Transcript unit 5 BE(Social Responsibility of business

Unit
Social 5
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.
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.
Social Responsibility Models
 Archie 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 Responsibilities
 Legal Responsibilities
 Ethical Responsibilities
 Discretionary Responsibilities (voluntary)
Factors Affecting Social
Orientation
 Promoters and Top Management
 Board of Directors
 Stakeholders and Internal Power
Relationship
 Societal Factors
 Government and Laws
 Competitors
 Resources
Claimants of Social Responsibility
of Business
Shareholde
r
Employe
es
Local
Community
Social
Responsibility
of Business
Governmen
t
Consumer
s
Society
Arguments for social responsibility
 Society and Business are interdependent
 Better environment for business
 Public Image
 Business has the resources and power
 Healthy relationship between society and
business.
 Moral responsibility
Arguments against Social
Responsibility
Profit Maximization
Society has to pay the cost
Lack of social skills
Social Overhead costs
Lack of accountability
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.
Features of the New Policy
 Liberalization
 Integration with the world economy
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(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
Components of New
Economic Policy
 Correcting the disequilibrium in foreign
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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
Advantages of New
Economic Policy
 Increase in GDP growth rate
 Increase in Foreign Direct Investment
 Increase in Foreign Exchange
 Outsourcing
Disadvantages of New
Economic Policy
 Growing Unemployment
 Neglect of Agriculture
 Growing personal disparities
 Infrastructural inadequacies
 Wide spread poverty
 Demonstration effect (luxury goods)
Outcome of New Economic
Policy
 Liberalization
 Privatization
 globalization
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.
Objectives of EXIM Policy
 To accelerate the economy
 To provide excess to essential raw material,
intermediate, component
 To enhance techno local strength and
efficiency of Indian agriculture, industry
and services
 To encourage the attainment of
internationally accepted standards of
quality
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.
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 %.
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.
EXIM policy (2009-14) - (Highlights)
• Higher support for Market and Product
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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
EXIM policy (2009-14) (Highlights)
– contd.
• Assistance to States for Infrastructure
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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)
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”.
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.
Drivers of Globalization
The 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.
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 Investment
 Mergers & Acquisitions
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Advantages of Globalization
1. 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
Disadvantages of Globalization
1. 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.
Globalization of Indian companies
( Obstacles)
 Government Policy and Procedures
 Poor Infrastructure
 Resistance to Change
 Poor Quality Image
 Lack of Experience
 Limited R&D
Global Competitiveness
 The 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.
Determinants of Global
Competitiveness
Productivity (Competitiveness) of the country
Ability to sustain a high
level Of income
Returns to investment
Economy’s growth potential
The 12 Pillars of Competitiveness
Basic Requirements
Institutions
Infrastructure
Macroeconomic stability
Health and primary education
Efficiency Enhancers
Higher education and training
Good market efficiency
Labor market efficiency
Financial market sophistication
Technology readiness
Market size
Innovation and sophistication factors
Business sophistication
innovation
Key for
Factor – driven
economies
Key for
Efficiency – driven
economies
Key for
Innovation-driven
economies
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
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). ExCoca 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)
MNCs (Meaning & Definition) –
contd.
• Jacques Maisonrouge, president of IBM World Trade
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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.
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
Organization of MNCs
MNCs can organize its operations in different
countries through either of the following
alternatives:
 Branches
 Subsidiaries
 Joint Ventures Companies
 Franchise Holders
Reasons for the Growth of MNCs
 Expansion of market territory
 Marketing superiorities
 Financial Superiorities
 Technological Superiorities
 Product Innovations
Advantages of MNCs
 MNCs help increase the investment level and thereby the
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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.
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.
Multinationals in India
 Tata motors to takeover Daewoo in South Korea
for $ 118 million
 Ambanis to takeover flag international for $211
million
 Ranbaxy to takeover RPG Aventis a France
based firm
 Sundaram Fasteners has acquired Dana Spicer
Europe, the British arm of an MNC
 Kirloskar Brothers took over SPP pumps, UK
Technology Transfer
 Technology 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.
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 TECHNOLOGYis 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.
Channels of technology flow
 Public dissemination
 Reverse engineering
 Purposeful acquisition
 Licensing
 Franchise
 Joint venture
 Turnkey project
 Foreign direct investment
 Technological consortium & joint R&D
Need for TOT
 To Research and development
 To commercial exploit
(Patent Cooperation Treaty)
COMMERCIALIZATI
ON
PROMOTION
COLLABORATION
INNOVATION
INVESTMENT
RESEARCH &
DEVELOPMENT
INFORMATION &
COMMUNICATION
ASSESSMENT
CONTENT OF TECHNOLOGY TRANSFER
Proper
Research
People’s
Acceptance
Paper work
6P
Partnership
Pricing
Publicity
8 April 2016
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.
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 pricing
1) 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.
8 April 2016
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.
8 April 2016
58
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
EXAMPLES OF TECHNOLOGY TRANSFER
# Chinese company offer
technology for the production of LPhenyl alanine by the enzyme
method.
Area of Application
# Food industry
Advantage
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Low input
Advanced process
No environmental contamination
Clear production
CHINA
L – Phenyl alanine
By enzyme method
(Ref : APC – 4041 – TOF)
Types of Transfer of Technology
 International
 Regional
 Industrial
 Corporation
 Internal
—
—
—
—
—
from the DCs to NICs or LDCs
indigenous vs. foreign
the threat of outsiders
licensing program
the issue of transferring price
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”
End of Unit 5