Unit 5 Social Responsibility of business enterprises, New Economic Policy, Globalization, EXIM...

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Transcript of Unit 5 Social Responsibility of business enterprises, New Economic Policy, Globalization, EXIM...

Page 1: Unit 5 Social Responsibility of business enterprises, New Economic Policy, Globalization, EXIM policy and role of EXIM bank, FDI policy, Multinational.
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Unit 5Social Responsibility of business enterprises, New

Economic Policy, Globalization, EXIM policy and

role of EXIM bank, FDI policy, Multinational

Corporation (MNCs) and Transnational

corporations (TNCs), Global Competitiveness,

technology and competitive advantage, technology

transfer - importance and types,

Appropriate technology and technology adaptation.

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Corporate Social Responsibility (CSR)-(Meaning)• Social responsibility of business refers

to what the business does, over and above the statutory requirement, for the benefit of the society. The word responsibility connotes that business has some moral obligations to the society.

• Social responsibility means eliminating corrupt, irresponsible or unethical behavior that might bring harm to the community, its people, or the environment before the behavior happens.

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Social Responsibility ModelsArchie B. Carroll, who defines

corporate social responsibility as the entire range of obligations business has towards society, has proposed the following model – dividing four categories of obligations of corporate performance :

Economic ResponsibilitiesLegal Responsibilities Ethical Responsibilities Discretionary Responsibilities

(voluntary)

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Factors Affecting Social OrientationPromoters and Top ManagementBoard of DirectorsStakeholders and Internal Power Relationship

Societal FactorsGovernment and LawsCompetitorsResources

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Claimants of Social Responsibility of Business

Social Responsibili

ty of Business

Employees

Government

Local Community

Shareholder

Consumers

Society

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Arguments for social responsibility

Society and Business are interdependent

Better environment for businessPublic ImageBusiness has the resources and

powerHealthy relationship between society

and business.Moral responsibility

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Arguments against Social Responsibility

Profit MaximizationSociety has to pay the costLack of social skillsSocial Overhead costsLack of accountability

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NEW ECONOMIC POLICY - 1991 Economic policy refers to the actions

that governments take in the economic field. It covers the systems for setting interest rates and government budget as well as the labor market, national ownership, and many other areas of government interventions into the economy.

The New Economic Policy of India is expected to encourage foreign investments by Indian companies.

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Features of the New Policy Liberalization Integration with the world economy

(Globalization) Dismantling of tariff wall. Protection of foreign direct investment Upgrading the technology of production Financial stability (control of inflation,

recession, depression etc.) Outward looking policies Deregulation of domestic market

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Components of New Economic Policy

Correcting the disequilibrium in foreign exchange market through demand reduction

Reduction in Fiscal Deficit (Fiscal Policy)

Trade and Industrial Policy Policies concerning the Public Sector Dismantling of barrier to free flow of

capital Exchange rate

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Advantages of New Economic Policy

Increase in GDP growth rateIncrease in Foreign Direct InvestmentIncrease in Foreign ExchangeOutsourcing

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Disadvantages of New Economic Policy

Growing UnemploymentNeglect of AgricultureGrowing personal disparitiesInfrastructural inadequaciesWide spread povertyDemonstration effect (luxury goods)

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Outcome of New Economic Policy

LiberalizationPrivatizationglobalization

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EXIM POLICY (Meaning)EXIM Policy is a set of guidelines and instructions established by DGFT (Directorate General of Foreign Trade) in matters related the import and export of goods in India.

This policy is regulated by Foreign Trade Development and Regulation Act, 1992.

Governing body Directorate General of Foreign Trade.

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Objectives of EXIM PolicyTo accelerate the economyTo provide excess to essential raw

material, intermediate, componentTo enhance techno local strength

and efficiency of Indian agriculture, industry and services

To encourage the attainment of internationally accepted standards of quality

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FOREIGN TRADE POLICY (EXIM Policy), 2009-14

Objectives : the Foreign Trade Policy, 2009-14 was announced on August 27, 2009, in a situation of continuously falling exports due to the global recession, to achieve the following objective –

To arrest and reverse the declining trend of exports

To provide additional support especially to those sectors which have been hit badly by recession in the developed world.

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Targets of the EXIM policy (2009-14)

• Export growth of 15 per cent in 2010-11 and annual export of $200 billion by March 2011(compared to $168 billion in 2008-09).

• Annual export growth of around 25 per cent in the remaining three years of the policy i.e. up to 2014.

• Double India’s exports of goods and services by 2014.

• Double India’s share in global trade by 2020 (share in goods and services trade in 2008 was 1.64 %.

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EXIM policy (2009-14) ( Strategies)• The Government would follow a mix of Policy

measures including fiscal incentives, institutional changes, procedural rationalization, enhanced market access across the world and diversification of export markets.

• Improvement in infrastructure related to export

• Bring down transactional costs and providing full refund of all indirect taxes and levies.

• Several measures are being taken for simplification of procedures and reduction of transaction costs.

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EXIM policy (2009-14) - (Highlights) • Higher support for Market and Product

Diversification• Technological Up gradation Schemes• Town of Export Excellence• Agricultural Sector• Support for Green products and products

from North East• Project Exports• Directorate of Trade Remedy Measures• E-trade Project

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EXIM policy (2009-14) (Highlights) – contd.• Assistance to States for Infrastructure

Development of Exports (ASIDE)• Market Access Initiatives (MAI)• Brand Promotion and Quality• Duty Entitlement Passbook Scheme

(DEPB)• Special Economic Zones (SEZ)• Free Trade & Warehousing Zones

(FTWZ)

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Globalization (Meaning & Definition)Globalization is the process of integration of

economies across the world through cross border flow of factors, products and information.

The IMF defines globalization as “ the growing economic interdependence of countries worldwide through increasing volume and variety of cross border transactions in goods and services and of international capital flows, and also through the more rapid and widespread diffusion of technology”.

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Globalization – contd.Globalization encompasses the following: Doing, or planning to expand business globally. Giving up the distinction between the domestic

market and foreign market and developing a global outlook of the business.

Locating the production and other physical facilities on a consideration of the global business dynamics, irrespective of national considerations.

Basing product development and production planning on the global market considerations.

Global sourcing of factors of production like raw materials, components etc.

Global orientation of organizational structure and management culture.

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Drivers of GlobalizationThe main drivers of Globalization are –International trade (lower trade barriers

and more competition).Financial flows (foreign direct investment,

technology transfer/licensing, portfolio investment, and debt).

Communications (traditional media and the Internet).

Technological advances in transportation, electronics, bioengineering and related fields.

Population mobility, especially of labor.

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Globalization strategies Exporting : Local products are sold abroad.Importing: The process of acquiring products

abroad and selling them in domestic markets. Joint ventures: A firm operates in a foreign

country through co-ownership with local parties. Licensing and Franchising: one firm pays a fee

for rights to make or sell another company’s products. a firm pays a fee for rights to use another company’s name and operating methods.

Strategic Alliance: each partner hopes to achieve through cooperation things they couldn’t do alone.

Foreign InvestmentMergers & Acquisitions

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Advantages of Globalization1.Increased free trade between nations

2.Increased liquidity of capital allowing investors in developed nations to invest in developing nations

3.Greater interdependence of nation-states

4.Increased flow of communications allows vital information to be shared between individuals and corporations around the world

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Disadvantages of Globalization1.Decreases in environmental integrity as

polluting corporations take advantage of weak regulatory rules in developing countries

2.Greater chance of reactions for globalization being violent in an attempt to preserve cultural heritage

3.Companies face much greater competition. This can put smaller companies, at a disadvantage as they do not have resources to compete at global scale.

4.Economic depression in one country can trigger adverse reaction across the globe.

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Globalization of Indian companies( Obstacles)Government Policy and ProceduresPoor InfrastructureResistance to ChangePoor Quality ImageLack of ExperienceLimited R&D

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Global CompetitivenessThe World Economic Forum (WEF) defines

competitiveness as the set of institutions, policies and factors that determine the level of productivity of a country.

The WEF has been studying the competitiveness of nations for nearly three decades.

It uses the Global Competitiveness Index (GCI) for measuring national competitiveness taking into account the microeconomic and macroeconomic foundations of national competitiveness.

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Determinants of Global Competitiveness

Productivity (Competitiveness) of the country

Ability to sustain a high level Of income

Returns to investment

Economy’s growth potential

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The 12 Pillars of CompetitivenessBasic Requirements

InstitutionsInfrastructure

Macroeconomic stabilityHealth and primary education

Key for Factor – driven

economies

Efficiency EnhancersHigher education and training

Good market efficiencyLabor market efficiency

Financial market sophisticationTechnology readiness

Market size

Innovation and sophistication factorsBusiness sophistication

innovation

Key for Efficiency – driven

economies

Key forInnovation-driven

economies

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Global Competitiveness Report

The Global Competitiveness Report is a yearly report published by the World Economic Forum.

The first report was released in 1979.

The 2009-2010 report covers 133 major and emerging economies, down from 134 considered in the 2008-2009 report

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MNCs (Meaning & Definition)

• MNCs are huge industrial organizations which expand their industrial and marketing operations through a network of their branches or their Majority Owned Foreign Affairs (MOFAs). Ex- Coca Cola and IBM

• According to an ILO Report, “ the essential nature of multinational enterprise lies in the fact that its managerial headquarters are located in one country (home country) while enterprise carries out operations in number of other countries as well (Host Countries)”.

• MNC’s can develop through mergers and acquisitions (example: Tata Steel and Corus, $13,2 billion acquisition)

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MNCs (Meaning & Definition) – contd.• Jacques Maisonrouge, president of IBM World

Trade Corporation, defines an MNC as a company that meets five criteria –

• It operates in many countries at different levels of economic development.

• Its local subsidiaries are managed by nationals.• It maintains complete industrial organizations,

including R&D and manufacturing facilities, in several countries.

• It has a multinational central management.• It has multinational stock ownership.

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Transnational Company ( Meaning)

A Transnational Company (TNC) is a multinational in which both ownership and control are so dispersed internationally. There is no principal domicile and no one central source of power.”

Examples – Royal Dutch-shell and Unilever & Nestle

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Organization of MNCs

MNCs can organize its operations in different countries through either of the following alternatives:

BranchesSubsidiariesJoint Ventures CompaniesFranchise Holders

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Reasons for the Growth of MNCs

Expansion of market territoryMarketing superioritiesFinancial SuperioritiesTechnological SuperioritiesProduct Innovations

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Advantages of MNCsMNCs help increase the investment level and thereby

the income and employment in the host country.The transnational corporations have become vehicles

for the transfer of technology, especially to the developing countries.

They also bring managerial revolution in the host countries through professional management and the employment of highly sophisticated management techniques.

The MNCs enable the host countries to increase their exports and decrease their import requirements.

They help increase competition and break domestic monopolies.

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Disadvantages of MNCs• MNCs technology is designed for world wide

profit maximization, not the development needs of poor countries.

• MNCs may destroy competition and acquire monopoly powers.

• They retard growth of employment in the home country.

• The transnational corporations cause fast depletion of some of the non-renewable natural resources in the host country.

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Multinationals in IndiaTata motors to takeover Daewoo in

South Korea for $ 118 millionAmbanis to takeover flag international

for $211 millionRanbaxy to takeover RPG Aventis a

France based firmSundaram Fasteners has acquired Dana

Spicer Europe, the British arm of an MNC

Kirloskar Brothers took over SPP pumps, UK

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Technology TransferTechnology transfer, also called transfer

of technology (TOT), is the process of transferring skills, knowledge, technologies, methods of manufacturing, samples of manufacturing and facilities among governments or universities and other institutions to ensure that scientific and technological developments are accessible to a wider range of users who can then further develop and exploit the technology into new products, processes, applications, materials or services.

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TYPES OF TECHNOLOGY

1) EMERGING TECHNOLOGY- is an innovative technology that currently is undergoing bench scale testing, in which a small version of the technology is tested in a laboratory.

2) INNOVATIVE TECHNOLOGY- is a technology that has been field tested and applied to a hazardous waste problem at a site, but lack a long history of full-scale use.

3) ESTABLISHED TECHNOLOGY- is a technology for which cost and performance information is readily only after a technology has been used at many different sites and the result fully documented is that technology considered. established.

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Channels of technology flow

Public disseminationReverse engineeringPurposeful acquisition

Licensing Franchise Joint ventureTurnkey projectForeign direct investmentTechnological consortium & joint R&D

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Need for TOTTo Research and developmentTo commercial exploit

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(Patent Cooperation Treaty)

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April 21, 2023

CONTENT OF TECHNOLOGY TRANSFER

6 P

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Proper Research – By proper research we mean firstly that in which the result are reproducible and issues such as scale up, stability etc and other practical now has been addressed, also that in which problem were taken up in first place.

Proper Research – By proper research we mean firstly that in which the result are reproducible and issues such as scale up, stability etc and other practical now has been addressed, also that in which problem were taken up in first place.

Proper work- This refer to institutional and guidelines regarding IP Protection licensing modalities etc. which must be in place beforehand. In the absence of these, decision get delayed, lack of fairness in decision e.g. case of X institute, which came up with good technology but since no guidance were there, kept running around for two years and then gave up.

Proper work- This refer to institutional and guidelines regarding IP Protection licensing modalities etc. which must be in place beforehand. In the absence of these, decision get delayed, lack of fairness in decision e.g. case of X institute, which came up with good technology but since no guidance were there, kept running around for two years and then gave up.

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April 21, 2023

Pricing – most difficult and critical area of Transfer of technology. - Too high price can put off buyer, leaving the technology unsold. - Too price a result in revenue loss. - There are basically two model regarding pricing1)Price charged for a technology should depend upon market force i.e. impact of the technology irrespective of amount spent on developing it.2)Price charged should include all expenses involved in developing it.

Publicity – It is important to identify and then approach buyer i.e. adopt targeted Publicity and not blanket publicity. Specific journal, website, letters to manufacturer, personal selective visit etc. are some common approach which help in locating buyer.

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April 21, 202358

Partnership – this means working along with industry. Industry takes it up, manufacturer and makes available to society. Partnership are important to ensure your technology is successfully adopted simply conveying the details may not be sufficient.

Partnership – this means working along with industry. Industry takes it up, manufacturer and makes available to society. Partnership are important to ensure your technology is successfully adopted simply conveying the details may not be sufficient.

People’s Acceptance – It is no use trying to develop a technology which people will not accept e.g. due to religious reason/social concern etc. genetically modified food, irradiated vegetables processed beef in India, improved capsule made of non-vegetarian material.

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The macro view of international technology transfer

Counterparts the private enterprises of developed countries, LDs

(transferor), vs. the governments of less developed countries, LDCs (transferee)

The transferor economic gains of technology by strategically taking the

advantage of LDCs (transferees)The transferee

the governmental interventions for GDP growth contributed from the expected technology externalities of transfer

prevent the indigenous resources and employment from being exploited

The processes of technology transfer are more political than economic negotiation

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EXAMPLES OF TECHNOLOGY TRANSFER

CHINA

L – Phenyl alanineBy enzyme method

(Ref : APC – 4041 – TOF)

# Chinese company offer technology for the production of L- Phenyl alanine by the enzyme method.

Area of Application # Food industryAdvantage- Low input Advanced process No environmental contamination Clear production

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Types of Transfer of Technology

International — from the DCs to NICs or LDCs

Regional — indigenous vs. foreign Industrial — the threat of outsiders Corporation — licensing programInternal — the issue of transferring

price

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Technology Adaptation

The Technology Acceptance Model (TAM) is an information systems theory that models how users come to accept and use a technology. The model suggests that when users are presented with a new technology, a number of factors influence their decision about how and when they will use it, notably:

Perceived usefulness (PU) - This was defined by Fred Davis as "the degree to which a person believes that using a particular system would enhance his or her job performance".

Perceived ease-of-use (PEOU) - Davis defined this as "the degree to which a person believes that using a particular system would be free from effort”

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End of Unit 5

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