the product mix and volume. Figure 4.2 shows the relation between the output variety (degree of customisation) and the type of manufacturing operation. As is evident from the graph, the output variety is highest when the company is operating in the make-to-order mode, as the companies can serve each and every individual customer in the way he/she wants. But the cycle time will be more and the cost of the product will also be more. But in the case of a MTS company, the products are already made and kept in the inventory for the customer to pick up. Here, the customer wont get any individual attention or customisation; he can buy what is available with the company. The MTS Company will be making products in lots and the cost of the products will be less as the economies of scale will be at work and there will not be any waiting period for the customer after placing the order. Assemble-to-Order (ATO) Another variation of the manufacturing operations is the assemble-to-order (ATO) company. The assemble-to-order company manufactures standardised, option modules according to the forecasts it has made and then assembles a specific combination, or package of modules, after receiving the customers order. The classic example is the automobile manufacturer. After receiving orders from a host of dealers, the manufacturer specifies the exact production schedule for the automobiles.

Above Figure shows Relation between output variety and the type of manufacturing process. The schedule is based on the options order by the customersautomatic transmission or manual transmission, air-conditioning, standard or digital control panel, leather, cloth or vinyl seating, a soon. Many components for assembling the automobiles would have be ordered or started into production before receiving the customers order based upon demand forecasts. Thus, the major processing that remains when the orders come in is assembly. This approach shortens the time between placement of the order and delivery of the product cycle time. Engineer-to-Order (ETO) Yet another variation of the manufacturing operations is the engineer-to-order (ETO) company. The engineer-to-order company is the ultimate in product variety, product customisation and flexibility. In this mode of operation, anything will be manufactured as per order but at a price. The expensive clothing of the bold and beautiful is an example of this kind of production. Products are made for each customer and even the minute details, for example, the texture and feel of the cloth, the color of the threads, and the size of the collar and soon will differ from one

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customer to another, depending upon the customers preferences. So the manufacturer cannot keep anything in inventory, he will have to order only once the customer has given his/her specifications. Obviously, the cost of production will be highest in this mode of production. Configure-to-Order (CTO) Along the broad spectrum of make-to-order manufacturing, there is a growing convergence between strictly assemble-to-order (limited options and features) and completely engineer-toorder (just about anything goes, at a cost) environments. This evolving environment is often referred to as configure-to-order. Using a rules-based product configuration system, configure-toorder (CTO) manufacturers are able to simplify the order entry process and retain engineer-toorder (ETO)flexibility, without maintaining bills of materials for every possible combination of product options. Manufacturing planning and control is broadly categorised as either make-toorder (MTO) or make-to-stock (MTS). The material and production planners within these communities confront unique challenges in the face of demand management. MTS manufacturers produce end items that are stocked and are ordinarily available, prior to receipt of a customer order. For MTO manufacturers, the identity of the end item is often unknown until the receipt of a customer order. Asa result, a certain level of standard subassemblies is typically inventoried to expedite delivery of the finished product. Traditionally, MTO manufacturers have had to choose between ATO and ETO. ATO suppliers face the need to extend product lines, add features, and increase flexibility to meet customer demands. ETO manufacturers feel a pressure to standardise at least some of their product lines to reduce costs and remain competitive. Today, the CTO environment has emerged in response to customers demands for individualised products with shortened lead-times, improved quality and competitive prices. Virtually any manufacturer that uses features, options, or variable dimensions is a candidate for entering the CTO environment. Transitioning to a CTO environment requires an evolution of the core planning tools that support the business. Traditional MRP tools rely on predefined bills of material and routings to support the planning process. For those moving from an ATO environment, existing bills and routings no longer represent the increasing end item availability and complexity. For material and production planners, the transition to CTO combines the challenges of planning in ATO and ETO environments. Planners are responsible for determining material and subassembly quantities at the right time. Faced with the lengthy new product introduction process, planners have virtually no advance information. The new or modified manufacturing bill is not available until after the customer order is received. Until a sales history is accrued for the newly introduced features and options, planners are not able to monitor and improve forecasts. Without software support tools, planners have few alternatives in developing a planning platform. Generally, bills and routings are constructed to reflect the manufacturing process. Each level of the bill and associated routing steps, represent individual shop orders. Planners work with a different set of bills and routings that are structured to represent demand percentages and load consumption of various options and defined common subassemblies. When customers request either a subtle change to a previous order or a complete new design, new part numbers have to be created, bills and routings developed or copied and modified, and costs assigned and rolled up Finally, accounting can calculate if there is any profit margin. By the time planners have access to the final bill and routing, material requirement! planning (MRP) and capacity planning (CP) have nothing to say except expedite and overload. One option is to pre-define all possible combinations of options and features, even if many will never be sold. This approach creates an engineering maintenance nightmare, however, and does nothing to facilitate forecasting Another option is to manually create part numbers, bills and routings on a as needed basis. Not only is this a time-consuming process, but it is also prone to errors. The only other option is to develop cumbersome combinations of special sales orders and phantom part numbers, creating an enterprise-wide nightmare. In response to the need for an accurate planning platform, several manufacturing software packages are now available with powerful configurations. The configuration process allows orders to be taken by answering questions with pre-defined rules that reduce order and entry errors. Many configurations also support the entry of a specific code string that allows customers to order just like the last time or just like the last time but make these yellow instead of red. The configuration then populates the attributes of the newly configured item, tests for configuration conflicts, and generates the appropriate bill of material, routing and price based on

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rules and calculations. The part number, assigned to the new item, can be formatted as an intelligent part number or simply given the next sequential assignment. The end item description and operation text in the routing reflects the result of the entry selections or text keyed directly by the operator. Setup and run times in the routing and quantity per assembly in the bills, can be calculated based on selections or user inputs. The key component of a configuration is the blueprint of valid combinations of features and options. This blueprint, or CTO model, uses a traditional bill of material model with parent and component relationships. Rules and calculations then ensure that the resulting configuration can be built by defining the way to build it and also establish a selling price. The flexibility of establishing this CTO model is clearly an important aspect of selecting the best configuration software for your business. Few functional areas are exempt from the impact of transitioning to a new way of entering sales orders; automatically generating new part numbers, bills and routings; building and shipping products; and recording the financial results of doing business. The design of the CTO model must support: Ease of quoting and order entry. Accurate pricing, discounting and commissioning. Essential customer documents such as packing lists and invoices, required shop paper, and applicable financial records. Input from product data management, sales and marketing, manufacturing, and finance is required to develop a CTO model that supports the integrated environment. It is important to understand how the configuration generates the "appropriate" bill of material and routing because they are at the core of the planning process. Typically, a CTO model represents a translation of product engineering rules that define relationships among product options, materials and manufacturing processes. Multiple CTO models differentiate different sets of valid relationships and required processes. The CTO model presents valid options within a model, and applies rules or calculations based on selections. For example, a CTO model of a personal computer would have a set of component options such as case styles (slim line or tower), CPUs (66 or 100 MHz), hard drives (520MB or 1.2GB), and monitors (VGA or SVGA). Structured beneath the options would be the real item part numbers. (There could be several levels of options before the real part number level.) Key considerations for material and production planners are the modularity of the real bills of material that will be combined in the configured end item, and the level at which sales analysis records will be stored. In many instances, the structure (if bills and routings exist at all) needs to be re-examined in light of how it will support the CTO model. With the introduction of configurations, the lengthy process of product introduction is greatly reduced by the ability of the configuration to automatically create new part numbers, generate bills and routings, and assign prices. However, unless the manufacturing bills have been reviewed and contoured to a CTO model, the result is often inaccurate/inadequate information, faster! With the architecture of the CTO model, and the ability to capture sales analysis information at the option level, planners have a tool to improve their planning models. The ability to capture sales analysis records on the options provides the ability to accrue data for use in forecasting software. For example, within the accessories option, each occurrence of a mouse, modem NIC, sound card and CD-ROM selection is captured as a sales analysis record. This information is available for summarisation at a month or year end. The data, can be reviewed and massaged, then input to the forecasting algorithms. Instead of forecasting at the accessory level with the use of percentage bills of material, information is automatically monitored and maintained at the detail level. The considerable power of configuration software provides the meanest< quickly develop accurate part, bill, and routing information. In addition t< maintaining sales analysis information at the configured item level, detail information by option is also available. This provides powerful database for the dissection of market data. It also becomes the foundation for improving forecasting and planning capabilities.

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Assignment (Set-1)
Subject code: MI0030

E-Commerce and Web Design


Q1. What are the developments that have contributed to the emergence of the internet as an electronic commerce infrastructure? Answer: The role of the Internet in the evolution of e-commerce has been socrucial that the history of ecommerce will remain incomplete without theinclusion of the history of the Internet. Using the Internet, you can communicate with other people throughout the world by means of e-mail, read online versions of newspapers, magazines, academic journals, and books, join discussion groups on almost any conceivable topic, participate in games and simulations, and obtain free computer software. In recent years, the Internet has allowed commercial enterprises to connect with one another and with customers. Today, all kinds of businesses provide information about their products and services on the Internet. Many of Business use internet to market or sell their product or services. The part of internet is known as WWW or World Wide Web or simply web, which is a subset of computers on the internet which are connected to each other in a specific way that makes those computers and their contents easily accessible to each other. The most important thing about the Web is that it includes an easy-to-use standard interface. This interface makes it possible for people who are not computer experts to use the World Wide Web to access a variety of Internet resources. In the early 1960s, the US Department of Defense became very much concerned about the possible effects of a nuclear attack on its computing facilities. The Defense Department realized the need for powerful computers for coordination and control. The powerful computers of that time were all large mainframe computers. So the Defense Department began examining ways to connect these computers to each other and also to weapon installations that were distributed all over the world. The Defense Department agency, charged with this task, hired many of the best communications technology researchers and funded research at leading universities and institutes to explore the task of creating a worldwide network that could remain operational even if parts of the network were destroyed by enemy military action or sabotage. These researchers worked to devise ways to build networks that could operate independently-that is, networks that would not require a central computer to control network operations. The worlds telephone companies were the early models for networked computers, because early networks of computers used leased telephone company lines for their connections. Telephone company systems of that time established a single connection between sender and receiver for each telephone call, and that connection carried all the data along a single path. When a company wanted to connect computers it owned at two different locations, it placed a telephone call to establish the connection and then connected one computer to each end of that single connection. The Defense Department was concerned about the inherent risk of this single-channel method for connecting computers. So its researchers developed a different method of sending information through multiple channels. In this method, files and messages are broken into packets and labeled electronically with codes about their origin and destination. The packets travel from computer to computer along the network until they reach their destination. The destination computer collects the packets and reassembles the original data from the pieces in each packet. Each computer that an individual packet encounters on its trip through the network determines the best way to move the packet forward to its destination. In 1969, these Defense Department researchers used this network model to connect four computers-one each at the University of California at Los Angeles, SRI International, the University of California at Santa Barbara, and the University of Utah. During the subsequent years, many researchers in the academic community connected to this network and contributed to technological developments that increased the speed and efficiency with which the network

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operated. At the same time, researchers at other universities were creating their own networks using similar technologies. The upshot was the Internet Protocol (IP), which enabled any number of computer networks to link up and act as one-and eventually it was given the name, the Internet. This meant that the communication network among the computers was not dependent on any single computer to operate, and so couldnt be shut down by destroying one or even several of the computers. Although the goals of the Defense Department network were still to control weapons systems and transfer research files, other uses of this vast network began to appear in the early 1970s. In 1972, a researcher wrote a program that could send and receive messages over the network. Thus was born the e-mail which came to be widely used very quickly. The number of network users in the military and education research communities continued to grow. Many of these new participants used the networking technology to transfer files and access remote computers. The network software included two tools for performing these tasks. File Transfer Protocol (FTP) enabled users to transfer files between computers, and Telnet let users log on to their computer accounts from remote sites. Both FTP and Telnet are still widely used on the Internet for file transfers and remote logins, even though more advanced techniques are now available that allow multimedia transmissions such as real-time audio and video clips. The first e-mail mailing lists also appeared on these networks. In 1979, a group of students and programmers at the Duke University and the University of North Carolina started Usenet, an abbreviation for Users News Network. Usenet allows anyone who connects to the network to read and post articles on a variety of subjects. The Defense Departments networking software became more widely used as academic and research institutes realized the benefits of having a common communications network. The explosion of personal computer use during that time also helped more people become comfortable with computing. In the late 1980s, these independent academic and research networks merged into one infra-structure-the Internet that links today hundreds and thousands of networks to one another. Q2. Explain the various E-commerce applications in industry. Answer: E-Commerce applications in Industry are as under: 1. Information Delivery Transport and E-Commerce Applications: Transport providers are principally telecommunications, cable, and wireless industries; computer networks including commercial networks such as CompuServe or America Online; and public networks such as the Internet. As noted earlier, the transport system does not function as a monolithic system, in the sense that there is no single Interstate 80 that connects the digital equivalent of New Yorks George Washington Bridge to San Franciscos Bay Bridge. Instead, the architecture is a mix of many forms of high-speed network transport whether it is land-based telephone; air-based wireless, modem-based PCs, or satellite transmissions. Literally, the transport routes for e-commerce applications are boundless. The distribution of information has become a competitive market with a combination of offense and defense. Playing on the defense are telephone companies and cable television companies, providers that have enjoyed monopoly positions for decades. Now, however, their enormous investments in wiring and equipment have become vulnerable to new competition. Playing offense are computer companies that offer new hardware capabilities and software programs with the potential to define new markets. The computer companies are banking on public networks such as the Internet, which is expanding at an astounding pace. Another emerging threat will be wireless communications known as personal communications services, a form of walk around telephony that bypasses the traditional telecommunications companies and uses wireless communications. Each highway route provider faces a different but no less daunting set of challenges: Telecom-based: These providers, the most visible (and vocal) of all competitors, include long-distance and local telephone service providers. For the phone companies, the breakthrough for e-commerce applications delivery came in 1991 when scientists found a way to do what everybody had assumed was impossible: squeeze a video signal through

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a telephone wire. The technology, known as asymmetric digital subscriber line (ADSL),has some unresolved drawbacks: It cannot handle live transmissions, and the picture it produces is not as clear as that provided by a well-tuned cable hookup. Researchers have recently improved the quality of the picture and with further compression expect to accommodate several channels of live video over a single telephone wire. Cable-based: These providers depend on coaxial cable as transport roads and will. Help determine which broadband applications and services the viewing public prefers. All leading cable providers are conducting trials with a variety of hardware and software; and most are expected to use fiber optic cable and coaxial wire as the delivery medium. The strategy among cable companies is to develop a "network neutral" content that uses digital compression and is adaptable to alternative delivery systems, such as wireless and satellites Computer network-based: These providers are often dial-up linkages of lower bandwidth when compared to telecom and cable highways. Bandwidth is analogous to the number of lanes on a highway. Examples of on-line transport architectures are CompuServe, Prodigy, and America Online, which often tend to serve as both a transport road and content providers. Wireless: These operators are typically radio-based-cellular, satellite and light-basedinfra red. In fact, some of the most exciting transport architectures are invisible. New wireless-based systems require new ways of thinking about information delivery. 2. Inventory Management and Organizational Applications: With borders opening up and companies facing stiff global competition for the first time in decades, managers know how they need to catch on quickly to better ways of doing international business. Adaptation would include moving toward computerized, paperless operations, to reduce trading costs and facilitate the adoption of new business processes. One often-targeted business process is inventory management. Solutions for these processes go by different names. In the manufacturing industry they are known as just-intime inventory systems, in the retail industry as quick response programs and in the transportation industry as consignment tracking systems. JIT Purchasing, considered an integral part of JIT. It has received considerable attention in electronic commerce. It allows a manufacturer to incorporate its suppliers efforts towards eliminating waste in the upstream portion of the manufacturing cycle. JIT purchasing focuses on the reduction of inventories throughout the logistical systems of the manufacturing firms involved and provides a careful audit of the production process. Quick Response Retailing: Quick response (QR) is a version of JIT purchasing tailored for retailing. 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. 3. Supply Chain Management: It is also called extending which means integrating the internal and external partners on the supply and process chains to get raw materials to the manufacturer and finished products to the consumer. SCM rests on the premise that product excellence alone fails to guarantee corporate success. In fact, customers expect many services, including the prompt delivery of products to precise locations with near-perfect administrative and physical quality. Supply Chain Management includes the following functions: Supplier Management Inventory Management Distribution Management Channel Management Payment Management

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Financial Management Sales Force Productivity 4. Work Group Collaboration Applications: For work group applications, e-commerce represents the holy grail of connectivity: a ubiquitous internet work that enables easy and inexpensive connection of various organizational segments to improve communication and information sharing among employees and to gather and analyze competitive data in real-time. E-commerce also facilitates sales force automation by enabling salespeople to carry product and reference information in one portable device. Other applications, such as videoconferencing, document sharing, multimedia, email are expected to reduce travel and encourage telecommuting. Businesses might also save on reduced processing costs by improving the distribution channel for documents and records to suppliers, collaborators and distributors. Q3. Describe the rules of thumb for designing good websites. Answer: Rules of thumb for designing good websites are listed as follows: 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. 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. 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. 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; contests; and events, such as hosting a chat session with a guest celebrity or public figure. Framing: A frame is a section of the viewers 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.

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Tables and Fonts: Tables are useful for providing structure to text that will not be lost due to the size of the visitors screen and the size of the viewing window, which is affected by the viewers 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 designers 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 websites. As mentioned earlier, try to keep line lengths less than 60 characters per line. 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 indifferent 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. 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 interlaces 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. 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. 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. 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 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. 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 toParenthood.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. 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 sites home page or other major pages. A navigation bar is a series of icon or text

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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. Maintaining consistency: Web pages design emphasizes consistency in its presentation. Theebusiness 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. 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.

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Assignment (Set-2)
Subject code: MI0031

Technology Management
Q1. What is Technology Forecasting? Classify the Technology Forecasting Approaches in brief? Discuss in detail the Product Development Process Phase in Technology Management? Answer: Technology Forecasting is a prediction of the future characteristics of useful machines, products, processes, procedures or techniques. There are two important points implied in this statement, viz.: A technological forecast deals with certain characteristics such as levels of technical performance (e.g. technical specifications including energy efficiency, energy levels, speed, power, safety, temperature, rate of technological advances (introduction of paperless office, picture phone, new materials, costs etc.) Technological forecasting also deals with useful machines, procedures or techniques. In particular, this is intended to exclude from the domain of technological forecasting those items intended for pleasure or amusement since they depend more on personal fads, foibles or tastes rather than on technological capability. The Technology Forecasting approaches are described in brief as under: There are two approaches to technology forecasting namely Exploratory and Normative. 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 characteristics 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 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. Examples of relevant normative techniques are: Relevance Trees Morphological Analysis Technology Watch and Technology Monitoring Delphi Analysis Trend impact analysis Technology substitution Product Development Phase in Technology Management: In most manufacturing firms the critical product development steps are similar. These functional steps include: A product proposal Design of the product with relevant technologies Capabilities of the manufacturing or software processes to build and support the product

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The marketing of the product to potential customers 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. It can be describes as an opportunity analysis which analyses the characteristics of demand and competition. The socio-technical environment which assists in defining the opportunity. The feasibility and capability requirements of the firms engineering, manufacturing and marketing resources which relate to the potential product solution. A market structure and market segmentation evaluation of the competitive economics, and design and communication alternatives. The overall firms line of business policies and strategies as they relate to the new product opportunity. Product Design and Technology In this step the design specifications, which include the technologies to be incorporated, are developed. Design and product engineering reviews modifies these specifications for manufacturing implementation. The acceptance of the design and technology is reached after the models of the product design and technology are developed and the product is stress-tested for design limitations and in compliance with customer requirements. 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. Market Release, Marketing and Servicing Products The final step that leads the product to the marketplace is the 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.
Q2. 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? Answer: 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 Lifecycle. 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. Syndication Stage: This stage represents the demonstration 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 factors. Diffusion Stage:

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This represents the market penetration of a new technology through acceptance of 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 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. Influence of IT revolution on Technological Changes: Information technology is all-pervasive and it affects all activities that contain some form of logical function. The source of the activity could be mechanical, electrical, pneumatic, hydraulic and even intellectual. Information Technology cuts horizontally across clerical, supervisory, managerial and communication activities which are common to all sectors of industry and also affect the design of products and services, processes and organizations producing the same. Some of the major changes brought about by developments in Information Technology are listed below: Changes in Products Changes in Services Substitutable Personal Services Progressive Services Explosive Services Changes in Processes Changes on Organization Generation and Development of Technologies: 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. Stages in Technology Generation: Basic research and invention Applied research and functional prototype Engineering prototype and testing Production prototype and pilot production Product testing and modification Initial production and sales Technology Development Approaches: In-House R&D Co-operative R&D Contract research R&D Collaboration Research Societies Research Companies Technology Strategy and its importance at the Corporate Level: Technology strategy is a planning document that explains how technology should be utilised as part of an organizations overall business strategy. The document is usually created by an organizations technology manager and should be designed to support the organizations overall business plan. There are many factors in competition and technology is only one factor. Yet some firms effectively use technology as a competitive advantage, others do not. One important factor is the successful use of technology has been the role of general management in technology strategy. In particular it has been managements ability to foster core technical competencies. The central idea here is that a business can be developed around a long-term consistent focus on

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a core technological competency. What it means is to have a core corporate technical competency to lead in both innovating new technology products and improving manufacturing quality and lowering cost of these products. With this not only can products be improved in future generations of technology, manufacturing processes can also be improved accordingly.

Q3. 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. Answer: Value Chain: In Michael E. Porters words 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. Porters Value Chain can be used to organize all the activities of a firm into categories of primary and support activities. Primary activities constitute the processes by which firms receive inputs, convert those inputs into outputs, get those outputs to customers, persuade customers to buy those products and support customers in using the products. Support activities are processes which provide support to the primary activities and to each other in terms of purchasing units, developing new and improved ways of doing activities, dealing with personnel and general management, accounting, finance and other activities which support the entire organization rather than individual activities. Value Chain Activities: Input/Output Analysis Alternative Technologies Ubiquitous ness of Technology Factors influencing the successful management of an innovation process: 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. Climate of Change: Innovation thrives in companies where the desired climate and environment are encouraged and spearheaded by the top management. Committed Style: Organization 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: The continuous cross-fertilization of innovative ideas through different groups/functions in the company is necessary. Larger R&D projects are in fact, implemented by teams functioning as mini company organisations. Creativity and Communication Skills: Management of innovation process requires (i) creative skills in an organization, removal of mental blocks, rewards for taking risks and facing challenges and (ii) capability to effectively communicate across various functions and disciplines. Control Systems: 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. FIVE STAGES OF INNOVATION PROCESS (EDWARD B. ROBERTS): STAGE 1: RECOGNITION OF OPPORTUNITY: In most cases the innovative process is prompted by an opportunity to fill market need and/or exploit a technology. 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 in stage1. This might include formal RD&E processes or informal thinking.

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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. 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. STAGE 5. TECHNOLOGY UTILIZATION AND DIFFUSION INTO THE MARKET PLACE: 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.

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Assignment (Set-2)
Subject code: MI0032

Java and Web Design


Q1. What are various parameters of an applet tag? Answer: 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> Life Cycle of an Applet You can describe the life cycle of an applet through four methods. These methods are: The init () method. The start () method. The stop () method. The destroy () method. The init () method The init () method is called the first time an applet is loaded into the memory of a computer. You can initialize variables, and add components like buttons and check boxes to the applet in the init () method. The start () method

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The start () method is called immediately after the init () method and every time the applet receives focus as a result of scrolling in the active window. You can use this method when you want to restart a process, such as thread animation, every time the applet receives the focus. The stop () method The stop () method is called every time the applet loses the focus. You can use this method to reset variables and stop the threads that are running. The destroy () method The destroy () method is called by the browser when the user moves to another page. You can use this method to perform clean-up operations like closing a file. The following diagram depicts the life cycle of an applet.

It is not mandatory to use any or all the methods of the applet. These methods are called automatically by the Java environment, and hence, must be declared public. None of the methods accept parameters. For example, public void init () { } All but the most trivial applets override a set of methods that provides the basic mechanism by which the browser or applet viewer interfaces to the applet and controls its execution. Four of these methods init(), start() , stop(), and destroy() are defined by Applet. Another, paint(), is defined by the AWT Component class. Default implementations for all of these methods are provided. Applets do not need to override those methods they do not use. However, only very simple applets will not need to define all of them. These five methods can be assembled into the skeleton shown here: // An Applet skeleton. import java.awt.*; import java.applet.*; /* <applet code="AppletSkel" width=300 height=100> </applet> */ public class AppletSkel extends Applet { // Called first. public void init(){ // initialization }

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/* Called second, after init(). Also called whenever the applet is restarted. */ public void start() { // start or resume execution } // Called when the applet is stopped. public void stop() { // suspends execution } /* Called when applet is terminated. This is the last method executed. */ public void destroy() { // perform shutdown activities Q2. Write a short note on following topic: A. Knock Knock Protocol B. Datagram Answer: A The Knock Knock Protocol 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 Knock Knock Server object contains the text of all the jokes and makes sure that the client gives the proper response to the servers 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. Answer: B 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, 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: Datagram Socket, Datagram Packet, and Multicast Socket An application can send and receive Datagram Packets through a Datagram Socket. In addition, Datagram Packets can be broadcast to multiple recipients all listening to a Multicast Socket. 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.

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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: Quote Server and QuoteServerThread. A single class implements the client application: QuoteClient. Lets investigate these classes, starting with the class that contains the main method for the server application. Working with a Server-Side Application contains an applet version of the QuoteClient class. The QuoteServer Class The QuoteServer class, shown here in its entirety, contains a single method: the main method for the quote server application. The main method simply creates a new QuoteServerThread object and starts it: import java.io.*; public class QuoteServer { public static void main(String[] args) throws IOException { new QuoteServerThread().start(); } } The QuoteServerThread class implements the main logic of the quote server. The QuoteServerThread Class When created, the QuoteServerThread creates a DatagramSocket on port 4445 (arbitrarily chosen).This is the DatagramSocket through which the server communicates with all of its clients. public QuoteServerThread() throws IOException { this("QuoteServer"); } public QuoteServerThread(String name) throws IOException { super(name); socket = new DatagramSocket(4445); try { in = new BufferedReader( new FileReader("one-liners.txt")); } catch (FileNotFoundException e) System.err.println("Couldn't open quote file. " + "Serving time instead."); } } Remember that certain ports are dedicated to well-known services and you cannot use them. If you specify a port that is in use, the creation of the DatagramSocket will fail. The constructor also opens a BufferedReader on a file named one-liners.txt which contains a list of quotes. Each quote in the file is on a line by itself. Now for the interesting part of the QuoteServerThread: its run method. The run method overrides run in the Thread class and provides the implementation for the thread. For information about threads, see Defining and Starting a Thread.

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The run method contains a while loop that continues as long as there are more quotes in the file. During each iteration of the loop, the thread waits for a DatagramPacket to arrive over the DatagramSocket. The packet indicates a request from a client. In response to the clients request, the QuoteServerThread gets a quote from the file, puts it in a DatagramPacket and sends it over the DatagramSocket to the client that asked for it. Lets look first at the section that receives the requests from clients: byte[] buf = new byte[256]; DatagramPacket packet = new DatagramPacket(buf,buf.length); socket.receive(packet); The first statement creates an array of bytes which is then used to create a DatagramPacket. The DatagramPacket will be used to receive a datagram from the socket because of the constructor used to create it. This constructor requires only two arguments: a byte array that contains clientspecific data and the length of the byte array. When constructing a DatagramPacket to send over the DatagramSocket, you also must supply the Internet address and port number of the packets destination. Youll see this later when we discuss how the server responds to a client request. The last statement in the previous code snippet receives a datagram from the socket (the information received from the client gets copied into the packet). The receive method waits forever until a packet is received. If no packet is received, the server makes no further progress and just waits. Now assume that, the server has received a request from a client for a quote. Now the server must respond. This section of code in the run method constructs the response: String dString = null; If (in == null) dString = new Date().toString(); Else dString = getNextQuote(); buf = dString.getBytes(); If the quote file did not get opened for some reason, then in equals null. If this is the case, the quote server serves up the time of day instead. Otherwise, the quote server gets the next quote from the already opened file. Finally, the code converts the string to an array of bytes. Now, the run method sends the response to the client over the DatagramSocket with this code: InetAddress address = packet.getAddress(); int port = packet.getPort(); packet = new DatagramPacket(buf, buf.length, address, port); socket.send(packet); The first two statements in this code segment get the Internet address and the port number, respectively, from the datagram packet received from the client. The Internet address and port number indicate where the datagram packet came from. This is where the server must send its response. In this example, the byte array of the datagram packet contains no relevant information. The arrival of the packet itself indicates a request from a client that can be found at the Internet address and port number indicated in the datagram packet. The third statement creates a new DatagramPacket object intended for sending a datagram message over the datagram socket. You can tell that the new DatagramPacket is intended to send data over the socket because of the constructor used to create it. This constructor requires four arguments. The first two arguments are the same required by the constructor used to create receiving datagrams: a byte array containing the message from the sender to the receiver and the length of this array. The next two arguments are different: an Internet address and a port number. These two arguments are the complete address of the destination of the datagram packet and must be supplied by the sender of the datagram. The last line of code sends the DatagramPacket on its way.

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When the server has read all the quotes from the quote file, the while loop terminates and the run method cleans up: socket.close(); The QuoteClient Class The QuoteClient class implements a client application for the QuoteServer. This application sends a request to the QuoteServer, waits for the response, and, when the response is received, displays it to the standard output. Lets look at the code in detail. The QuoteClient class contains one method, the main method for the client application. The top of the main method declares several local variables for its use: int port; InetAddress address; DatagramSocket socket = null; DatagramPacket packet;byte[] sendBuf = new byte[256]; First, the main method processes the command-line arguments used to invoke the QuoteClient application: if (args.length != 1) { System.out.println("Usage: java QuoteClient <hostname>"); return; } The QuoteClient application requires one command-line arguments: the name of the machine on which the QuoteServer is running. Next, the main method creates a DatagramSocket: DatagramSocket socket = new DatagramSocket(); The client uses a constructor that does not require a port number. This constructor just binds the DatagramSocket to any available local port. It doesnt matter what port the client is bound to because the DatagramPackets contain the addressing information. The server gets the port number from the DatagramPackets and sends its response to that port. Next, the QuoteClient program sends a request to the server: byte[ ] buf = new byte[256]; InetAddress address = InetAddress.getByName(args[0]); DatagramPacket packet = new DatagramPacket(buf, buf.length,address, 4445); socket.send(packet); The code segment gets the Internet address for the host named on the command line (presumably the name of the machine on which the server is running). This Inet Address and the port number4445 (the port number that the server used to create its DatagramSocket) are then used to create DatagramPacket destined for that Internet address and port number. Therefore the DatagramPacket will be delivered to the quote server. Note that the code creates a DatagramPacket with an empty byte array. The byte array is empty because this datagram packet is simply a request to the server for information. All the server needs to know to send a response the address and port number to which reply is automatically part of the packet. Next, the client gets a response from the server and displays it: packet = new DatagramPacket(buf, buf.length); socket.receive(packet); String received = new String(packet.getData(), 0, packet.getLength()); System.out.println("Quote of the Moment: " + received);

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To get a response from the server, the client creates a "receive" packet and uses the DatagramSocket receive method to receive the reply from the server. The receive method waits until a datagram packet destined for the client comes through the socket. Note that if the servers reply is somehow lost, the client will wait forever because of the no-guarantee policy of the datagram model. Normally, a client sets a timer so that it doesnt wait forever for a reply; if no reply arrives, the timer goes off and the client retransmits. When the client receives a reply from the server, the client uses the getData method to retrieve that data from the packet. The client then converts the data to a string and displays it. Running the Server and Client After youve 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. Q3. What are the different access specifiers in Java? How can we call a superclass constructor? Explain with a suitable example. Answer: 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. Example public class publicclass { public int publicvaraible; public void publicmethod () { } } 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. Example private int privatevariable; 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. Example protected int protectedvariable; Default Access

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If you do not specify any of the above access specifiers, the scope is friendly. A class, variable, or method that has friendly access is accessible to all the classes of a package. Consider the following set of classes. Class Y and Z inherit from class X. Class Z belongs to a package different than that of classes X and Y.

A method accessMe() has been declared in class X. The following table shows you the accessibility of the method accessMe() from classes Y and Z You can access a non-private variable or method using an object of the class as shown below: Someclass classobject = new someclass (); classobject.publicvariable; classobject.protectedmethod (); Although a subclass includes all of the members of its superclass, it cannot access those members of the superclass that have been declared as private. For example, consider the following simple class hierarchy: /* In a class hierarchy, private members remain private to their class. This program contains an error and will notcompile.*/ // Create a superclass.class A {int i; // public by defaultprivate int j; // private to A void setij(int x, int y) {i = x;j = y; } } // As j is not accessible here. class B extends A { int total; void sum() { total = i + j; // ERROR, j is not accessible here }

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} class Access {

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public static void main(String args[]) { B subOb = new B(); subOb.setij(10, 12); subOb.sum(); System.out.println("Total is " + subOb.total); } } This program will not compile because the reference to j inside the sum() method of B causes an access violation. Since j is declared as private, it is only accessible by other members of its own class. Subclasses have no access to it. Note: A class member that has been declared as private will remain private to its class. It is not accessible by any code outside its class, including subclasses. A Superclass Variable Can Reference a Subclass Object A reference variable of a superclass can be assigned a reference to any subclass derived from that superclass. You will find this aspect of inheritance quite useful in a variety of situations. For example, consider the following: class Ref Demo { public static void main(String args[]) { BoxWeight weightbox = new BoxWeight(3, 5, 7, 8.37); Box plainbox = new Box(); double vol;vol = weightbox.volume(); System.out.println("Volume of weightbox is " + vol); System.out.println("Weight of weightbox is " +weightbox.weight); System.out.println(); // assign BoxWeight reference to Box referenceplainbox = weightbox; vol = plainbox.volume(); // OK, volume() defined in Box System.out.println("Volume of plainbox is " + vol); /* The following statement is invalid because plain box does not define a weight member. */ // System.out.println("Weight of plainbox is " +plainbox.weight); } } Here, weightbox is a reference to BoxWeight objects, and plainbox is a reference to Box objects. Since BoxWeight is a subclass of Box, it is permissible to assign plainbox a reference to the weightbox object. It is important to understand that it is the type of the reference variable not the type of the object that it refers to that determines what members can be accessed. That is, when a reference to a subclass object is assigned to a superclass reference variable, you will have access only to those parts of the object defined by the superclass. This is why plainbox cant access weight even when it refers to a BoxWeight object. If you think about it, this makes sense, because the

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MBA (IS) Semester- 4

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superclass has no knowledge of what a subclass adds to it. This is why the last line of code in the preceding fragment is commented out. It is not possible for a Box reference to access the weight field, because it does not define one. Although the preceding may seem a bit esoteric, it has some important practical applications. Using super In the preceding examples, classes derived from Box were not implemented as efficiently or as robustly as they could have been. For example, the constructor for BoxWeight explicitly initializes the width, height, and depth fields of Box(). Not only does this duplicate code found in its superclass, which is inefficient, but it implies that a subclass must be granted access to these members. However, there will be times when you will want to create a superclass that keeps the details of its implementation to itself (that is, that keeps its data members private). In this case, there would be no way for a subclass to directly access or initialize these variables on its own. Since encapsulation is a primary attribute of OOP, it is not surprising that Java provides a solution to this problem. Whenever a subclass needs to refer to its immediate superclass, it can do so by use of the keyword super. Super has two general forms. The first calls the superclass constructor. The second is used to access a member of the superclass that has been hidden by a member of a subclass. Each use is examined here. Using super to Call Superclass Constructors 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 constructorweight = 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;

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private double depth; // construct clone of an object Box(Box ob) {

MBA (IS) Semester- 4

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// pass object to constructorwidth = 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 double volume() { return width * height * depth; } } // BoxWeight now fully implements all constructors. class BoxWeight extends Box { double weight; // weight of box // construct clone of an object BoxWeight(BoxWeight ob) { // pass object to constructorsuper(ob); weight = ob.weight; }

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Vishal Bibekar 510915951

MBA (IS) Semester- 4

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// 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 {public static void main(String args[]) { 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 = mybox2.volume(); System.out.println("Volume of mybox2 is " + vol); System.out.println("Weight of mybox2 is " + mybox2.weight); System.out.println();vol = mybox3.volume(); System.out.println("Volume of mybox3 is " + vol); System.out.println("Weight of mybox3 is " + mybox3.weight); System.out.println(); vol = myclone.volume(); System.out.println("Volume of myclone is " + vol); System.out.println("Weight of myclone is " + myclone.weight); System.out.println();

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vol = mycube.volume();

MBA (IS) Semester- 4

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System.out.println("Volume of mycube is " + vol); System.out.println("Weight of mycube is " + mycube.weight); System.out.println(); } } 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( ): // construct clone of an object 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. Lets 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. A Second Use for super The second form of super acts somewhat like this, except that it always refers to the superclass of the subclass in which it is used. This usage has the following general form: super.member Here, member can be either a method or an instance variable. This second form of super is most applicable to situations in which member names of a subclass hide members by the same name in the superclass. Consider this simple class hierarchy: // Using super to overcome name hiding. class A { int i; }

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Vishal Bibekar 510915951

MBA (IS) Semester- 4

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// Create a subclass by extending class A. class B extends A { int i; // this i hides the i in A B(int a, int b) { super.i = a; // i in A i = b; // i in B } void show() { System.out.println("i in superclass: " + super.i); System.out.println("i in subclass: " + i); } } class UseSuper { public static void main(String args[]) { B subOb = new B(1, 2); subOb.show(); } } This program displays the following: i in superclass: 1 i in subclass: 2 Although the instance variable I in B hides the I in A , super allows access to the I defined in the superclass. As you will see, super can also be used to call methods that are hidden by a subclass. The abstract class An abstract class defines common properties and behaviors of other classes. An abstract class is sued as a base class to derive specific classes of the same kind. It defines properties common to the classes derived from it. The abstract keyword is used to declare such a class. The classes declared using the abstract keyword cannot be instantiated. Syntax abstract class <class_name> { } You can also declare abstract methods. Abstract methods have public scope. The code below declares an abstract method for the class shape. abstract class shape { public abstract float calculateArea (); }

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Vishal Bibekar 510915951

MBA (IS) Semester- 4

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The abstract method calculateArea (), given above, is inherited by the subclasses of the shape class. The subclasses Rectangle, Circle and Hexagon implement this method in different ways. public class circle extends shape { float radius; public float calculateArea () { return radius*22/7; } } In the above example, the calculateArea () method has been overridden in the circle class. If the method is not overridden, the class will inherit the abstract method from the parent class. Any class that has a abstract method is abstract. Hence, you would not be able to create an object of the circle class. Therefore, it is necessary to override the calculateArea () method in the circle class. The final Keyword A class called password authenticates user login. You do not want anybody to change the functionality of the class by extending it. To prevent inheritance, use the final modifier. Example final class password { } You will also find final classes in JDK package. For example, the java.lang.String class has been declared final. This is done for security reasons. It ensure that any method that refers to the String class gets the actual String class and not a modified one.

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