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INTERNAL ASSIGNMENT

Name of the candidate: NAMAN MALHOTRA Enrollment no. : 09915903910 Course:

MBA IV-B

Batch: 2010-2012 Subject:

GCSA

Subject code: MS 244 Topic of assignment: Internal assignment Subject Teacher’s name: Ms Shruti  Shruti 

 

Q1.  “India’s emergence as a major economic power over the last decade can be attributed in

a significant manner, to its sustained efforts at technological learning and capacity building.” capacity  building.”   In line of this statement trace out India’s technological development and and the role it has played in the process of enhancing India’s competitiveness.  competitiveness. 

Ans.

Introduction Indian technological developments since independence in 1947 have received substantial political support and most of their funding from the government. Technology initiatives have been important aspects of the government's five-year plans and usually are based on fulfilling short-term needs, while aiming to provide the institutional base needed to achieve long-term goals.

As India has striven to develop leading scientists and world-class research institutes, government-sponsored government-spo nsored scientific and technical t echnical developments have aided diverse areas such as agriculture, biotechnology, cold regions research, communications, environment, industry, mining, nuclear power, space, and transportation.

IT Sector There is an impression that India is world class in information technology. This is mainly due to the success of India's software industry and contribution of people of Indian origin in IT revolution in the United States. The fact that IT sector in the country has increased at an incredible rate of 35% per year for the last 10 years reinforces the view that India is world class in IT.

In IT, India has built up valuable brand equity over the years. In IT enabled services (ITES), India is emerging as one of the most preferred destinations for business process outsourcing (BPO). The importance of IT industry in the Indian economy can be gauge gauged d from the fact that its contribution to the national gross domestic product increased seven fold in one decade from 0.6% in 1994-95 to 4.3% in 2004-05.

 

Human Capital and Infrastructure Availability and adequate supply of skilled and knowledgeable work force and the quality of  infrastructure is critical for the growth of Technology industry in India. An important reason for the success of Indian Technology industry has been the large supply of technologically skilled workforce.

Infrastructure is the basic building block for development. Among various infrastructural facilities, electric power, transport, and law and order are the most fundamental, and probably the most difficult ones to tackle. The government needs to focus on improving law and order, transport infrastructure, and power supply in the country for the continuous development of  Technology industry. In the last decade, the telecom infrastructure in the country has improved significantly.

Pharmaceutical Industry Exports have become a major growth area for Indian drug manufacturers. Domestic pharmaceutical companies have thrived by using their low labor and research costs to export generic drugs to developed-country markets, especially the US. Exports are likely to maintain strong growth during the coming years.

Economic Development Technology has potential to raise the long-term growth prospects through increased productivity in almost every sector of the economy. The resurgence of the American economy since 1995 is a classic example of the same. Technology can play an important role in economic development in a broader sense, beyond  just economic growth. Obviously, this depends on comparative advantage in providing technologically improved products and services, global demand for these products and services, development of a robust domestic market, positive spill over to rest of the domestic economy, and impact on governance. governance.

Technology can influence the national economy in a number of ways.  It can create employment opportunities, reduce illiteracy, provide universal health service, and deliver  good governance. It can not only help the emerging sector such as ITES, biotechnology,

 

pharmaceuticall research, nanotechnology, pharmaceutica nanotechnology, etc., but also it is crucial for the development development of  strategically important sectors such as defence and intelligence, space research and development, weather forecasting, and transportation. tr ansportation.

For example, the information technology can play a major role in overall economic development of the country. India has a comparative advantage in the global IT sector at least in terms of cost. With large pool of workers having software and language skills, it is in a position to move toward producing higher value-added goods and services. Improvement in telecom infrastructure, increase in PC and internet connectivity, and decrease in prices of  hardware and internet connection have provided great opportunities for firms to strengthen domestic IT market. The use of PC, an important access device for IT, and internet needs to be encouraged further for larger economic benefits. This can easily be used to provide distance education, telemedicine, and variety of other information. This can also enhance access and delivery of government services to various stakeholders and citizens. Internal record keeping, flow of information, and tracking decision and performance can be improved with the use of IT. The use of IT in governance can directly benefit the people, particularly the poor ones

There are strong complementarities between technology and rest of the economy. It can enhance the productivity and efficiency in other industries. It can improve efficiency in areas such as accounting, procurement, inventor management, and production and operations management. Although labour unions usually raise concern with technology adoption due to fear of job loss, evidence suggests that increases in other kinds of job as a result of its use more than make up for job loss. Moreover, technology implementation may increase the productivity and/or quality more than that is feasible otherwise. The use of technology in rural banking and micro-finance may enhance efficiency in informal sector and can impact broader cross-section of population. Its access to farmers could benefit agriculture sector as well. Farmers can receive weather forecasts, market price quotes, advice on farming practice, offers to buy and sell livestock, and specific trainings.

To uplift the status of socially and economically weaker section of the society, the government needs to make IT accessible to them. Special efforts should be made to promote IT use in rural areas. There is a need to make significant capital investments in rural areas if  not for some altruistic reasoning, at least because of a desire to enter a domestic emerging

 

market that has been virtually untapped so far. There is a need to resolve resolve regulatory regulatory issues in communication, and reduction and rationalization of tariff structure on hardware and software to provide provide seamless seamless communication communication connectivity to rural areas and promote valueadded services services and micro enterprises to enhance economic economic well-being of rural commun community. ity.

 

model?  Q2. What is Porter’s diamond model? How is it different from the double diamond model? 

Ans.

Introduction The diamond model is an economical model developed by Michael Porter in his book  The Competitive Advantage of Nations, where he published his theory of why particular industries

become competitive in particular locations. Porter's diamond model suggests that there are inherent reasons why some nations, and industries within nations, are more competitive than others on a global scale. The argument is that the national home base of an organization provides organizations with specific factors, which will potentially create competitive advantages on a global scale.

Porter's model includes 4 determinants of national advantage, which are shortly described below:  Factor Conditions

Factor conditions include those factors that can be exploited by companies in a given nation. Factor conditions can be seen as advantageous factors found within a country that are subsequently build upon by companies to more advanced factors of competition. Factors not normally seen as advantageous, such as workforce shortage, can also be seen as a factor

 

potentially strengthening competitiveness, because this factor may heighten companies' focus on automation and zero defects. Some examples of factor conditions: 

  Highly skilled workforce



  Linguistic abilities of workforce



  Rich amount of raw materials



  Workforce shortage



Demand conditions

If the local market for a product is larger and more demanding at home than in foreign markets, local firms potentially put more emphasis on improvements than foreign companies. This will potentially increase the global competitiveness of local exporting companies. A more demanding home market can thus be seen as a driver of growth, innovation and quality improvements. For instance, Japanese consumers have historically been more demanding of  electrical and electronic equipment than western consumers. This has partly founded the success of Japanese manufacturers manufacturers within this sector. Related and Supporting Industries

When local supporting industries and suppliers are competitive, home country companies will potentially get more cost efficient and receive more innovative parts and products. This will potentially lead to greater competitiveness for national firms. For instance, the Italian shoe industry benefits from a highly competent pool of related businesses and industries, which has strengthened the competitiveness of the Italian shoe industry world-wide.

Firm Strategy, Structure, and Rivalry The structure and management systems of firms in different countries can potentially affect

competitiveness. German firms are oftentimes very hierarchical, which has resulted in advantagess within industries such as engineering. In comparison, Danish firms are oftentimes advantage more flat and organic, which leads to advantages within industries such as biochemistry and design. 

Likewise, if rivalry in the domestic market is very fierce, companies may build up capabilities that can act as competitive advantages on a global scale. Home markets with less rivalry may therefore be counterproductive, and act as a barrier in the generating of global competitive advantages such as innovation and development.

 

  By using Porter's diamond, business leaders may analyze which competitive factors may reside in their company's home country, and which of these factors may be exploited to gain global competitive advantages. Business leaders can also use the Porter's diamond model during a phase of internationalization, in which leaders may use the model to analyze whether or not the home market factors support the process of internationalization, and whether or not the conditions found in the home country are able to create competitive advantages on a global scale.

Finally, business leaders may use this model to asses in which counties to invest, and to assess which countries are most likely to be able to sustain growth and development.

Double Diamond Model Porter raises the basic question of international i nternational competitiveness: "Why do some nations succeed and others fail in international competition?" As its title suggests, the book is meant to be a contemporary equivalent of the wealth of nations, a new-forged version of Adam Smith's opus. Porter argues that nations are most likely to succeed in industries or industry segments where the national 'diamond' is the most favorable. The diamond has four interrelated components: (1) factor conditions, (2) demand conditions, (3) related and supporting industries, and (4) firm strategy, structure, and rivalry, and two exogenous parameters (1) government and (2) chance, as shown above.

This model cleverly integrates the important variables determining a nation's competitiveness into one model. Most other models designed for this purpose represent subsets of Porter's comprehensive model. However, substantial ambiguity remains regarding the signs of  relationships and the predictive power of the 'model'. 'model'.

[11]

 This is mainly because Porter fails to

incorporate the effects of multinational activities in his model. To solve this problem, Dunning, for example, treats multinational activities as a third exogenous variable which should be added to Porter's model. In today's global business, however, multinational activities represent much more than just an exogenous variable. Therefore, Porter's original diamond model has been extended to the generalized double diamond model whereby multinational activity is formally incorporated into the model.

 

Firms from small countries such as Korea and Singapore target resources and markets not just in a domestic context, but also in a global context (Global targeting also becomes very important to firms from large economic systems such as the United States). Therefore, a nation's competitiveness depends partly upon the domestic diamond and partly upon the 'international' diamond relevant to its firms. The figure on the left side shows the generalized double diamond where the outside one represents a global diamond and the inside one a domestic diamond. The size of the global diamond is fixed within a foreseeable period, but the size of the domestic diamond varies according to the country size and its competitiveness. The diamond of dotted lines, between these two diamonds, is an international diamond which represents the nation's competitiveness as determined by both domestic and international parameters. The difference between the international diamond and the domestic diamond thus represents international or multinational activities. The multinational activities include both outbound and inbound foreign direct investment (FDI).

In the generalized double diamond model, national competitiveness is defined as the capability of firms engaged in value added activities in a specific industry in a particular country to sustain this value added over long periods of time in spite of international competition. Theoretically, two methodological differences between Porter and this new model are important. First, sustainable value added in a specific country may result from both domestically owned and foreign owned firms. Porter, however, does not incorporate foreign activities into his model as he makes a distinction between geographic scope of competition and the geographic locus of competitive advantage. Second, sustainability may require a geographic configuration spanning many countries, whereby firm specific and location advantages present in several nations may complement each other. In contrast, Porter argues that the most effective global strategy is to concentrate as many activities as possible in one country and to serve the world from this home base. Porter's global firm is just an exporter and his methodology does not take into account the organizational complexities of true global operations by multinational firms.

 

company . Do you think it has Q3.  Ikea is the world’s largest home furnishings retail chain company. been successful successful even even if it offers offers relatively standardized

product and and product line in a

business with strong cultural influence.with this approach? Comment on the Global Competitiveness of Ikea and explain the factors responsible responsible for the same.

Ans.

Introduction Ikea Svenska AB, founded in 1943 is the world's largest furniture retailer which specializes in stylish but inexpensive Scandinavian designed furniture. Ikea's success in the retail industry can be attributed to its vast experience in the retail market, product differentiation, and cost leadership. The company is, perhaps, one of the World's most successful multinational retailing firms operating as a global organization based on its unique concept that the furniture is sold in kits that are assembled by the customer at home.

Story of IKEA It has been successful successful even if it offers relatively stand standardized ardized product and product product line in a business . Ikea's success is based on the relatively simple idea of keeping the cost between manufacturers and customers down. Costs are kept under control starting at the design level of the value-added chain. Ikea also keeps costs down by packing items compactly in flat standardized embalages and stacking as much as possible to reduce storage space during and after distribution in the logistics process.

In the case of Ikea, a standardized product strategy does not mean complete cultural insensitivity. The company company responds to globally globally emerging consumer ta tastes stes and preferences. preferences. Retail outlets all over the world carry the basic product range which is universally accepted, but also places great emphasis on the product lines that appeal to local customer preferences The corporate culture of Ikea is built upon continuous strife for improvement in all areas of  the value chain as an effective way to shape the industry to better fit Ikea's future strategies. Due to the uniqueness of Ikea's strategic positioning, being the largest competitor in its field, the firm has the advantage of setting the phase of the industry .Bureaucracy is fought at all levels in the organization.. In addition, the culture emphasizes efficiency and low cost which is not to be achieved on the expense of quality or service. Global competitiveness of IKEA

 

and the factors responsible for the same Ikea places great emphasis on Porters three generic strategies to improve its competitiveness in the international market place. In addition, Ikea has improved its value-chain by a co-operative focus on suppliers and customers. The firm emphasizes centralized centralized control and standardization of the product mix.

The strategies for global competitiveness adopted by IKEA are:   Achieve overall low-cost leadership in the industry indu stry  

According to IKEA, a cost leadership strategy involves placing great emphasis on efficiency in all organizational activities in order to reduce the overall costs of products delivered to customers. A generic low cost leadership strategy will only work effectively when the organization can provide products and/or services at a lower cost than the competition.

   Market products that are differentiated 



On the other hand, a differentiation strategy is aimed at delivering products and/or services that are different from the product mix of the competition. Differentiated products are often marketed at premium prices in order to cope with added costs of differentiation, leading to higher profit margins.

  Focus on market segments for growth in cost and/or differentiation  



The focus strategy involves a mix of the two earlier earlier discussed generic generic strategies. It focuses focuses on cost leadership and product differentiation simultaneously in one particular market segment, or a niche.

As indicated in Ikea's mission statement, the company is in business to produce high quality products at a low cost. This would support a cost leadership strategy. However, the company is also applying an indirect differentiation strategy due to its unique way of incorporating the customer in the value chain.

 Ikea also providesprovides-

  Wide product range to all the customers be it domestically or worldwide



  The products are based on the functional approach to design i.e. the the products are



attractive and easy to use.

  It also provides right type of quality which is required for use.



 

Under Ikea's global strategy, suppliers are usually located in low-cost nations, with close proximity to raw-materials and reliable access to distribution channels. These suppliers produce highly standardized products intended for the global market, which size provides the t he firm with the opportunity take the advantage of economies of scale factors. Ikea's role is not only to globally integrate operations and centrally design products, but also to find an effective combination of low cost, standardization, technology and quality.

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