CU-BCOM-SEM-III-Business Environment

According to McMillan Dictionary (1985) \"Consumerism is concerned with protecting consumers from all organizations with which there is exchanged relationship. It encompasses the set of activities of government, business, independent organizations and concerned consumers that are designed to protect the rights of consumers\". The Chamber's Dictionary (1993) defines Consumerism as the protection of the interests of the buyers of goods and services against defective or dangerous goods etc. \"Consumerism is a movement or policies aimed at regulating the products or services, methods or standards of manufacturers, sellers and advertisers in the interest of buyers, such regulation maybe institutional, statutory or embodied in a voluntary code occupied by a particular industry or it may result more indirectly from the influence of consumer organizations\" In the current day scenario, the consumer is the focal point of any business. Consumers' satisfaction will benefit not only business but government and society as well. So consumerism should not be considered as consumers' war against any business. It is a collective consciousness on the part of consumers, business, government and civil society to enhance consumers' satisfaction and social welfare which will in turn benefit all of them and finally make the society a better place to live in. Components of Consumerism There are various components of consumerism. First and foremost is self-protection by consumers. Consumer must be aware of his rights, raise voice against exploitation and seek redressal of his grievances. Consumers' consciousness determines the effectiveness of consumerism. It is the duty of the consumer to identify his rights and to protect them. Voluntary Consumer Organizations engaged in organizing consumers and encouraging them to safeguard their interests is another important element of consumer movement. The success of consumerism lies in the realization of the business that there is no substitute for voluntary self-regulations. Little attention from the business will not only serve consumers interest but will also benefit them. Some businesses in India have come together to adopt a code of conduct for regulating their own activities. Regulation of business through legislation is one of the important means of protecting the consumers. Consumerism has over the time developed into a sound force designed to aid and protect the consumer by exerting, legal, moral and economic pressure on producers and providers in some of the developed countries 10.4 CONSUMER PROTECTION ACT, 1986 “An Act to provide for better protection of the interests of consumers and for that purpose to make provision for the establishment of consumer councils and other authorities for the settlement of consumers' disputes and for matters connected therewith.”(According to Consumer Protection Act, 1986) 201 CU IDOL SELF LEARNING MATERIAL (SLM)

Consumer Protection Act, 1986 seeks to promote and protect the interest of consumers against deficiencies and defects in goods or services. It also seeks to secure the rights of a consumer against unfair or restrictive trade practices. This act was passed in Lok Sabha on 9th December,1986 and Rajya Sabha on 10th December, 1986 and assented by the President of India on 24th December, 1986 and was published in the Gazette of India on 26th December, 1986. 10.4.1 Jurisdiction and Objective The judicial system set up under the Consumer Protection Act, 1986, consists of consumer courts at the district level, state level and national level. These are known as District Forum, State Consumer Disputes Redressal Commission (State commission) and National Consumer Disputes Redressal Commission (National Commission). Any individual consumer or association of consumers can lodge a complaint in writing with the district, state or National level forum, depending on the value goods and claim for compensation, if any. The district forum has the jurisdiction to deal with all complaints where the value of the goods or services or the compensation claimed does not exceed Rs 20 lakhs. The state commissions are empowered to deal with cases where the value or amount involved exceed Rs 20 lakhs but does Consumer Protection 161 not exceed Rs One Crore. The State commissions also deal with appeals and against orders of the district forum. The National commission has the juistisdiction to take up all claims and grievances exceeding the value of Rs. one crore. It has also appellate jurisdiction, that is, power to deal with appeals against orders passed by state commissions. An aggrieved party can appeal to the Supreme Court against the orders of the National Commission 10.5 CONSUMER PROTECTION COUNCILS 10.5.1 Three – tier Enforcement machinery The Consumer Protection Act provides for setting up of a three-tier enforcement machinery at the District, State, and the National levels, known as the District Consumer Dispute Redressal Forum, State Consumer Disputes Redressal Commission and the National Consumer Disputes Redressal Commission. While the National Commission is set up by the Central Government, the State Commissions and the District Forums are set up, in each State and District, respectively, by the State Government concerned. 202 CU IDOL SELF LEARNING MATERIAL (SLM)

National Supreme Commission Court District State Forum Commission Fig 10.1 Three – tier Enforcement machinery as per Consumer Protection Act, 1986 1. District Forum: District forum consists of a president and two other members. The president can be a retired or working judge of District Court. They are appointed by state government. The complaints for goods or services worth Rs 20 lakhs or less can be filed in this agency. The agency sends the goods for testing in laboratory if required and gives decisions on the basis of facts and laboratory report. If the aggrieved party is not satisfied by the jurisdiction of the district forum then they can file an appeal against the judgment in State Commission within 30 days by depositing Rs 25000 or 50% of the penalty amount whichever is less. 2. State Commission: It consists of a president and two other members. The president must be a retired or working judge of high court. They all are appointed by state government. The complaints for the goods worth more than Rs 20 lakhs and less than Rs 1 crore can be filed in State Commission on receiving complaint the State commission contacts the party against whom the complaint is filed and sends the goods for testing in laboratory if required. In case the aggrieved party is not satisfied with the judgment then they can file an appeal in National Commission within 30 days by depositing Rs 3500 or 50% of penalty amount whichever is less. 3. National Commission: The national commission consists of a president and four members one of whom shall be a woman. They are appointed by Central Government. The complaint can be filed in National Commission if the value of goods exceeds Rs 1 crore. On receiving the complaint, the National Commission informs the party against whom complaint is filed and sends the goods for testing if required and gives judgment? If aggrieved party is not satisfied with the judgment then they can file a complaint in Supreme Court within 30 days. 203 CU IDOL SELF LEARNING MATERIAL (SLM)

10.5.2 Consumer Disputes Redressal Agencies Procedure for redressal of consumer grievances As stated in the previous section consumer complaints can be filed by an individual consumer or association of consumers. The complaint may be filed before the District Forum for the district where the cause of action has arisen or where the opposite party resides, or before the State Commission notified by the state government or the union territory, or it can be filed before the National Commission at New Delhi. There is no fee charged for filing a complaint. The complaint may be filed by the complainant or his/her authorized agent in person, or it may be sent by post. Five copies of the complaint are generally required to be filed along with the following information. i) Name, description and address of the complainant; ii) Name, description and address of the opposite party or parties, as the case may be; iii) Facts relating to the complaint and when and where it arose; iv) Documents, if any, in support of the allegations contained in the complaint (like cash memo, receipt, etc.) v) The nature of relief which the complainant is seeking. The complaint should be signed by the complainant or his/her authorized agent. It has to be addressed to the president of the District Forum or State Commission or National Commission. A complaint is required to be filed within a period of two years from the date on which the cause of action arose. If these are delay and it is excused by the concerned Forum/Commission, the reason must be on record. Complaints are expected to be decided, as far as possible, within three months from the date of notice received by the opposite parties. For those complaints which require laboratory analysis or testing of products, the period is extended to five months. Depending on the nature of complaint and relief sought by the consumer and facts of the case, the redressed Forum/Commission may order one or more of the following reliefs: (a) Removal of defect in goods/deficiency in services. (b) Replacement of the goods/restoration of the service. (c) Refund of the price paid for goods or excess charge paid for service. (d) Compensation for loss or injury suffered. 10.5.3 Consumer Complaints Department of Consumer Affairs has been receiving a very large number of complaints from the consumers regarding shortfall in the supplies/expectations of the consumers. The complaints cover a wide range of subjects like supply of defective refrigerators, T.V. Sets, use of poor material by the builders in the construction of flats, non-refund of fixed deposit 204 CU IDOL SELF LEARNING MATERIAL (SLM)

amounts by companies on maturity and complaint against unfair trade practice against service providers, etc. Consumer Grievance Redressal Cell (CGRC) and Consumer Coordination Council (CCC) The department had set up a Consumer Grievance Redressal Cell (CGRC) in February 2002, for providing services for redressal of complaints of the consumers belonging to the following categories:  Sale of defective goods or deficient services and charging of higher prices, etc.  General grievances including those received from the Cabinet Secretary and the PMO related to consumer matters.  Attending to the consumer complaints appearing in the columns of the newspapers to the extent possible. Also, complaints regarding delay in disposal of pending cases with the various districts/States/National Commission were received and processed and necessary follow up action were taken up as pro-active measures in order to redress their grievances to their satisfaction. The Redressal Cell had received 2272 complaints up to 31st March 2007. These complaints were forwarded to the Consumer Coordination Council (CCC) for redressal regarding replacement of goods, re-installation of telephone/electricity, rectification of wrong bills, possession of allotted flats, payment of amounts due to the investors on maturity, etc. The Consumer Grievance Redressal Cell and Consumer Coordination Council do not have any statutory powers to take action on the complaints of consumers. Hence, they forward the complaints to the concerned authorities to get the redressal. 10.5.4 Remedial Action Redressal Mechanism as per the Consumer Protection Act Who Can File a Complaint? A complainant in relation to any goods or services may be filled by-  A consumer or  Any voluntary consumer association registered under the Companies Act, 1956 (1of 1956)or under any other law for the time being in force or  The Central Government or any State Government; or  One or more consumers, where there are numerous consumers having the same interest or  In case of death of a consumer, his legal heir or representative A power of attorney holder cannot file a complaint under the Act. 205 CU IDOL SELF LEARNING MATERIAL (SLM)

What Constitutes a Complaint? A complaint means any allegation in writing made by a complainant that-  An unfair trade practice or a restrictive trade practice has been adopted by any trader or service provider  The goods bought by him or agreed to be bought by him; suffer from one or more defects  The services hired or availed of or agreed to be hired or availed of by him suffer from deficiency in any respect  A trader or service provider, as the case may be, has charged for the goods or for the service mentioned in the complaint a price in excess of the price fixed by or under any law for the time being in force or displayed on the goods or any package containing such goods or displayed on the price list exhibited by him by or under any law for the time being in force or agreed between the parties  Goods which will be hazardous to life and safety when used or being offered for sale to the public  Services which are hazardous or likely to be hazardous to life and safety of the public when used, are being offered by the service provider which such person could have known with due diligence to be injurious to life and safety. How to File a Complaint? A complaint can be filed on a plain paper. It should contain-  The name description and address of the complaints and the opposite party  The Facts relating to complaint and when and where it arose.  Documents in support of allegations in the complaint  The relief which the complainants is seeking  The complaint should be signed by the complainants or his authorized agent. No lawyer required for filing the complaint and Nominal court fee Where to File a Complaint? (depends upon the cost of the goods or services or the compensation asked)  District Forum: if it is less than Rs. 20 lakhs  State Commission: if more than Rs. 20 lakhs but less then Rs. 1 crore  National Commission: if more than Rs. 1 crore 10.5.5 Penalties Penalties and administrative fines 206 CU IDOL SELF LEARNING MATERIAL (SLM)

Any person convicted of an offence is liable for a fine or imprisonment for a period not exceeding 12 months, or both a fine and imprisonment. The NCT may impose an administrative fine in respect of prohibited or required conduct. An administrative fine imposed may not exceed the greater of 10 per cent of the respondent's annual turnover during the preceding financial year, or Rs 1000000. Clearly, non-compliance with the Act will result in regulatory risk for any business that transacts with consumers. However, the reputational risk of non-compliance could be as severe. Businesses would be well advised to actively prepare for the Act to mitigate these risks. This will protect their business interests as well as their reputations and help them to avoid negative public opinion and potential loss of business arising from, for example, damaging media reports about their non-compliance with the Act or complaints by consumers about their disregard for consumer rights in general and for the purposes of the Consumer Protection Act. 10.6 SUMMARY  Rights of the consumers are (i) Right to safety (ii) Right to be informed (iii) Right to choose (iv) Right to be heard (v) Right to seek redressal (vi) Right to consumer education  Consumer protection refers to the steps necessary to be taken or measures required to be accepted to protect consumers from business malpractices.  Nature of problems faced by consumers  Adulteration of goods  Sale of spurious products Business Studies 164  False weights and measures  Sale of duplicate items  Hoarding and black marketing  Tie-in-sales  Offering gifts  Misleading advertisements  Sale of substandard goods  Need for consumer protection- the necessity of adopting measures to protect the interest of consumers arises mainly due to their helpless position and the unfair business practices.  Parties to consumer protection 207 CU IDOL SELF LEARNING MATERIAL (SLM)

(i) Consumers (ii) Businessmen (iii) Government  Legal protection to consumers  Industries (Development and Regulation) Act, 1931  Essential Commodities Act, 1955  Prevention of Food Adulteration Act, 1954  Prevention of Black-marketing and Maintenance of Essential Supplies Act, 1980.  Bureau of Indian Standards Act, 1986  Agricultural Products (Grading and Marketing) Act, 1937  The Standards of Weight and Measures Act, 1956.  Monopolies and Restrictive Trade Practices Act, 1969  Consumer Protection Act, 1986 10.7 KEYWORDS  Grievance: an official statement of a complaint over something believed to be wrong or unfair.  Redressal: a setting right again  Penalty: a punishment imposed for breaking a law, rule, or contract.  Consumerism: the protection or promotion of the interests of consumers  Adulteration: to corrupt, debase, or make impure by the addition of a foreign or inferior substance or element. 10.8 LEARNING ACTIVITY 1. Educating Consumers regarding their rights and responsibilities is one of the best ways of empowering consumer. Support this statement with necessary arguments. ___________________________________________________________________________ ___________________________________________________________________________ 2. I had purchased seeds from a party. The seeds did not germinate. The other party took the plea that I was not a consumer. Whether purchase of seeds for the purpose of agriculture is purchase for commercial purpose? ___________________________________________________________________________ ___________________________________________________________________________ 208 CU IDOL SELF LEARNING MATERIAL (SLM)

10.9 UNIT END QUESTIONS A. Descriptive Questions: Short Answers: 1. What is meant by consumer protection? 2. Why should consumers be protected? 3. Describe the various problems faced by consumers in their daily life? 4. Write a note on Penalties and administrative fines. 5. What is Consumerism? Long Answers: 1. What information is required to be filed before the consumer courts while filing any complaint? 2. State how consumer court may order in favor of consumers. 3. State the procedure to be followed for redressal of consumer grievances 4. Enumerate the various Acts passed by the government for protection of consumer’s interest. 5. Who can file a complaint? Discuss the eligibility. B. Multiple choice questions 1. In which year consumer Protection Act was enforced? a. 1972 b. 1982 c. 1986 d. 1995 2. How many rights of consumers are provided under the Consumer Protections Act 1986? a. 6 b. 8 c. 7 d. 4 3. Responsibility of Consumer includes: 209 a. Proper use of Product/Service b. Right to Education c. Must fight for its rights d. Should always visit consumers courts CU IDOL SELF LEARNING MATERIAL (SLM)

4. Consumerism refers to movement by a. Government b. Society c. Producers d. Consumers 5. Which right provides due compassion to consumers? a. Right to be informed b. Right to seek redressal c. Right to be heard d. Right to choose Answers: 1-c, 2-a, 3-a, 4-d, 5-b. 10.10 REFERENCES Text Books:  Francis Cherunilam , Business and Environment, Text and Cases, [Himalaya Publishing House],  C. Fernando, Business Environment Kindle Edition, Pearson  K.Aswathappa, Essentials Of Business Environment, Himalaya Publishing House  SHAIKH SALEEM, BUSINESS ENVIRONMENT, Pearson  Ian Worthington, Chris Britton, The Business Environment , Financial Times/ Prentice Hall. Reference Books:  Dr. Durga Surekha, 2010, Consumers‟ Awareness about Rights and Grievance Redressal, Abhijeet Publications.  Akanksha Rana, Consumer Claims, Eastern Book Company  Morrison J, The International Business Environment, Palgrave  MISHRA AND PURI, Indian Economy, Himalaya Publishing House, New Delhi  Business Environment Raj Aggarwal Excel Books, Delhi  Strategic Planning for Corporate Ramaswamy V McMillan, New Delhi Open Text Source: 210  www.yourarticlelibrary.com  https://courses.lumenlearning.com/ CU IDOL SELF LEARNING MATERIAL (SLM)

UNIT 11: TECHNOLOGICAL ENVIRONMENT Structure 11.0 Learning Objective 11.1 Introduction 11.2 Technology & Technological Environment: Meaning 11.3 Technology and Competitive Advantage 11.4 Levels of Technology 11.5 Impact of Technology on Business 11.5.1 Technology and Society 11.5.2 Technology and Economy 11.5.3 Plant Level Implications 11.5.4 Technology and Globalization 11.6 Status of Technology in India 11.7 Summary 11.8 Keywords 11.9 Learning Activity 11.10 Unit End Questions 11.11 References. 11.0 LEARNING OBJECTIVES: After studying this unit, Students will be able to:  Explain the concept of Technology and Technological Environment  State the relationship between Technology and Competitive advantage  Comprehend the impact of Technology on Society, Economy, Plant level implications and Globalization  Outline the concept of time lag in Technology Introduction and Absorption  Explain the Management of Technology  Appreciate the Status of Technology in India  Appreciate the Science and Technology Policy, 2003 and Strategies to realize its objectives 211 CU IDOL SELF LEARNING MATERIAL (SLM)

11.1 INTRODUCTION: Technology is a very critical factor in economic development and transfer of it is an important preoccupation for both industrialized and developing countries because of the progress in global system of communication, the increasing economic subordination among different nations, and the serious undersupply of vital natural resources. Many industrialized countries have been witnessing the changes in the technological environment over the last 30 years particularly in areas like chemicals, drugs, information technology and electronics. Technological upgradation and adoption are vital that helps organization to stay abreast of environmental changes – that will provide a strong base for anticipating and competing organization’s counterparts. In today’s aggressive and constantly changing business environment, companies has deeply modified their strategies to integrate technology into the business planning process as follows: Products Development This type of technology can reduce the duration required for products to get into the market. The simple reason behind it is that majority of companies are now able to create a database of product requirement which has been gathered using best market intelligence from customers, sales representatives and proprietary records. Also with the help of manufacturing software and associated computer software it is easy to speed up the decision making process. Thus, this technology-oriented platform also updates regarding the changes in the customer requirement which businesses are enjoying at their liberty. Process Improvement Enterprise resource planning systems (ERP) is an example of real time based T business solution popular among business that makes it easier for managers to review costs, sales and any other types of operating metrics on a software platform which is fully integrated. Improves Communication: Nowadays employee’s communication involves much more than phone calls or inter-office mail as they can send instant messages and share important work-related files, documents and reports through intranet messengers which are customized as per the business operation. Also, technology-based platforms and internet had improved the communication with business partners, clients and customers. Human Capital: Technology had changed the Human Resource function and had improved the performance of screening, recruiting and hiring potential candidates. Also, it is easy to attract the talent pool for various job openings through Job portals, social networks and online advertising. Also, 212 CU IDOL SELF LEARNING MATERIAL (SLM)

digital platform had made the manager’s job easy to carry out the recruitment process smoothly. IT enabled screening tests, personality assessment and psychometric test had improved the screening process and results in figuring out the appropriate fit for an organization. Efficiency: Technology had also improved the performance and reduced the cost like digital filing systems that helps to save space, paper and printing costs. The huge database, required information and corrections can be figured out with the click of a button. Mobility: Technology had made the world very small also for global businesses or MNC’s. It is practically possible that any organization’s head office is connected all the time with its branches or SBU’s operational in various countries and also there whole work functions are integrated in same system with the help of technology applications. The business heads does not require to travel across different SBU’s for meeting that can be arranged through video conferencing or virtual meeting system which also facilitates the sharing of important documents, reports, files, etc. through internet enabled applications. Fusion of Stakeholders With the help of integrated websites, the organizations are able to convey direct message or information to the research analysts, shareholders and other important market holders for the purpose of staying ahead in the business. Globalization: Businesses are not existing merely to earn profits or customer loyalty of one country, they are moving on global platform for acquiring a huge market, brand recognition, sky limit profits, stakeholder’s belief and socially responsible existence. So, technology is helping the businesses to achieve such big goals in a competitive environment by integrating the functions across SBU’s which results in improved efficiency, product quality and cost saving systems. Thus, technology is proving as a competitive edge for businesses which enables them to be in a forefront in a competitive environment. 11.2 TECHNOLOGY AND TECHNOLOGICAL ENVIRONMENT MEANING: TECHNOLOGY: 213 CU IDOL SELF LEARNING MATERIAL (SLM)

Usually, technology is defined as the entities, both relevant and irrelevant, built by the application of intellectual and actuals effort for achieving utility and benefits. In general sense, application of technology refers to use of gimmick and gizmo to construct, repair, maintain and solve many problems of physical world. It is a radical term which includes equipment’s as easy as a crowbar or wooden spoon and as composite as a space station or particle accelerator. Technology covers dimension of internet, operating system of computers, android of smart phone, business software beyond normal instruments. W. Brian Arthur defines technology in a similarly broad way as \"a means to fulfil a human purpose\". Technology refers to collection of methodology that has great scope of application which involves human’s know-how to combine different forms of inputs to make and develop such products which will satisfy the needs and wants. It includes supplies, tools, methodologies, and operations. When technology is referred in specific aspect like \"medical technology\" or \"space technology\", it represents know-how and application in that relevant field to. \"State- of-the-art technology\" relates the application of technology in any domain and easily approachable by humanity. The development of Modern Computer was started as soon as formulation of integrated circuits and the microprocessor came into existence (i.e., in 1971 – Intel introduced 4004 chip). Culture is always influenced by Technology. Now-a-days we often check tech-savvy skill (people who are comfortable to work with computers and software’s) of new joinee’s in an organization. Technology is based on combination and application of various subjects like science, math and arts and it is meant for improving the life. As now, we have adopted digital economy which is the result of technology that has become part of our daily lives. But we cannot deny the misuse of technology that is mostly used by violent groups. Not all technology enhances culture in a creative way; technology can also help facilitate political oppression and war via tools such as guns. Technology foreshadows the dimension of science and engineering in cultural aspects, that are its building blocks to an extent. Collectively the methodologies, operations or activities utilized for production of goods or services or in the attainment of goals in some research work constitutes technology. It can be the know-how of procedures, methods, blueprint, etc. or it can be submerged in appliances, computers, devices and business units, which are managed by employees or professionals without having working knowledge of such applications. We can categorized Technology into five divisions as : 1. Tangible: blueprints, models, operating manuals, prototypes 2. Intangible: consultancy, problem-solving, and training methods. 3. High: entirely or almost entirely automated and intelligent technology that manipulates ever finer matter and ever powerful forces. 214 CU IDOL SELF LEARNING MATERIAL (SLM)

4. Intermediate: semi-automated partially intelligent technology that manipulates refined matter and medium level forces. 5. Low labour-intensive technology that manipulates only coarse or gross matter and weaker forces. TECHNOLOGICAL ENVIRONMENT: External factors in technology that impact business operations is termed as Technological environment. Changes in technology affect how a company will do business. The strategies adopted and functional aspect of a business will get change to respond the changes in the technological environment. The different factors which improve the operational efficiency and quality of business by application of advanced technical know- how will be termed ass Technological environment. For instance, use of ERP modules in various function of business-like ERP-Inventory Management, ERP- Tally, etc. Different technological matter related to supply chain management of an organization will be considered in Technological environment. There are various matters like development in technology, the life cycle of current technology, the role of world wide web, Funds allocated for technological research in the country, amendments and modification in current technology policy and anticipation of after effects of potential technology. Other important aspect is the expectations of the millennials from the current and potential technology who are the current and potential user of it. 11.3 TECHNOLOGY AND COMPETITIVE ADVANTAGE: When core competency and strengths of an organization are utilized with environmental opportunity that results in increase in market share and profits is termed as Competitive advantage which is result of continuous efforts and operational efficiency that helps to outperform in market. The core competency components can be developed because of numerous reasons like quality ores, skilled and trained workforce, less cost of production because of improved methods and process. Even the smart phones, variety of digital interventions, software and so on can prove a contributing factor in developing competitive advantage. There are numerous benefits that organization can enjoy because of Competitive advantage like market leadership, improved performance, increase in Managers and employee’s motivation, development of more prominent strategies. When Business strategy are clubbed with technology that manoeuvre the resources and create competitive advantage, but proper control system needs to be added to ensure the stability of competitive advantage. Exemplary and excellent performance is the main goal of the efforts taken by organization 215 CU IDOL SELF LEARNING MATERIAL (SLM)

which is achieved by Competitive advantage and that’s why technology and its factors are of utmost importance for an organization. Porter admitted the importance of technology in bringing about modification and advancement in existing business and development of new industries. Changes in technological environment has an important implication for business functions and competitive advantage. New products or improving existing product line and enhancing current competitive strategy will help to gain advantage in the competition. Thus, ensuring market share leadership is maintained. Each and every task in an organization uses and needs information which is the main function of information technology to keep the operations up to date. The process of planning, co-ordinating, scheduling, controlling and monitoring activities are taken care by the different application of IT. Also, the office or administrative work involves different types of applications that also uses IT in one or other way. Even Gordon Pearson has supported the Porter’s thought that maintaining competitive advantage is very important for organization’s survival and success. In Gordon’s view, organization should identify apt technology for manufacturing and supplying the products and services. Fresh technology offers more attributes like quality in performance, lower cost of production and improving the productivity of employees. Commercial utility defines the importance of innovation and inventions. Also, we cannot miss upon the negative aspect of technology as sometime it is unprofitable option. Technology is utilized in almost every stage of value chain and is directly related to production. So, if we assume that there will be low- technology employed in any industry to avoid associated complexity, it is not possible. Also increase in profit is not guaranteed by implementing high- technology. In reality, many complexities are involved with high-technology so such industries sometime suffer low profit. Application of technology may be restricted but competitive advantage is achieved with proper integration of technology in value chain. Porter a has also highlighted the fact that technology to an extent can impact its five- force model as well. Technological changes may have significant impact on nature of rivalry, bargaining power of suppliers and buyers, entry of new entrant and offering cost position or differentiation. Sometime technology act as a deciding factor to define the attractiveness of the industry. Unfortunately, sometime technology has an adverse impact on the structural changes which are dependent on the intensity of technology involved in different function. (Organization can opt for exclusive and customized softwares for Finance department, while no software for admin department). It is mandatory to fine tune technological strategies with industry structure. If the technology employed in value-activity becomes popular and accepted across the industry, it would be treated as an important determinant of overall industry structure. 216 CU IDOL SELF LEARNING MATERIAL (SLM)

According to Porter, technological change by a firm will lead to sustainable competitive advantage under the following circumstances:  The technological change itself lowers the cost of production or enhances the differentiation. Thus, the firm’s technological lead is sustainable.  The technological change shifts costs or uniqueness drivers in favour of a firm.  Pioneering the technological change translates into first mover advantages besides those inherent in the technology itself.  The technological change leads to improvement in overall industry structure. Sources of Competitive Advantage: There are many sources of competitive advantage that can result from the development and application of new technology stated as follows: 1. Block competitors from using the technology In India, Companies can resort to Patent’s Act, where they can patent the technology for at least 20 years. This will help them to safeguard their competitive advantage in the market. Also, with proper organizational policy in place can help to keep the trade secrets and the capability to maintain technical knowledge are also different options to safeguard competitive advantage in short and long run. 2. Make it difficult for competitors to use or duplicate the technology: The companies that are involved in developing technology might be within the organization or from external vendor can ensure that such technological development is almost impossible to imitate or difficult to use for. As organization develops very customized technology which is specific to their operations and functions itself. So, it become difficult for other companies to follow the same. Like some IT companies they generally develop such softwares which are highly customized as per their requirements. 3. Apply the technology quickly than competitors: If you are first in developing or implementing any technology which is not so expensive and then quickly upgrading the features helps in maintaining competitive advantages. Such strategy will help organization to influence particular categories of customers and thus stabilize the market share and profits. 4. Better application of the technology than competitors: 217 CU IDOL SELF LEARNING MATERIAL (SLM)

Competitive advantage can be developed by implementing the technology with higher efficiency, maintaining cost effectiveness and much better way than the competitors. This strategy will work with skilled workforce and improved infrastructure that will ensure quality in the delivery. Such strategies will help organization to re-engineered the existing operations or adopt new methodologies. 5. Apply the technology to a greater proportion than competitors: When organization apply technology in broader sense that means incorporating technological applications across all the levels and departments it proves more beneficial then applying it to just one function. For instance, maintaining a centralized HRMS system where employees can mark attendance and apply for leaves easily, so it provides efficiency in maintaining employee records throughout the organization. 6. Derive more value than competitors Technology which is specifically applied to certain geographical factors that will help organization to maintain the competitive advantage. It will be very difficult for competitors to replicate it. For instance, crude oil extraction companies use specific technology like tools, machineries that are dependent on geological factors and there will be rise of allied industries which will be using by-products of crude oil distillation process. So, if business is industry specific then competitive advantage in terms of technology can be maintained. 7. Workforce motivation and development. Integration of technology in business functions present exciting upgradation opportunities for employees. Employees love to grow with organization. Such technological intervention helps to ease out the tedious task related to their job and also provides platform to expand their knowledge base. In case, organization offer such learning opportunities with the help of technical experts and institutions that provide employees certification for undertaking such trainings successfully. Even employees career path will also get boosted because there are high chances of promotion associated with it. So, overall productivity and motivation of workforces touches sky. 11.4 LEVELS OF TECHNOLOGY: The management of technology deals with its categorization and managing that system which enables its awareness, acquisition, adaptation, advancement and abandonment. Classification of Technology: Technology can be classified as follows- 218 CU IDOL SELF LEARNING MATERIAL (SLM)

 State-of –the-art-technologies: Technology which is equal to or surpasses the competitors.  Known technologies: These technologies are common in nature and are aware to many organizations but the way it is utilized is unique.  Proprietary Technologies: Technologies protected by patents or secrecy agreements that provide a measurable competitive advantage.  Core Technologies: Technologies those are essential to maintain a competitive position.  Scouting Technologies: Formal tracking of potential product and process technologies for future study or application.  Leveraging Technologies: Technologies that support several products, product lines, or classes of products.  Supporting Technologies: Technologies that support the core technologies.  Idealized unknown basic technologies: Technologies that, if available, would provide a significant benefit in some aspect of life.  Pacing Technologies: Technologies whose rate of development controls the rate of products or processes.  Emerging Technologies: Technologies that are currently under considerations for future products or processes. Following the classification, the management of technology involves carefully implementing the five stages as follows and shown in the figure 11.4.1 below: 1. Awareness Phase: It is the first phase of the technology cycle in which a formal mechanism of company is used to become aware of emerging technologies relevant to the company’s needs. Some companies have ‘Think Tanks system’ which includes engineers and scientists, who carries on the technology research across the world and collects information through books, magazines, journals, bulletin services, conferences and international exhibitions. After analysing this information, it is compiled in a short internal report that is used as a reference by corporate strategic planners and technologies policy makers for the benefit of company. 2. Acquisition Phase: It is a phase where actual acquisition of a particular technology takes place. For this a group of Company’s technical team collaborates with the industrial engineering group which conducts technical feasibility study and economic feasibility study before acquiring a new technology, it is important to justify. 219 CU IDOL SELF LEARNING MATERIAL (SLM)

3. Adaptation Phase: If feasibility study gives positive results and proper justification, every enterprise ends up adapting an acquired technology for its particular needs. If the feasibility study is done correctly, then the transition from acquisition to adaptation becomes much smoother and less expensive or else great amount of rework and adaptation becomes necessary. The process of rework results in frustration of the people acquiring the technology, slow assimilation rate, major productivity losses and severe quality problems. 4. Advancement Phase: When there are limited funds, companies can’t opt for indiscriminately purchases and abandons technologies. It becomes very essential for companies to improve the acquired technologies as per their needs. Lincoln electric is an electric arc-welding equipments company which is world leader in its segment has come up with process of generating required technologies internally instead of acquiring them externally. Also, this company after successful invention and implementation of technologies eventually patenting them because it cannot find equipment’s among the vendors. With the strong team of its design and development engineers, it is advancing its technologies continuously. 5. Abandonment Phase: It is a very critical and last phase of the technology cycle because it deals with decisions regarding the obsolescence of a particular technology. New technologies are hitting the market at lightning speed so do the discarding of existing technologies is also faster which makes timing as a crucial factor for survival and winning in the business game. There are possibilities of suffering losses in revenues because of prematurely abandoning a product technology or waiting too long to abandon the existing technology and adopting a new technology because a customer can figure out a better alternatives in competition. So this abandonment decision is not so easy or based on any kind of mathematical formula but it is improved using more information from different areas of the company, such as R & D, marketing and production. 220 CU IDOL SELF LEARNING MATERIAL (SLM)

Fig 11.1: The Technology Cycle [Reference: International Business 4th Edition K. Aswathappa- Tata Mcgraw Hill ] 11.5 IMPACT OF TECHNOLOGY ON BUSINESS 11.5.1 Impact of Technology on Society: Social Change: The technology advancement can bring about social changes in more than one way: - First, the changes in a technological process can change the social life. Like an invention may create more jobs and a new city and same invention can displace thousands of workers from specific location. Such technological changes create sort of turmoil in a society. Second, technology changes can directly affect the social life pattern. An invention can create new employment opportunities to women, new job avenues for youth, bring about the change in time spent at work & with family, increase available leisure time, open jobs to youth, & deny them to middle-aged or old workers. Technological advancement tends to smoothen out differences, as it creates a freer & egalitarian society. Third, technological advancement also creates the issue of status differences as technology flows from multinational companies to less developed countries. In our country 221 CU IDOL SELF LEARNING MATERIAL (SLM)

India, the employees in Multinational companies are paid much higher than the employees working in the local Indian companies though they are doing the same type of job. Fourth, the way we speak, cook, dressed up and work are affected by technology. Even now a days our vocabulary has been upgraded with words like house-husband, surrogate mother and domestic partner, etc. The language we use in our day to day life is changing (like earlier we use to greet people by saying ‘Namaste’ and now we use ‘Hi’, ‘Hello’, etc.). The terms which were not even part of our lexicon have got common usage in our language recently. Thus, words indicate the social change, and when our language is changing then our behaviour will also. Fifth, technology also affects the religion in at least two different ways. First, religiosity has declined the importance of God and Goddesses as individuals rely more on technology for their well-being (Like medical science has come up with lots of treatment for deadly diseases). Second, modernization pressures against genetically modified foods which leads to wholesale rejection of western technologies by some of the religious fundamentalists. Sixth, education system is also being revolutionised by technology. Internet- a speedy and easiest option that has brought the world class knowledge available for everyone and round the clock. Internet and technology has given birth to the industries like e-learning, distance education, e-library and online books available for reading and these options are available to whole world. Industrialization: Advancement of technology has led the growth of industries or the process of industrialization. Industrialization is a general term that indicates the growth in a society hitherto mainly agrarian to modern industry with all its economic and social circumstances and problems. It also describes in general term where the major role is played by manufacturing industry for the growth of a society. The features of an industry is like large- scale standardized production process, heavy machineries, huge fixed capital investment in plant and building, and application of science to industrial techniques. From the 18th century, the Industrial Revolution had initiated the unprecedented growth of industries. Industrialization is associated with the factory system of production i.e. mechanization of production which has improved the quality of products, maximized their output, provides huge employment opportunities which has given rise to worker class and brought down the prices of commodities. The family or traditional business has lost its economic importance and thus, the traditional skills have declined and good number of artisans has lost their work. The overall process of industrialization has an impact over the nature, character and the growth of economy and also contributed to the growth of urbanization. Urbanization: Urbanization basically indicates a diffusion of the influence of urban centres with the rural hinterland. It can be described as a process of becoming urban i.e. moving to such cities 222 CU IDOL SELF LEARNING MATERIAL (SLM)

which are changing from agriculture to industrialised sector and such other pursuits common to cities that leads to the change in behavioural patterns respectively. Hence, in other words when a large population of inhabitants in an area come to cities urbanization is said to occur. It has become a world phenomenon today. In many countries, the growth of industries has contributed to the unprecedented growth of cities in terms of numbers and population. Industrialization has created huge number of employment opportunities and people from different region move in such areas which leads to the development of industrial areas into towns and cities. Modernization: Modernization is a process which refers to the adopting of the modern ways of life and values or changing the habits related to foods, dress, style of speaking, preferences, recreational activities and so on. It also indicates the way people who are custom-bound to adapt themselves to the present conditions, needs, styles and ways in general. The process of modernization emphasize the use and application of science and technology (Like we have electronic Roti maker nowadays instead of making roti’s on conventional gas stoves). The scientific and technological inventions has installed new ideologies in the place of traditional ones and brought about remarkable changes in the whole system of social relationship, thus modernized societies in various countries. Transformation in the economy and the evolution of the new social classes: The introduction of the factory system and manufacturing units of production has changed the agricultural economy into industrial economy. The industrialization has divided the society into two dominant class-the capitalist class which is the owner of the industries and the working class- which is employed in these industries. Because of mutually opposite interest, these two classes are always at conflict with each other. Also in the course of time, middle class which is an intermediary class between the capitalist and the working class has evolved. Development of the means of transport and communication: The tremendous development of the means of transport and communication has led the growth of national and international trade on a large scale. The means of transport like roads (express ways), modern trucks and goods carrier vehicles, the speedy trains, organized train routes as well as modernized stations, technology integrated ship ports, ships of new generation and inexpensive services offered by air transport system has revolutionized the movement of men and material goods. Communication has become faster and easier with the development of technology that has given us the options of e-mails, virtual meeting and conference system, video calling, digitalization of televisions and media and so on has change the lifestyle of individuals and society. The continuous development and inventions in space 223 CU IDOL SELF LEARNING MATERIAL (SLM)

research and the launch of various communication satellites by different countries has further facilitated the great developments and brought the world closer. Unemployment: Rapid technological advancement cannot be thought without the concomitant of unemployment problem. Machines have reduced lot of manual work that was common in early industrialization phase, so lot of employees had lost their job and their skill set become out of date which has resulted in technological unemployment. Changes in social institutions: Technology has profoundly altered social institution like family, religion, morality, marriage, state and modes of people’s life. Modern technology has completely transformed the family organization by taking away its functions via other agencies. Technology has not only elevated the status of women in the society by creating lots of opportunities with flexibility and other benefits but it has also contributed to the stresses and strains in the relations between men and women at home which is one of the reason why Marriage has lost its sanctity. It is merely treated as a civil contract than a sacred bond and that’s why Marriages are becoming more and more unstable. Instances of divorce, desertion and separation are increasing at an alarming rate. Inventions and discoveries in science have shaken the strong foundations of religion and religion has started losing hold over the members. People are becoming more secular, rational, practical and scientific but less religious in their outlook. Because of modern technology, lots of improvement and positive aspects can be seen around in the society like the broad function of the state or the field of state activity that are successfully implementing the programs like -the protection of the aged, the weaker section and the minorities making provision for education, health care etc. With new inventions and development that has changed the face of Transportation and communication across the countries, are also leading to a shift of functions from local government to the central government of the whole state. Technology has not only strengthened the nationalism but also enforce the modern governments which used to rule through the bureaucracy to further impersonalize the human relations. Cultural Lag: The concept of ‘Cultural Lag’ was coined by W.F Ogbum in his book of Social Change (1922). He has made a differentiation between ‘material culture’ that includes technology & invention and the ‘non-material culture’ which includes ideas, values, beliefs, norms, customs, laws & social arrangements. The ‘material culture’ changes rapidly than ‘non-material culture’ as its aspects of persists longer because of strength and intensity of resistance to change than material aspects. 224 CU IDOL SELF LEARNING MATERIAL (SLM)

So, when any change occurs in material culture it stimulates the change in non- material culture wherein non-material culture lags behind the changes in the material culture. The time gap between the appearance of new trait (material culture) and the completion of its enforced adaptation (non-material culture) is known as ‘Cultural Lag’. Moreover, different parts of culture changes at a different speed and time. Ogbum has explained this concept with example like people have adopted new methods and machineries for cultivating their lands to improve the quality and production but the property rights of the land have not yet changed. Technology and non-material culture are cumulative, when efficient method or tool is invented which is consistent with the values and beliefs of the society, the old one is replaced. Technology and war: Advancement of technology in defence has bought fear and anxieties to the mankind. The new type of machines and missiles developed for warfare is very dangerous as it can destroy not only the present human race but also had its effect on coming generation.(The impact of Nagasaki and Hiroshima missile attack is still visible in the generation of Japan). Thus, Technological advancement is also associated with the negative aspect that can endanger whole mankind. 11.5.2 TECHNOLOGY AND ECONOMY: The relationship between Economy and Developments in technology has different implications for business. This relationship presents many opportunities and threats for the business as follows: - Increased productivity: The most significant impact of technology is greater productivity in terms of both quality & quantity that leads to increment in the real wages of employees & decrement in the prices of some products. This is the main reason why technology is adopted at all levels. Need to Spend on R&D: Research & Development (R&D) assumes to be the centre of technological developments considerably. Firms are required to consider, decide & take action on at least six issues. First, the efficient allocation of resources to R&D enables to develop synergies among product lines & business units that helps to improve the corporate performance. Second, when companies are unable to undertake innovation for some reasons then the process of technology transfer i.e. the process of taking new technology from the laboratory to the market place is becomes important. Third, time factor is critically important in R&D as competition will not allow the companies to recoup their investment. 225 CU IDOL SELF LEARNING MATERIAL (SLM)

Fourth, it is very important for R&D manager to determine the appropriate time to adapt the new technology and when to abandon the present technology. The process of replacing the old by new technology is known as technological discontinuity. Such discontinuity occurs when a new technology enhances the current technology to yield better performance. Fifth, it is also very important decision for companies whether to opt for outsourcing the technology. It is beneficial if a company buys commonly available technologies from market and develop such technologies which are valuable and hard to imitate or have no close substitutes (Most of the company’s manufacturing smart phones buy Android OS from market as it is common platform while Apple IPhone has unique OS developed by the company itself). In addition, outsourcing technology may be appropriate when:  The supplier has proprietary technology  The supplier’s technology is better &/or cheaper & reasonable that is easy to integrate into the current system  The technology is of little significance to competitive advantage.  The technology development process requires special expertise and new resources. Sixth & the final issue is all about related with the decision on product innovation and process innovation. The product’s physical attributes & capabilities affect financial performance of the company so the product innovations are most important aspect. Also process innovations is meant to improve the manufacturing facilities, increasing product quality and faster distribution is important for maintaining the economic returns. Jobs Become Intellectual: The development of technology has upgraded the jobs that required the service of an educated & component worker, while earlier jobs were handled by an illiterate & un-skilled worker. This makes it obligatory on the part of business houses to retrain its employees & to rehabilitate those displaced & untrainable employees as introduction of new technology has dislocated them. Equal is the responsibility of the government to provide training & educational facilities to its citizens. The jobs will be rewarding for those employees who pick up & acquaint themselves with the new technology as they can contribute in increased productivity & reduced prices which will increase their real wages. Also, these intellectual jobs plays an important role to improve the human interaction and activity i.e. human relations. Problem of Techno-structure: The scientific & professional workers constitute, the techno- structure of an organization. Now a days, incumbents have become more professional and highly knowledgeable as jobs have become more intellectual. There are certain issues linked with this aspect for an enterprise as follows: Firstly, to motivate the new generation of employees is a challenging task for the organization as they need to grow faster in their career, requires highly challenging job and 226 CU IDOL SELF LEARNING MATERIAL (SLM)

incentives like attractive remuneration, job security, & just treatment, hardly inspire the enlightened workforce. Secondly, as today’s workforce is quite ambitious so they easily opt for good and growing opportunities and retaining & retraining such employees has become a difficult job. The company has to make several exceptions for its professional employees:-  Regular attendance & punctuality have to be relaxed.  Attendance at professional get-togethers has to be sponsored.  Dual promotion ladders have to be established for outperforming technical people to give them better growth options.  Profit-sharing/ financial stake in the company for creative persons so that they have rewards for their creativity.  Writing professional articles has to be encouraged & special assignments & part-time teaching may be allowed. Thirdly, the techno-structure which are more action oriented influences management’s decision-making process without considering the social aspects of business decision and thus, tries to control the organisation. Management is, therefore, in a very tight position to balance the ruffled feelings of technocrats & the social consequences of business decisions. Increased Regulation & Stiff Opposition: Nowadays regulations have been increased on business by the government of the land as it has the powers to investigate & ban products that are directly harmful. Also new technology needs to face stiff opposition from the public to avoid the direct harm against the sentiments of a section of society. Rise & Decline of Products & Organisations: Change is constant and thus change of technology is in evident that possess problem to the business in general. Technological changes may spawn a major industry but it may also destroy an existing one. Transistors has replaced the vacuum- tube industry & similarly, xerography had replaced carbon paper business. A typical product is associated with the cycle that includes: introduction, growth, maturity, decline, & abandonment whereas an organisation that is associated with particular technology will go through the following stages :- (i) birth, (ii) growth, (iii) policy, (iv) procedure, (v) theory, (vi) religion, (vii) ritual, & (viii) last rites. Technological change in the form of process and material innovation, is a potent force in broadening or narrowing the industry boundaries. Also, prevailing business definition of individual companies has a significant impact of technological changes as the consequences of those impacts that affects the whole industries. Technological change is a dominant force that shapes competitive dynamics, give rise to product substitution & product differentiation, influences industry boundaries & structure, price quality, relationship between products and so on. Finally, for multi-product companies technological change may have multiple impacts. 227 CU IDOL SELF LEARNING MATERIAL (SLM)

Indian Context: Significantly, India is positioned itself as among the top five nations in the field of space exploration and one of the topmost countries in the world in the field of scientific research. It has been regularly undertaking space missions to the moon and the famed Polar Satellite Launch Vehicle (PSLV). ISRO's Polar Satellite Launch Vehicle, PSLV-C26, successfully launched IRNSS-1C, the third satellite in the Indian Regional Navigation Satellite System (IRNSS), on October 16, 2014, from Satish Dhawan Space Centre, Sriharikota. This is the twenty seventh consecutively successful mission of PSLV. Lot of initiatives has been focused on encouraging the scientific temperament in India’s youth by setting up of numerous technical universities and institutes, both in the private and the government sector. India presently has 16 Indian Institutes of Technology (IITs), 30 National Institutes of Technology (NITs), 162 universities awarding about 4,000 doctorates and 35,000 post-graduate degrees, and about 40 research laboratories run by the Council of Scientific and Industrial Research (CSIR) all over the country. Market size India is among the top 10 nations in the world in the number of scientific publications. Position-wise, it is ranked 17th in the number of citations received and 34th in the number of citations per paper across the science and technology field (among nations publishing 50,000 or more papers). It is also ranked ninth globally in the number of scientific publications and 12th in the number of patents filed. Backed by the government, there has been a lot of investments and developments in different sectors such as agriculture, healthcare, space research and nuclear power through scientific research. For instance, India is gradually becoming self-reliant in nuclear technology through the commercial success of the indigenous reactors like the Dhruva reactor at BARC, which achieved criticality on August 8, 1985. Investments According to the latest available statistics by the Government of India, the Indian investment in science and technology in terms of Gross expenditure on Research and Development (GERD) during 2011-12 has been US$ 36.2 billion Purchasing Power Parity (PPP). India invested 0.88% of its Gross Domestic Product (GDP) towards Research and Development (R&D) whereas USA and South Korea spent 2.76% and 4.04% respectively during 2011-12.  India and the United Kingdom have agreed to scale up their bilateral research & innovation relationship to a greater level. In a meeting held between Dr Harsh Vardhan, Minister for Science & Technology, and the UK’s Minister for Universities, 228 CU IDOL SELF LEARNING MATERIAL (SLM)

Science and Cities the Rt Hon Greg Clark MP, it was decided that a new be known as the Newton-Bhabha Fund worth £ 50 million (US$ 77.76 million) will be taken to further the relations.  MOL, world's largest ship operator with over 900 ships, has in partnership with an Indian company setup a cutting edge simulation centre for training seafarers, and said it would step up the number of Indians recruited for its merchant navy. The initiative named marine advanced simulation training (MAST) centre is among the most advanced simulation centres in the world, and would be part of the ongoing efforts of MOL and its partner Synergy Group, a ship management firm with over 100 vessels under its management and MOL's partner in the initiative, to step up recruitment of seafarers from India.  A memorandum of understanding (MoU) between the Earth System Science Organization-Ministry of Earth Sciences (ESSO-MoES) and the University Corporation for Atmospheric Research (UCAR), USA was signed here in New Delhi last month for cooperation in Earth System Sciences. Dr Shailesh Nayak Secretary M/o Earth Sciences said on the occasion that since Weather and climate affects all our activities, this collaboration will act as a step to bring together academia and application scientists to come together  Patna University, in its centenary decade, is planning to set up a number of study centres with a view to expanding its academic horizon and boosting up research activities. An announcement to this effect was made by PU vice-chancellor Y C Simhadri at the university's convocation held recently. To facilitate genetic research, the university has initiated steps for setting up a research centre on the pattern of the Centre for Cellular and Molecular Biology, Hyderabad. [Source: www.ibef.org] 11.5.3 PLANT LEVEL IMPLICATIONS: The impact of technology at the plant level is also significant. Technology & Organisation Structure: The impact of Technology and its changes has considerable influence on the organisation structure, line of command and span of control. Matrix structure has become more popular because of fast changing technology. No doubt, besides technology, other factors like the personalities of the people who founded the firm and managed it subsequently and history and background of a company also influences the organisation’s structure. The common structures of an organization are:  Production is routine & process based - Lines of command tend to be lengthy, Decision-making is highly centralised.  Production is customized-- Lines of command tend to be short, more use of specialist and decision- making gets delegated. 229 CU IDOL SELF LEARNING MATERIAL (SLM)

 For mass production-- the number of people whom an executive controls tends to be larger. Any technological advancement will result in:- a) Substitution of capital for labour, leading to higher productivity & lower costs b) Increases in sales or power for the innovating organisation relative to its competitors c) The expanded availability of a range of products & services d) Initiation of changes in behaviour among customers, suppliers, employees, or society, and e) Side-effects on the quality of physical environment. Resistance to Change: Resistance to any kind of change is natural phenomena which is faced by the businessman who is investing for new technology as it involves risk factor and related expenses. Also, the manager of a given business unit also confronts such resistance to change as new technology poses new problems. The resistance to change is often psychological that stems from the following reasons: - 1. Psychological or social commitments to existing products, process & organisation, 2. Low profits & reduced rate of growth, 3. Complacent top management, 4. Small size or fragmented activities, 5. Industry norms & associations or cartels that perpetuate industry-bound thinking, 6. Sizable capital investments in long-life single-use facilities, 7. Lack of successful entrepreneurial models to emulate, & 8. Powerful labour resistance to changes in methods. Fear of Risk: There is always the fear of risk. A research oriented-company like DuPont Corfam, an intended substitute for the forecasted shortage of shoe leather, after an investment of $3000 million, abandoned the project in 1971 because of quality & cost problems. Telecommunications: The new technology in telecommunication sector is an obvious for the development of other industry as it is treated as very important. The development in terms of 3G, wifi, broadband, MMS, instant messengers and application of smartphones are welcomed by both domestic and global businesses. 230 CU IDOL SELF LEARNING MATERIAL (SLM)

E-commerce: The phenomenal growth of the internet & the associated World Wide Web has made e-commerce possible. E-commerce is contributing to a growing percentage of cross-border transactions as it rolls back some of the constraints of location, distance, scale, & time zones. The Web allows, both small & large businesses, to expand their global presence at a lower cost than ever before instead of their location and size. Modern factories are now able to produce goods in a short period of time & with improved quality with minimum defects. The main focus of e-commerce is on marketing & sales process, E-business emphasizes on integration of systems, processes, value chains, organisations, and markets. Integration is done with the help of Internet based software’s and also it helps build new relationships between businesses & customers. The benefits associated with the internet & e- business are as follows:- 1. Convenience in conducting business worldwide; 2. Facilitating communication across borders that brings markets closer; 3. An electronic meeting & trading place, which adds efficiency in the operations; 4. Consumers has access to limitless options & price differential 5. Efficiency in distribution Transportation: The technological advancements in the field of transportation since World War II has improved the connectivity at reasonable rates. While the advent of commercial jet has reduced the travel time of businessmen, containerization has lowered the costs of shipping goods over long distances. Globalization of Production: Development of Technology have facilitated the globalization of production like a satellite based communications system allows Texas Instruments (TI) can co-ordinate on a global scale, its production planning, financial planning, human resource, marketing, customer service and cost accounting. Markets: Along with the globalization of production, technological innovations have facilitated the internationalization of markets like containerization has made it more economical to transport goods over long distances, thereby creating global market. Low-cost global communications networks such as the World Wide Web and smartphone applications are helping to connect the global market places through internet. In additions, low-cost air travel has increased the mass movement of people around the world that has facilitated in the setup of MNCs across different countries that has reduced the cultural distance and brought about convergence of consumer tastes & preferences. Thus, global communications networks 231 CU IDOL SELF LEARNING MATERIAL (SLM)

& global media are creating a worldwide culture, which is creating a world market for consumer goods. Technology Transfers: It is a process that permits the flow of technology from a source to a receiver through published material that includes:- i) Internal transfer of technology from the R&D or engineering department to the manufacturing department of a firm based in a country; ii) The same transfer of technology from a laboratory or operations of an MNC in one country to its laboratory or operations located in another country; iii) The transfer of technology from a research consortium supported by many firms to one of its members. iv) Purchase & sale of machinery, equipment & inter- mediate goods, transfer of data & personnel; & interpersonal communication. 11.5.4 TECHNOLOGY AND GLOBALIZATION: Technology is a very important facilitating factor of globalization and technological advances have tremendously fostered globalization as it substantially increasing the scale of economies and the market scale required to break even. Trade Liberalization and the development in technology like containerisation, super tonnage cargo ships, improved logistics and value chain system that has considerably reduced the costs of transportation has encouraged global sourcing. Thus, revolution in transport and communication sector by advent of technology has given a great impetus to globalization and reduced the limitation associated with natural barriers like distance and costs. Technology, monopoly, like possession of patent technology, encourages internalization because the firm can exploit the respective demand without any competition. The IT revolution has led to the emergence of global village concept. The World Wide Web has bought the World much closer and opened up global avenues of growth and development for everyone. The invention of global satellite television, for example, has exposed consumers to global advertising. Consumers are also aware of what is available in other countries, and are keen to give it a try. Thus, technology has changed the consumer tastes by opening the World market available at the ease of click. Thus, the pace of globalization has been accelerated by several establishing technologies. 232 CU IDOL SELF LEARNING MATERIAL (SLM)

11.6 STATUS OF TECHNOLOGY IN INDIA: After Independence, India has a basic problem like poverty, unemployment and development of India. Indian Government has taken many following steps for technological development. Technological Development in India: Jawaharlal Nehru aimed \"to convert India’s economy into that of a modern state and to fit her into the nuclear age and do it quickly.\" Nehru understood that India had not been at the forefront of the Industrial Revolution, and hence made an effort to promote higher education, and science and technology in India. Nehru's Planning Commission (1950) fixed investment levels, prescribed priorities, divided funds between agriculture and industry, and divided resources between the state and the federal governments. The result of the efforts in the year from 1947 to 1962 saw the area under irrigation increase by 45 million acres (180,000 km2), food production rise by 34 million metric tons, installed power generating capacity increase by 79 million kilowatts, and an overall increase of 94 percent in industrial production. The enormous population rise, however, would balance the gains made by Nehru. On 18 August 1951 the minister of education Maulana Abul Kalam Azad, inaugurated the Indian Institute of Technology at Kharagpur. Defence Research and Development Organisation was formed in 1958. Radio broadcasting was initiated in 1927 but became state responsibility only in 1930. In 1937 it was given the name All India Radio and since 1957 it has been called Akashvani. Limited duration of television programming began in 1959, and complete broadcasting followed in 1965. The Indian Government acquired the EVS EM computers from the Soviet Union, which were used in large companies and research laboratories. Tata Consultancy Services – established in 1968 by the Tata Group – were the country's largest software producers during the 1960s. The roots of nuclear power in India lie in early acquisition of nuclear reactor technology from a number of western countries, particularly the American support for the Tarapur Atomic Power Station and Canada's CANDU reactors.  The Indian space program received only financial support from the Soviet Union, which helped the Indian Space Research Organisation achieve aims such as establishing the Thumba Equatorial Rocket Launching Station, launching remote sensing satellites, developing India’s first satellite—Arya Bhatta, and sending astronauts into the space. India sustain its nuclear program during the aftermath of Operation Smiling Buddha – India's first nuclear tests.  Though the roots of the Steel Authority of India Ltd. lie in Hindustan Steel Private Limited (1954), the events leading up to the formation of the modern avatar are described below: 233 CU IDOL SELF LEARNING MATERIAL (SLM)

 In 1981, the Indian Antarctic Programme was started when the first Indian Expedition was flagged off for Antarctica from Goa. More missions were subsequently sent each year to India's base Dakshin Gangotri.  Indian agriculture benefited from the developments made in the fields of Biotechnology, for which a separate department was created in 1986 under the Ministry of Science and Technology. Both the Indian private sector and the government have invested in the medical and agricultural applications of biotechnology. Massive Biotech parks were established in India while the government provided tax deduction for research and development under biotechnological firms. On 25 June 2002 India and the European Union agreed to bilateral cooperation in the field of science and technology. A joint EU-India group of scholars was formed on 23 November 2001 to further promote joint research and development. India holds observer status at CERN while a joint India-EU Software Education and Development Center is due at Bangalore.  On 18 November 2008, the Moon Impact probe was released from Chandrayaan-1 at a height of 100 km (62 mi). During its 25 minute decent, Chandra's Altitudinal Composition Explorer (CHACE) recorded evidence of water in 650 mass spectra readings gathered during this time. On 24 September 2009 Science journal reported that the Chandrayaan-1 had detected water ice on the Moon  The Mars Orbiter Mission (MOM), also called Mangalyaan was launched on 5 November 2013 by the Indian Space Research Organisation (ISRO). It is India's first interplanetary mission making ISRO the fourth space agency to reach Mars, after the Soviet space program, NASA, and the European Space Agency and the first Asian nation to reach Mars orbit, and the first nation to do so on its first attempt. IT and IT enabled services:  On the basis of the NASSCOM report, clocking revenue growth of about US$ 76 billion, contributing 19% in the fiscal year 2011 has been estimated and recorded more than the anticipated growth in the IT sector, as hailed by the NASSCOM.  Estimation of revenues from exports in the financial year 2011 summing up to US$ 59 billion that brings about 26% of its contribution to total Indian exports including products and services by a research report.  Internal revenues from IT-BPO exclusive of hardware have been estimated at a growth rate of nearly 16% touching US$ 17.35 billion in the year 2011.  According to the IDC India report, the nation's data centre services market has been expected to reach almost US$ 2.2 billion at the end of the year 2011 that was aggregated at US$ 1.39 billion in 2009. 234 CU IDOL SELF LEARNING MATERIAL (SLM)

 Domestic BPO industry is targeted at US$ 1.4 billion in 2011 that was US$ 1.1 billion in 2010 whereas it has been forecasted to touch US$ 1.69 billion and 2.47 billion by 2012 and 2014 respectively. Measures undertaken by the Government of India to encourage Technological Development: 1. Establishment of technological and research institute: Indian government has established 500 technological institutes for providing education to Indian students. It has also established 1080 research institutes. These institutes consists space research centre, Medical research centre and Agricultural research centres which has contributed in the technical development of India. 2. Positive Technical Policy: India has a strong and positive technical policy for technological development. This policy has facilitated the import of technology from foreign countries for increasing agricultural and industrial developments. 3. High Growth Rate of Information Technology in India: In India, the IT sector is developing with 35% growth rate and we are at second position after China who is involved in usage of internet at large scale for e-commerce, e- education and e-accounting. 4. Incentives for promoting Technology in India: Indian Government has given 100% income tax exemption incurred in research of Technology. State Financial Corporation is uplifting domestic technology by providing finance to domestic industries. IT and IT enabled Service Sector Measures: The Technical Advisory Group for Unique Projects (TAGUP) has been set up and Mr. Nandan Nilekani, one of the founders of the outsourcing jumbo, Infosys has been appointed as a chairman of this project to develop IT infrastructure in major areas inclusive of the issuance of unique ID to Indian citizens, new pension system and goods and services tax.  Constitution of National Task Force on Information Technology and Software Development to make a framework of long-term IT policy nationally. 235 CU IDOL SELF LEARNING MATERIAL (SLM)

 Legislation of the Information Technology Act to furnish a legal patronage facilitating electronics business and trade.  Establishment of Software Technology Parks of India to augment software exports of the country and 51 STPI centres have been set up at present with certain exemptions and benefits.  Projects to develop Information Technology Investment Regions invested with good infrastructure to derive maximum benefits of networking and greater efficiency. [Source: http://www.indiastudychannel.com/] 11.7 SUMMARY The Technology and technological environment is very important external environment factor that has impact on business, business environment, nation economic growth and development. Various elements of technological environment has different implication which is of critical importance to succeed and achieve the position in rising global village. Not only the awareness or knowledge of new technology or technological upgradation alone is sufficient but effective implementation, utilization and control is also at most necessary to achieve competitive advantage on the global platform. Technology is like an edge to establish the economy and the business globally. 11.8 KEYWORDS  Technology - can be most broadly defined as the entities, both material and immaterial, created by the application of mental and physical effort in order to achieve some value.  Urbanization basically indicates a diffusion of the influence of urban centres with the rural hinterland  Industrialization is a general term that indicates the growth in a society hitherto mainly agrarian to modern industry with all its economic and social circumstances and problems  Proprietary Technologies: Technologies protected by patents or secrecy agreements that provide a measurable competitive advantage  Pacing Technologies: Technologies whose rate of development controls the rate of products or processes 11.9 LEARNING ACTIVITY 236 CU IDOL SELF LEARNING MATERIAL (SLM)

1. Why Porter has acknowledged technology's role as one of the principal drivers of competition? ________________________________________________________________________ ________________________________________________________________________ 2.How Competitive advantage can be achieved because of the development and application of technology? ________________________________________________________________________ ________________________________________________________________________ 11.10 UNIT END QUESTIONS A. Descriptive Questions: Short Answers: 1. What is Technology? 2. What are the types of Technology? 3.Explain - The impact of Technology and its changes has considerable influence on the organization structure. 4. What is Industrialization? 5. State the measures undertaken by the Government of India to encourage Technological Development. Long Answers: 1. Give a brief introduction of Technological Environment. 2. Discuss the status of Technology in India. 3. Elaborate different dimensions to highlight the impact of Technology on Business 4. Write a note on different phases of Technology and its management. 5. Justify Competitive advantage and Technology B. Multiple Choice Questions 1. The ability of company to apply the technology better than competitor depends on__________ a. Both B & C b. Quality of People 237 CU IDOL SELF LEARNING MATERIAL (SLM)

c. Resource at the disposal d. Quality of Machine 2. In which technology whose rate of development controls the rate of products or processes? a. Intangible technology b. Pacing Technology c. High technology d. Low labour-intensive technology 3. What are the reasons for resistance to change? a. High Profits b. Fragmented Activities c. Increased rate of growth d. Business Commitments 4. In which phase of technology cycle a company has a formal mechanism to become aware of emerging technologies relevant to the company’s needs? a. Acquisition Phase b. Adaptation Phase c. Awareness Phase d. Advancement Phase 5. Which type of technologies supports several products, product lines, or classes of products? a. Leveraging Technologies b. Core Technologies c. Scouting Technologies d. Known Technologies Answer 1 – a; 2 - b ; 3 - b; 4 – c; 5 - a; 11.11 REFERENCES Text Books:  Francis Cherunilam , Business and Environment, Text and Cases, [Himalaya Publishing House],  C. Fernando, Business Environment Kindle Edition, Pearson 238 CU IDOL SELF LEARNING MATERIAL (SLM)

 K.Aswathappa, Essentials Of Business Environment, Himalaya Publishing House  SHAIKH SALEEM, BUSINESS ENVIRONMENT, Pearson  Ian Worthington, Chris Britton, The Business Environment , Financial Times/ Prentice Hall. Reference Books:  Dr. Durga Surekha, 2010, Consumers‟ Awareness about Rights and Grievance Redressal, Abhijeet Publications.  Akanksha Rana, Consumer Claims, Eastern Book Company  Morrison J, The International Business Environment, Palgrave  MISHRA AND PURI, Indian Economy, Himalaya Publishing House, New Delhi  Business Environment Raj Aggarwal Excel Books, Delhi  Strategic Planning for Corporate Ramaswamy V McMillan, New Delhi Open Text Source:  www.yourarticlelibrary.com  https://courses.lumenlearning.com/ 239 CU IDOL SELF LEARNING MATERIAL (SLM)

UNIT 12- GLOBAL ENVIRONMENT: Structure 12.0 Learning Objectives 12.1 Introduction 12.2 Global Environment 12.2.1 Factors of Global Environment 12.3 Foreign Direct Investment 12.4 International Environment and International Institution 12.4.1 The General Agreement on Tariffs and Trade (GATT), 12.4.2 World Trade Organization: 12.4.3 International Monetary Fund: 12.4.4 World Bank 12.5 Summary 12.6 Keywords 12.7 Learning Activity 12.8 Unit End Questions 12.9 References 12.0 LEARNING OBJECTIVE After Studying this Unit, you will be able to  Explain the role of different factors in Global Environment  Compare the different routes and provision for FDI(Foreign Direct Investment)  Explain the relation between International Business Environment and International Institutions  Outline the difference between WTO, GATT, IMF and World Bank 12.1 INTRODUCTION Very popular term and forms the basis for each and every discussion. Globalization word is frequently used for cross border business, technology transfer from one country to other, increase in consumption of foreign goods, increase in export of domestic products, Foreign Direct Investment, Foreign collaboration, setting up of foreign subsidiaries in the country and so on. Globalization covers a very broader 240 CU IDOL SELF LEARNING MATERIAL (SLM)

aspect. The supply chain , technology, jobs and information which is widely spread across the World is Globalization. Setting up manufacturing plants in the country that has necessary resources, availability of skilled labour and supporting business policy is an example of globalization. Blend of social, cultural, political, and legal elements of different societies is globalization. Globalization ensures interchange of customs, belief, traditions among different region, creates cohesive social network where communication and exchange of ideas becomes easy and quick. International laws, treaty’s and policy are adhered for carrying out the international trade. Organization like World Trade Organization (WTO), United Nations (UN) and World bank are dominantly administering the international trade. There are advantages and disadvantages linked with the globalization as generation of employment opportunity, increasing the competitiveness of the industry, quality products, while the parent country suffers losses if business shifts operational branch in another country as reduction in employee opportunities in home country. Globalization's theme is very attractive for business to leverage upon. So, globalization has become necessary expansionary tool for carrying out business at International level. 12.2 GLOBAL ENVIRONMENT No country can now run their economy in complete isolation. Every national economy is integrated with the global economy in some way. Internal trade relations, imports, exports, trade agreements between nations, etc. are all examples. Let us see an example. Imagine an FMCG company that makes food products. They operate on a huge scale, so they must import some of their raw materials like cocoa, honey, etc. Their ability to import such materials, produce their goods and sell their product in local and international markets will depend on the global environment. Global environment basically consists of international interactions of a firm over which it has no control. So, now in this global market with such a high level of competitiveness, all companies must be mindful of the global environment. Let us look at a few such factors of the global environment. 12.2.1 Factors of Global Environment: The three factors that have a major impact in the marketing environment are given below – 241 CU IDOL SELF LEARNING MATERIAL (SLM)

Factors of Global Global Environment Domestic Organizational Fig 12. 1: Factors of Global Environment Global factors Global factors are those which are cross border factors like difference in lifestyle, traditions, customs and procedures, legal procedures, political stability, consumption pattern and natural and technological change. These factors are not at all manageable by any businesses. Some major organizations involved in this level of international marketing are the UNO, World Bank, and the WTO. Domestic factors Internal policy of the government in the form of Industrial Policy, FDI, EXIM Policy regulates the domestic business environment. The production factors are mandatory for carrying out economical activities but beyond this, Government perception, adoption and designing various initiatives and hosting such program where business owners get clear view of Government’s attitude and participation in development and success of expanding the domestic business at international level. Amendments introduced in the existing policy supports globalization. Organizational factors Organizational Policy, Physical and intangible assets of Business, Organizational culture and value system, leadership style, influences the performance and effectiveness of an organization constitutes internal environment. The internal factors need to be aligned with 242 CU IDOL SELF LEARNING MATERIAL (SLM)

the global opportunities to convert the business into global business. Environmental analysis, strong team of employees is must to channelize the investment for developing competitive advantage that will help business to grow. With the advent of technology and pandemic situation across the globe has introduced so much of complexities that business needs to gear up and adopt all possible resorts that will help to grow business globally. Let’s understand the important implication of few factors on globalization as: 12. 3 FOREIGN DIRECT INVESTMENT Foreign direct investment (FDI) is when a company takes controlling ownership in a business entity in another country. With FDI, foreign companies are directly involved with day-to-day operations in the other country. This means they aren’t just bringing money with them, but also knowledge, skills and technology. Generally, FDI takes place when an investor establishes foreign business operations or acquires foreign business assets, including establishing ownership or controlling interest in a foreign company. Where is FDI made? Foreign Direct Investments are commonly made in open economies that have skilled workforce and growth prospect. FDIs not only bring money with them but also skills, technology and knowledge. FDI in India FDI is an important monetary source for India's economic development. Economic liberalisation started in India in the wake of the 1991 crisis and since then, FDI has steadily increased in the country. India, today is a part of top 100-club on Ease of Doing Business (EoDB) and globally ranks number 1 in the greenfield FDI ranking. Routes through which India gets FDI Automatic route: The non-resident or Indian company does not require prior nod of the RBI or government of India for FDI. Govt route: The government's approval is mandatory. The company will have to file an application through Foreign Investment Facilitation Portal, which facilitates single-window clearance. The application is then forwarded to the respective ministry, which will 243 CU IDOL SELF LEARNING MATERIAL (SLM)

approve/reject the application in consultation with the Department for Promotion of Industry and Internal Trade (DPIIT), Ministry of Commerce. DPIIT will issue the Standard Operating Procedure (SOP) for processing of applications under the existing FDI policy. Sectors which come under the ' 100% Automatic Route' category are Agriculture & Animal Husbandry, Air-Transport Services (non-scheduled and other services under civil aviation sector), Airports (Greenfield + Brownfield), Asset Reconstruction Companies, Auto-components, Automobiles, Biotechnology (Greenfield), Broadcast Content Services (Up-linking & down-linking of TV channels, Broadcasting Carriage Services, Capital Goods, Cash & Carry Wholesale Trading (including sourcing from MSEs), Chemicals, Coal & Lignite, Construction Development, Construction of Hospitals, Credit Information Companies, Duty Free Shops, E-commerce Activities, Electronic Systems, Food Processing, Gems & Jewellery, Healthcare, Industrial Parks, IT & BPM, Leather, Manufacturing, Mining & Exploration of metals & non-metal ores, Other Financial Services, Services under Civil Aviation Services such as Maintenance & Repair Organizations, Petroleum & Natural gas, Pharmaceuticals, Plantation sector, Ports & Shipping, Railway Infrastructure, Renewable Energy, Roads & Highways, Single Brand Retail Trading, Textiles & Garments, Thermal Power, Tourism & Hospitality and White Label ATM Operations. Sectors which come under up to 100% Automatic Route' category are  Infrastructure Company in the Securities Market: 49%  Insurance: up to 49%  Medical Devices:up to 100%  Pension: 49%  Petroleum Refining (By PSUs): 49%  Power Exchanges: 49% Government route 244 Sectors which come under the 'up to 100% Government Route' category are  Banking & Public sector: 20%  Broadcasting Content Services: 49%  Core Investment Company: 100%  Food Products Retail Trading: 100%  Mining & Minerals separations of titanium bearing minerals and ores: 100%  Multi-Brand Retail Trading: 51% CU IDOL SELF LEARNING MATERIAL (SLM)

 Print Media (publications/ printing of scientific and technical magazines/ specialty journals/ periodicals and facsimile edition of foreign newspapers): 100%  Print Media (publishing of newspaper, periodicals and Indian editions of foreign magazines dealing with news & current affairs): 26%  Satellite (Establishment and operations): 100% FDI prohibition There are a few industries where FDI is strictly prohibited under any route. These industries are  Atomic Energy Generation  Any Gambling or Betting businesses  Lotteries (online, private, government, etc)  Investment in Chit Funds  Nidhi Company  Agricultural or Plantation Activities (although there are many exceptions like horticulture, fisheries, tea plantations, Pisciculture, animal husbandry, etc)  Housing and Real Estate (except townships, commercial projects, etc)  Trading in TDR’s  Cigars, Cigarettes, or any related tobacco industry FDI inflow During the fiscal ended March 2019, India received the highest-ever FDI inflow of $64.37 billion. The FDI inflows were $45.14 billion during 2014-15 and $55.55 billion in the following year. (Source: https://www.business-standard.com/) 12.3.1 Types And Examples Of Foreign Direct Investment Typically, there are two main types of FDI: horizontal and vertical FDI. Horizontal: a business expands its domestic operations to a foreign country. In this case, the business conducts the same activities but in a foreign country. For example, McDonald’s opening restaurants in Japan would be considered horizontal FDI. Vertical: a business expands into a foreign country by moving to a different level of the supply chain. In other words, a firm conducts different activities abroad but these 245 CU IDOL SELF LEARNING MATERIAL (SLM)

activities are still related to the main business. Using the same example, McDonald’s could purchase a large-scale farm in Canada to produce meat for their restaurants. However, two other forms of FDI have also been observed: conglomerate and platform FDI. Fig 12.2: Types of FDI (Vertical and Horizontal) Conglomerate: a business acquires an unrelated business in a foreign country. This is uncommon, as it requires overcoming two barriers to entry: entering a foreign country and entering a new industry or market. An example of this would be if Virgin Group, which is based in the United Kingdom, acquired a clothing line in France. Platform: a business expands into a foreign country but the output from the foreign operations is exported to a third country. This is also referred to as export-platform FDI. Platform FDI commonly happens in low-cost locations inside free-trade areas. For example, if Ford purchased manufacturing plants in Ireland with the primary purpose of exporting cars to other countries in the EU. 246 CU IDOL SELF LEARNING MATERIAL (SLM)

Fig 12.3.Type of platform FDI 12.3.2 Merits of FDI There are many ways in which FDI benefits the recipient nation: 1. Increased Employment and Economic Growth Creation of jobs is the most obvious advantage of FDI. It is also one of the most important reasons why a nation, especially a developing one, looks to attract FDI. Increased FDI boosts the manufacturing as well as the services sector. This in turn creates jobs, and helps reduce unemployment among the educated youth - as well as skilled and unskilled labour - in the country. Increased employment translates to increased incomes, and equips the population with enhanced buying power. This boosts the economy of the country. 2. Human Resource Development This is one of the less obvious advantages of FDI. Hence, it is often understated. Human Capital refers to the knowledge and competence of the workforce. Skills gained and enhanced through training and experience boost the education and human capital quotient of the country. Once developed, human capital is mobile. It can train human resources in other companies, thereby creating a ripple effect. 3. Development of Backward Areas This is one of the most crucial benefits of FDI for a developing country. FDI enables the transformation of backward areas in a country into industrial centres. This in turn provides a boost to the social economy of the area. The Hyundai unit at Sriperumbudur, Tamil Nadu in India exemplifies this process. 4. Provision of Finance & Technology Recipient businesses get access to latest financing tools, technologies and operational practices from across the world. Over time, the introduction of newer, enhanced technologies and processes results in their diffusion into the local economy, resulting in enhanced efficiency and effectiveness of the industry. 5. Increase in Exports Not all goods produced through FDI are meant for domestic consumption. Many of these products have global markets. The creation of 100% Export Oriented Units and Economic Zones have further assisted FDI investors in boosting their exports from other countries. 6. Exchange Rate Stability 247 CU IDOL SELF LEARNING MATERIAL (SLM)

The constant flow of FDI into a country translates into a continuous flow of foreign exchange. This helps the country’s Central Bank maintain a comfortable reserve of foreign exchange. This in turn ensures stable exchange rates. 7. Stimulation of Economic Development This is another very important advantage of FDI. FDI is a source of external capital and higher revenues for a country. When factories are constructed, at least some local labour, materials and equipment are utilised. Once the construction is complete, the factory will employ some local employees and further use local materials and services. The people who are employed by such factories thus have more money to spend. This creates more jobs. These factories will also create additional tax revenue for the Government, that can be infused into creating and improving physical and financial infrastructure. 8. Improved Capital Flow Inflow of capital is particularly beneficial for countries with limited domestic resources, as well as for nations with restricted opportunities to raise funds in global capital markets. 9. Creation of a Competitive Market By facilitating the entry of foreign organisations into the domestic marketplace, FDI helps create a competitive environment, as well as break domestic monopolies. A healthy competitive environment pushes firms to continuously enhance their processes and product offerings, thereby fostering innovation. Consumers also gain access to a wider range of competitively priced products. For a multinational corporation, FDI in India is a means to access new consumption and production markets, and thereby expand its influence and business operations. It can gain access not only to limited resources such as fossil fuels and precious metals, but also skilled and unskilled labour, management expertise and technologies. FDI also enables an organisation to lower its cost of production- by accessing cheaper resources, or going directly to the source of raw materials rather than buying them from third parties. Often, there are various tax advantages that accrue to a company undertaking FDI. This can occur when the home country allows tax deduction on foreign income, or when the recipient country allows tax deductions and benefits for organisations incurring FDI in that country. Additionally, this can happen when the recipient country has a more beneficial tax code than the home country. 12.3.3 Disadvantages of Foreign Direct Investment 248 Despite many benefits, there are still two main disadvantages to FDI, such as:  Displacement of local businesses CU IDOL SELF LEARNING MATERIAL (SLM)

 Profit repatriation The entry of large firms, such as Walmart, may displace local businesses. Walmart is often criticized for driving out local businesses that cannot compete with its lower prices. In the case of profit repatriation, the primary concern is that firms will not reinvest profits back into the host country. This leads to large capital outflows from the host country. As a result, many countries have regulations limiting foreign direct investment. 12.4 INTERNATIONAL ENVIRONMENT AND INTERNATIONAL INSTITUTIONS Almost every country exports and imports products to benefit from the growing international trade. The growth of international trade can be increased, if the countries follow a common set of rules, regulations, and standards related to import and export. These common rules and regulations are set by various international economic institutions. These institutions aim to provide a level playing field for all the countries and develop economic cooperation These institutions also help in solving the currency issues among countries related to stabilizing the exchange rates. There are three major international economic institutions, namely, WTO, IMF, and UNCTAD. 12.4.1 The General Agreement on Tariffs and Trade (GATT), GATT was signed on October 30, 1947, by 23 countries, was a legal agreement minimizing barriers to international trade by eliminating or reducing quotas, tariffs, and subsidies while preserving significant regulations.1 The GATT was intended to boost economic recovery after World War II through reconstructing and liberalizing global trade. The GATT went into effect on January 1, 1948.2 Since that beginning it has been refined, eventually leading to the creation of the World Trade Organization (WTO) on January 1, 1995, which absorbed and extended it.3 By this time 125 nations were signatories to its agreements, which covered about 90% of global trade.4 The Council for Trade in Goods (Goods Council) is responsible for the GATT and consists of representatives from all WTO member countries. As of September 2020, the chair of the Goods Council is Swedish Ambassador Mikael Anzén.5 The council has 10 committees that address subjects including market access, agriculture, subsidies, and anti-dumping measures.  The General Agreement on Tariffs and Trade (GATT) was signed by 23 countries in October 1947, after World War II, and became law on Jan. 1, 1948. 249 CU IDOL SELF LEARNING MATERIAL (SLM)

 The purpose of the General Agreement on Tariffs and Trade (GATT) was to make international trade easier.  The General Agreement on Tariffs and Trade (GATT) held eight rounds in total from April 1947 to December 1993, each with significant achievements and outcomes.7  In 1995, the General Agreement on Tariffs and Trade (GATT) was absorbed into the World Trade Organization (WTO), which extended it. Understanding the General Agreement on Tariffs and Trade (GATT) The GATT was created to form rules to end or restrict the most costly and undesirable features of the prewar protectionist period, namely quantitative trade barriers such as trade controls and quotas. The agreement also provided a system to arbitrate commercial disputes among nations, and the framework enabled a number of multilateral negotiations for the reduction of tariff barriers. The GATT was regarded as a significant success in the postwar years. General Agreement on Tariffs and Trade (GATT) One of the key achievements of the GATT was that of trade without discrimination. Every signatory member of the GATT was to be treated as equal to any other. This is known as the most-favored-nation principle, and it has been carried through into the WTO. A practical outcome of this was that once a country had negotiated a tariff cut with some other countries (usually its most important trading partners), this same cut would automatically apply to all GATT signatories. Escape clauses did exist, whereby countries could negotiate exceptions if their domestic producers would be particularly harmed by tariff cuts.10 Most nations adopted the most-favored-nation principle in setting tariffs, which largely replaced quotas. Tariffs (preferable to quotas but still a trade barrier) were in turn cut steadily in rounds of successive negotiations. History of the General Agreement on Tariffs and Trade (GATT) The GATT held eight rounds of meetings between April 1947 and December 1993. Each of the conferences had significant achievements and outcomes.  The first meeting was in Geneva, Switzerland, and included 23 countries. The focus in this opening conference was on tariffs. The members established tax concessions touching over US$10 billion of trade around the globe.7  The second series of meetings began in April 1949 and were held in Annecy, France. Again, tariffs were the primary topic. Thirteen countries were at the second meeting, and they accomplished an additional 5,000 tax concessions reducing tariffs.711  Starting in September 1950 the third series of GATT meetings occurred in Torquay, England. This time 38 countries were involved, and almost 9,000 tariff concessions passed, reducing tax levels by as much as 25%.11 250 CU IDOL SELF LEARNING MATERIAL (SLM)