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Question
Q.1)'The Theory of Comparative Cost Advantage is an improvement over the Theory of Absolute Cost Advantage'. Briefly Discuss.
Q.2) Write short notes on
    a) Globalisation of Business
    b) Strategic alliances
    c) Management Practices of MNC'S.


Answer

GURMEET,
HERE  IS SOME  USEFUL MATERIAL.
REGARDS
LEO  LINGHAM
======================================

The Principle of Absolute Advantage
A country has an absolute advantage over it trading partners if it is able to produce more of a good or service with the same amount of resources or the same amount of a good or service with fewer resources. In the case of Zambia, the country has an absolute advantage over many countries in the production of copper. This occurs because of the existence of reserves of copper ore or bauxite. We can see that in terms of the production of goods, there are obvious gains from specialisation and trade, if Zambia produces copper and exports it to those countries that specialise in the production of other goods or services.
The Principle of Comparative Advantage
Comparative costs suggested that countries will specialise and trade in goods and services in which they have a comparative advantage. It is easy to see that if countries have an absolute advantage there are advantages to trade. However, what happens if one country has an absolute advantage over its trading partners in the production of a number of goods. Specialisation and trade can still result in there being welfare gains made from trade.
A country has a comparative advantage in the production of a good or service that it produces at a lower opportunity cost than its trading partners. Some countries have an absolute advantage in the production of many goods relative to their trading partners. Some have an absolute disadvantage. They are inefficient in producing anything, relative to their trading partners. The theory of comparative costs argues that, put simply, it is better for a country that is inefficient at producing a good or service to specialise in the production of that good it is least inefficient at, compared with producing other goods.

The Theory of Comparative Advantage
Absolute advantage was a limited case of a more general theory. Consider Table 1. It can be seen that Portugal can produce both wheat and wine more cheaply than England (ie it has an absolute advantage in both commodities). It could still be mutually beneficial for both countries to specialise and trade.
Table 1

Country   Wheat   Wine      
  Cost Per Unit In Man Hours   Cost Per Unit In Man Hours      
England   15   30      
Portugal   10   15    
In Table 1, a unit of wine in England costs the same amount to produce as 2 units of wheat. Production of an extra unit of wine means foregoing production of 2 units of wheat (ie the opportunity cost of a unit of wine is 2 units of wheat). In Portugal, a unit of wine costs 1.5 units of wheat to produce (ie the opportunity cost of a unit of wine is 1.5 units of wheat in Portugal). Because relative or comparative costs differ, it will still be mutually advantageous for both countries to trade even though Portugal has an absolute advantage in both commodities.
Portugal is relatively better at producing wine than wheat: so Portugal is said to have a COMPARATIVE ADVANTAGE in the production of wine. England is relatively better at producing wheat than wine: so England is said to have a comparative advantage in the production of wheat.
Table 2 shows how trade might be advantageous. Costs of production are as set out in Table 1. England is assumed to have 270 man hours available for production. Before trade takes place it produces and consumes 8 units of wheat and 5 units of wine. Portugal has fewer labour resources with 180 man hours of labour available for production. Before trade takes place it produces and consumes 9 units of wheat and 6 units of wine. Total production between the two economies is 17 units of wheat and 11 units of wine.
Table 2

BC o u n t r y    Production                
   Before Trade       After Trade         
   Wheat    Wine    Wheat    Wine       
E n g l a n d    8    5   18    0       
P o r t u g a l    9    6   0    12       
T o t a l    17    11    18    12     
If both countries now specialise, Portugal producing only wine and England producing only wheat, total production is 18 units of wheat and 12 units of wine. Specialisation has enabled the world economy to increase production by 1 unit of wheat and 1 unit of wine.
The simple theory of comparative advantage outlined above makes a number of important assumptions:
There are no transport costs.
Costs are constant and there are no economies of scale.
There are only two economies producing two goods.
The theory assumes that traded goods are homogeneous (ie identical).
Factors of production are assumed to be perfectly mobile.
There are no tariffs or other trade barriers.
There is perfect knowledge, so that all buyers and sellers know where the cheapest goods can be found internationally.

Assumptions underlying the concept of comparative advantage
Perfect occupational mobility of factors of production - resources used in one industry can be switched into another without any loss of efficiency
Constant returns to scale (i.e. doubling the inputs in each country leads to a doubling of total output)
No externalities arising from production and/or consumption
Transportation costs are ignored

If businesses exploit increasing returns to scale (i.e. economies of scale) when they specialise, the potential gains from trade are much greater. The idea that specialisation should lead to increasing returns is associated with economists such as Paul Romer and Paul Ormerod
What determines comparative advantage?
Comparative advantage is a dynamic concept. It can and does change over time. Some businesses find they have enjoyed a comparative advantage in one product for several years only to face increasing competition as rival producers from other countries enter their markets.
For a country, the following factors are important in determining the relative costs of production:
The quantity and quality of factors of production available (e.g. the size and efficiency of the available labour force and the productivity of the existing stock of capital inputs). If an economy can improve the quality of its labour force and increase the stock of capital available it can expand the productive potential in industries in which it has an advantage.
Investment in research & development (important in industries where patents give some firms significant market advantage) .
Movements in the exchange rate. An appreciation of the exchange rate can cause exports from a country to increase in price. This makes them less competitive in international markets.
Long-term rates of inflation compared to other countries. For example if average inflation in Country X is 4% whilst in Country B it is 8% over a number of years, the goods and services produced by Country X will become relatively more expensive over time. This worsens their competitiveness and causes a switch in comparative advantage.
Import controls such as tariffs and quotas that can be used to create an artificial comparative advantage for a country's domestic producers- although most countries agree to abide by international trade agreements.
Non-price competitiveness of producers (e.g. product design, reliability, quality of after-sales support)
================
Absolute advantage theory asserts that a nation benefits from manufacturing more output than others since it is in the possession of a particular resource or commodity. This particular resource can also be a certain method or knowledge that increases the production efficiency, and thus reduces the relative need to resources
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2. Write short notes on

C)    Management Practices of MNC’s

Nowadays, business is set in a global environment. Companies not only regard their locations or primary market bases, but also consider the rest of the world. In this context, more and more companies start to run multinational business in various parts of the world. In this essay, companies which run multinational business are to be characterized as ‘multinational companies'. By following the globalization campaign, multinational companies' supply chains can be enriched, high costs work force can be transformed and potential markets can be expanded. Consequentially, competitive advantages of companies can be strengthened in a global market. Otherwise, some problems are met in the changed environments in foreign countries at the same time. The changed environments can be divided into four main aspects, namely, cultural environment, legal environment, economic environment and political system problems. All the changed environments make problems to multinational companies. In particular, problems which are caused by changed culture environment are the most serious aspect of running a multinational business.

"culture is complex whole which includes knowledge, beliefs, art, morals, laws, customs and any other capabilities and habits acquired by man as a member of society". According to this definition, it is easy to know that every nation has different cultural preferences, national tastes and value standards. These factors impact on every part of management in multinational companies, especially on marketing management, human resource management and alliances management. Thus, multinational companies have to consider the cross culture issues when they run multinational business.

FIRST, the MNC  is  conduct  a  PESTLE   ANALYSIS.

Political (incl. Legal)

-Environmental regulations and protection
[what are the government regualtions/ protection laws that must be observed ]

-Tax policies
what tax hinder the business and what taxes incentives are available]

-International trade regulations and restrictions
[ does the government encourage exports / with high tariffs on imports]

-Contract enforcement law/Consumer protection
[does the government enforce on consumer protection ]

-Employment laws]
[ is the government encouraging skilled immigrants with temp. permits]

-Government organization / attitude
[ does the government have a very positive attitude towards this industry]

-Competition regulation
[ are there regulation for limiting competition]

-Political Stability
[ politically , does the government have a very stable government ]

-Safety regulations
[ has the government adopted some of the modern safety regulations]
=================================================================
Economic

-Economic growth
[ what is the economic growth rate / what are the reasons ]

-Interest rates & monetary policies
[ are the interest rates under control / is there a sound monetary policies]

-Government spending
[is government spending is significant and is it under control ]

-Unemployment policy
[what is the employment / unemployment policies of the government ]

-Taxation
[ has the taxation encouraged the industry ]

-Exchange rates
[ is there well managed exchange controls and is it helping the industry]

-Inflation rates
[ is the inflation well under control ]

-Stage of the business cycle
[ is your industry is on the growth pattern]

-Consumer confidence
[ is the consumer confidence is high/ strong and if not, why ]

==================================================
Social

-Income distribution
[is there balanced income distribution policy ]

-Demographics, Population growth rates, Age distribution
[ what is population growth and why ]

-Labor / social mobility
[ what are the labor policies and is there labor mobility]

-Lifestyle changes
[ are there significant lifestyle changes taking place--more modernization/ why ]

-Work/career and leisure attitudes
[ are the population career minded and are seeking better lifestyle]

-Education
[ what are the education policies / is it successful ]

-Fashion, hypes
[are the people becoming fashion conscious ]

-Health consciousness & welfare, feelings on safety
[ are the people becoming health consciousness]

-Living conditions
[ is the living conditions improving fast and spreading rapidly]

=========================================================
Technological

Government research spending
[is the government spending on research and development]

Industry focus on technological effort
[are the industries focused on using improved technology]

New inventions and development
[ are new inventions being encouraged for developments]

Rate of technology transfer
[ is the rate of technology transfer is speeding up ]

(Changes in) Information Technology
[ is the information technology rapidly moving and is there government support]

(Changes in) Internet
[ is the internet usage rapidly increasing and why]

(Changes in) Mobile Technology
[is the Mobile technology rapidly developing and is there government support]
===================================================
#####################################################

ALL THESE FACTORS AFFECT THE  GLOBAL  BUSINESS

-in various combinations

-at different times

-at various emphasis
===========================================================
MARKETING  DEPARTMENT

-research the  market.
-source  the  product.
-local make or locally  sourced
-imported  products
-develop marketing planning.
===========================
DISTRIBUTION  DEPARTMENT
-research  the  channels
-select  the  channel  for  distribution.
-establish  the  logistics
-develop  the supply
-develop/set  up  the  channel programs.
============================
SALES   DEPARTMENT
-research  sales  methods.
-select  the  sales  method.
-establish  sales  management  team
-product / market orientation.
-sales  training
-sales  policies development.
=========================
SUPPLY  CHAIN  MANAGEMENT
-research  the  process  required.
-select  the  right  process.
-establish  the  process / system
which  will  include
-demand  planning
-sourcing of  supplies
-procurement
-inventory  management
-warehousing
-transport  management
-order processing
-order  servicing
-damage /theft/loss  control.

-SET  UP  POLICIES.
==============================
MANUFACTURING
If  they decide  to go  for  local  manufacturing

-ESTABLISHING  THE MANUFACTURING
SYSTEM,  WHICH  INCLUDE

*purchase.
*raw  material  inventory
*production  planning
*production  
*total  quality  management  system
*finished good  inventory
*warehousing
*transport
*order processing/order servicing.
etc
============================
LEGAL  DEPARTMENT
============================
FINANCE  DEPARTMENT
============================
PUBLIC  RELATIONS  DEPARTMENT
============================
CORPORATE  AFFAIRS  DEPARTMENT
==================================
ETC  ETC


OTHER AREAS  TO  CONSIDER  


1.LOCAL MANUFACTURING OR IMPORT.

2.LOCAL MARKETING SET UP OR USE DISTRIBUTORS.

3.SELECTION OF GEOGRAPHICAL AREAS.

4.SELECTION OF MARKET SEGMENTS.

5.UNDERSTANDING LOCAL CONSUMER VALUES.

6.SEASONAL TRENDS.

7.AVAILABILITY OF PRODUCTS.

8.SELECTION OF PRODUCT RANGE.

9.COMPETITION.

10.PRICE / PRICING

11.DISTRIBUTION

12.SELECTION OF DISTRIBUTION CHANNELS.

13.PROMOTION MIX.

14.SALES PROMOTION MIX.

15.SALES ORGANIZATION.

16.PRE -SALES

17. AFTER -SALES SERVICE.

18.CUSTOMER SERVICE.

19.TRAINING

20.MARKETING RESEARCH.


##############################################




2A] GLOBALIZATION

To some the word "Globalization" may seem a cliché. To others, it may
appear an end in itself. Competitive pressures are creating the need for
most companies to become Global.

Globalization is one means for
becoming and remaining a world-class competitor — a goal encased in
the mission statements of most corporations.

When developing a globalization strategy, it is clear that the emerging
markets present the greatest opportunity. The growth projections for
Europe, Japan and the United States pale in comparison to some of the
emerging markets.

Emerging Markets
Throughout the emerging markets an unprecedented consumer market
boom is driving up demand for western-style goods and services. The
largest segment of consumers in these markets is a decade short of its
peak spending years. In India alone, sales of consumer goods are rising
at 14% per year, while China is growing at almost 20% per year.
Couple the consumer-spending boom with the still burgeoning need for
infrastructure improvements and you’ll have a range of opportunities that
extends into the trillions of dollars. Projects are planned or underway in
many of these countries to upgrade transportation and
telecommunication systems, explore energy resources, build power
generation facilities and provide health care facilities.


In addition, the privatization efforts are presenting an incredible range of
opportunities for investors, lending institutions, service providers and
manufacturers.


Four key trend  influence  emerging  market potential

There are four key trends that are influencing the emerging market
potential:
1. Demographics:
Overall world population growth is now concentrated in the
developing world. Where industrial nations are facing an
increasingly older population, the emerging markets remain
young. The developed world comprises only 11% of the world’s
population.

2. Governments:
Many countries that once relied on centrally planned economies
are becoming market-driven. Industries that governments
previously restricted to foreign companies are now opening to
foreign investment.

3. Communications:
Access to the emerging markets is increasing due to huge
developments in communications technology such as the Internet
and electronic commerce. Cyberspace represents a profound shift
in the nature of communications as well as our perception of
distance.

4. Urbanization:
As infrastructure improvements are made, urban growth in the
emerging markets will continue to explode.
Estimates indicate that the emerging markets' share of world imports will
double by the year 2010, rising to over 38%. Companies dazzled by the
magnitude of these numbers must be equipped with the appropriate
knowledge, information, and strategy to make its market forays
successful.




MACRO  LEVEL  Industry Globalization
   is  due  to  such  factors  as :

Level of international trade
Intensity of international competition
Worldwide product standardization
Presence of key competitors in all key international markets.
Intra-firm trade
Technological intensity
International linkages of value-added activities among countries
International integration of value-added activities among countries
WORLDWIDE  FREETRADE  AGREEMENTS
WORLDWIDE  ECONOMIC  REFORMS
WORLWIDE  FINANCIAL  REFORMS
REMOVAL  TARIFF  BARRIERS  BY  COUNTRIES
REMOVAL  OF  SUBSIDIES  COUNTRIES

ETC  ETC
====================================================

THE  PUSH  FACTORS OF   GLOBALIZATION

Market Drivers

Per capita income converging among industrial nations
Convergence of lifestyles and taste
Growth of global and regional channels
Establishment of world brands
Spread of global and regional media


Cost Drivers

Continuing push for economies of scale ( but offset by flexible manufacturing)
Accelerating technological innovation
Advances in transportation (e.g., use of FedEx to deliver urgent supplies from one continent to another)
Emergence of newly industrializing countries with productive capability and low labor costs (e.g., China, India and Indonesia)


Government Drivers

Reduction of tariff barriers (e.g., North American Free Trade Agreement)
Reduction of non-tariff barriers (e.g., Japan’s gradual opening of its markets)
Creation of trading blocs (e.g., European Union, and Euro Currency in 1999)
Strengthening of world trade institutions (e.g., formation of the World Trade Organization)


Competitive Drivers

Continuing increase in level of world trade
More countries becoming key competitive battlegrounds (e.g., rise of Japan to become a “lead” country)
Rise of new competitors intent upon becoming global competitors (e.g., Japanese firms in the 1970’s, Korean firms in the 1980’s, Taiwanese firms in the 1990’s, Chinese firms in the 2000s, and probably Indian and Russian firms in the 2010’s.


OTHER  FACTORS  WHICH   DRIVES  THE  GLOBALIZATION

In a Globalized industry, firms must simultaneously accomplish:
Global Scale Efficiency
Local Responsiveness
World-Wide Learning
=============================================
HOW  GLOBALIZATION   AFFECTS   THE  ENVIRONMENTS.

Political (incl. Legal)   [ [Poltical] EST[Environment][Legal] ]

==========================================
-Tax policies
what tax  hinder the business and what  taxes  incentives  are available]

[ if  the  tax  policies are  liberal / incentivated,  businesses  will  add
expansion ,  which means  the  impact  on   HR  

-MORE RECRUITMENT/ SELECTION
-MORE  INDUCTION / ORIENTATION
-MORE TRAINING
-MORE  CHANGE  MANAAGEMENT
-MORE  Organization Development    PROGRAMS
-MORE  Organization culture  change  programs
========================================

-International trade regulations and restrictions
[ does  the  government    encourage  exports / with  high tariffs  on  imports]

[ if  the  exports  policies  are  liberal / incentivated,  businesses  will  add
expansion ,  which means  the  impact  on   HR  

-MORE RECRUITMENT/ SELECTION
-MORE  INDUCTION / ORIENTATION
-MORE TRAINING
------------------------------------------------------------------------------------------
[ if  the import  policies  are  liberal / incentivated,  local  mfg. businesses  will  
contract ,  which means  the  impact  on   HR  

-less  RECRUITMENT/ SELECTION
-MORE TRAINING  to improve  efficiency / productivity  

======================================================
-Employment laws]
[ is the  government    encouraging  skilled  immigrants  with  temp. permits]

[if the government  relaxes the  rules on  skilled  migrants,
which  means  the impact  on  HR

-EMPHASIS  WILL  BE   ON FOREIGN   RECRUITMENTS.
-DEVELOPMENT  OF  OVERSEAS  CONTRACTS
-TRAINING  FOR THE  INCOMING  STAFF  ON   LOCAL CULTURE.
-TRAINING  FOR  MANAGERS   TO  MANAGE  DIVERSITY

=======================================================


Economic     [P[Economics][Social]TEL ]

-Economic growth
[  what  is  the economic growth rate  /  what  are  the  reasons ]

[ if  the  economy  is on growth path,  businesses  will  add
expansion ,  which means  the  impact  on   HR  

-MORE RECRUITMENT/ SELECTION
-MORE  INDUCTION / ORIENTATION
-MORE TRAINING
-COMPENSATION  NEEDS  REVISION
--------------------------------------------------------------------------------
[ if  the  economy  contracts/demand  drops,  businesses  will  reduce
volume ,  which means  the  impact  on   HR  

-less  RECRUITMENT/ SELECTION
-MORE TRAINING   TO  IMPROVE  EFFICIENCY/PRODUCTIVITY
-MORE INCENTIVATES   FOR   PRODUCTIVITY  GAIN

===================================================
-Interest rates & monetary policies
[ are  the  interest  rates    under control /  is there   a  sound  monetary  policies]

[ if  the  interest  rate  goes down/ the monetary  policies  are liberal,  
as the  demand  goes  up, businesses  will  add
expansion ,  which means  the  impact  on   HR  

-MORE RECRUITMENT/ SELECTION
-MORE  INDUCTION / ORIENTATION
-MORE TRAINING
----------------------------------------------------------------------------
[ if  the  interest  rate  goes  up ,  the demand  will  go  down
 businesses   will  downsize / cut cost  
 which means  the  impact  on   HR  

-less  RECRUITMENT/ SELECTION
-MORE TRAINING  for   efficiency / productivity  improvements
-EMPHASIS   WILL  BE  FOR  ''PAY  FOR  PERFORMANCE''.

===================================================
-Government spending
[is  government  spending  is  significant   and  is it   under control ]

[ if  the  government  increases  the  spending  on  infrastructures etc,
the  demand  goes  up  , businesses  will  add
expansion ,  which means  the  impact  on   HR  

-MORE RECRUITMENT/ SELECTION
-MORE  INDUCTION / ORIENTATION
-MORE TRAINING
==================================================
-Unemployment policy
[what  is  the  employment / unemployment  policies  of the government ]
=====================================================
-Taxation
[  has  the  taxation    encouraged  the  industry ]

[ if  the  taxation policies encouraged  the  industry,  businesses  will  add
expansion ,  which means  the  impact  on   HR  

-MORE RECRUITMENT/ SELECTION
-MORE  INDUCTION / ORIENTATION
-MORE TRAINING
=======================================================


-Consumer confidence
[ is  the  consumer  confidence   is   high/ strong and  if  not, why ]

[ as  the  consumer  confidence  goes up, more jobs are created,
demand  for  product/services   will go  up, businesses  will  add
expansion ,  which means  the  impact  on   HR  

-MORE RECRUITMENT/ SELECTION
-MORE  INDUCTION / ORIENTATION
-MORE TRAINING

==================================================

Social  [ PE[Social]TEL ]

-Income distribution
[is there   balanced   income  distribution   policy ]

[ as  the  income level  goes  up and  income  distribution  improves,  
demand  for  product/services   will go  up, businesses  will  add
expansion ,  which means  the  impact  on   HR  

-MORE RECRUITMENT/ SELECTION
-MORE  INDUCTION / ORIENTATION
-MORE TRAINING
==================================================

-Demographics, Population growth rates, Age distribution
[ what  is   population   growth  and  why ]

[ as  the  population  level  goes  up and  age  distribution  improves,  
demand  for  product/services   will go  up, businesses  will  add
expansion ,  which means  the  impact  on   HR  

-MORE RECRUITMENT/ SELECTION
-MORE  INDUCTION / ORIENTATION
-MORE TRAINING
====================================================

-Lifestyle changes
[ are  there  significant  lifestyle   changes     taking  place--more  modernization/ why  ]

[ as  the  life style   goes  up and  more modernization   improvements,  
demand  for  product/services   will go  up, businesses  will  add
expansion ,  which means  the  impact  on   HR  

-MORE RECRUITMENT/ SELECTION
-MORE  INDUCTION / ORIENTATION
-MORE TRAINING
=========================================================

-Work/career and leisure attitudes
[ are  the  population      career  minded  and  are  seeking  better  lifestyle]

[ as  the  income level  goes  up and   workers  attitudes  changes,  
demand  for  product/services   will go  up, businesses  will  add
expansion ,  which means  the  impact  on   HR  

-MORE RECRUITMENT/ SELECTION
-MORE  INDUCTION / ORIENTATION
-MORE TRAINING
==================================================
-Education
[ what  are  the  education  policies /  is  it  successful ]

[ as  the  education level  goes  up and  income  distribution  improves,  
demand  for  product/services   will go  up, businesses  will  add
expansion ,  which means  the  impact  on   HR  

-MORE RECRUITMENT/ SELECTION
-MORE  INDUCTION / ORIENTATION
-MORE TRAINING
=======================================================

-Living conditions
[ is the  living  conditions   improving  fast  and  spreading  rapidly]

[ as  the  income level  goes  up and  living  conditions  improves,  
demand  for  product/services   will go  up, businesses  will  add
expansion ,  which means  the  impact  on   HR  

-MORE RECRUITMENT/ SELECTION
-MORE  INDUCTION / ORIENTATION
-MORE TRAINING
=========================================================
Technological  [  PES [Technology] EL]

==================================================
Industry focus on technological effort
[are  the   industries    focused  on  using  improved  technology]

[ as  the  industry  focuses  on  technology, more jobs are created,
demand  for  product/services   will go  up, businesses  will  add
expansion ,  which means  the  impact  on   HR  

-MORE RECRUITMENT/ SELECTION
-MORE  INDUCTION / ORIENTATION
-MORE TRAINING
-MORE  TECHNICAL  TRAINING
-MORE  CHANGE  MANAAGEMENT
-MORE  Organization Development    PROGRAMS
-MORE  Organization culture  change  programs

========================================================
New inventions and development
[ are  new  inventions     being   encouraged  for  developments]

[ as  more  inventions are brought  out, more jobs are created,
demand  for  product/services   will go  up, businesses  will  add
expansion ,  which means  the  impact  on   HR  

-MORE RECRUITMENT/ SELECTION
-MORE  INDUCTION / ORIENTATION
-MORE TRAINING
-MORE  TECHNICAL  TRAINING
-MORE  CHANGE  MANAAGEMENT
-MORE  Organization Development    PROGRAMS
-MORE  Organization culture  change  programs

======================================================
Rate of technology transfer
[ is  the  rate  of  technology  transfer  is  speeding  up ]

[ as  the  rate of  technology  transfer  speeds up, more jobs are created,
demand  for  product/services   will go  up, businesses  will  add
expansion ,  which means  the  impact  on   HR  

-MORE RECRUITMENT/ SELECTION
-MORE  INDUCTION / ORIENTATION
-MORE TRAINING
-MORE   TECHNICAL  TRAINING
-MORE  CHANGE  MANAAGEMENT
-MORE  Organization Development    PROGRAMS
-MORE  Organization culture  change  programs

=======================================================
(Changes in) Information Technology
[ is  the   information  technology    rapidly  moving  and  is  there  government  support]

[ as  the  IT  usage  increases, more jobs are created,
demand  for  product/services   will go  up, businesses  will  add
expansion ,  which means  the  impact  on   HR  

-MORE RECRUITMENT/ SELECTION
-MORE  INDUCTION / ORIENTATION
-MORE TRAINING
-MORE  TECHNICAL  TRAINING
-MORE  CHANGE  MANAAGEMENT
-MORE  Organization Development    PROGRAMS
-MORE  Organization culture  change  programs

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2B/ STRATEGIC   ALLIANCE

Strategic Alliance is a formal relationship between two or more parties to pursue a set of agreed upon goals or to meet a critical business need while remaining independent organizations.

A strategic alliance is essentially a partnership in which you combine efforts in projects ranging from getting a better price for supplies by buying in bulk together to building a product together with each of you providing part of its production. The goal of alliances is to minimize risk while maximizing your leverage and profit. Alliances are often confused with MERGERS, ACQUISITIONS  AND  OUTSOURCING. While there are similarities in the circumstances in which a business might consider one these solutions, they are far from the same. Mergers and acquisitions are permanent, structural changes in how the company exists. Outsourcing is simply a way of purchasing a functional service for the company.
An alliance is simply a business-to-business collaboration. Another term that is frequently used in conjunction with alliances is establishing a business network. Alliances are formed for joint marketing, joint sales or distribution, joint production, design collaboration, technology licensing, and research and development. Relationships can be vertical between a vendor and a customer, horizontal between vendors, local, or global. Alliances often are established formally in a JOINT  VENTURE OR  PARTNERSHIP.
Businesses use strategic alliances to:
achieve advantages of scale, scope and speed
increase market penetration
enhance competitiveness in domestic and/or global markets
enhance product development
develop new business opportunities through new products and services
expand market development
increase exports
diversify
create new businesses
reduce costs.
Strategic alliances are becoming a more and more common tool for expanding the reach of your company without committing yourself to expensive internal expansions beyond your core business.

Partners may provide the strategic alliance with resources such as products, distribution channels, manufacturing capability, project funding, capital equipment, knowledge, expertise, or intellectual property. The alliance is a COOPERATION or COLLABORATION  which aims for a SYNERGY  where each partner hopes that the benefits from the alliance will be greater than those from individual efforts. The alliance often involves TECHNOLOGY  TRANSFER  (access to knowledge and expertise), ECONOMIC   SPECIALIZATION, shared expenses and shared risk.

Types of strategic alliances
Various terms have been used to describe forms of strategic partnering. These include ‘international coalitions’ , ‘strategic networks’  and, most commonly, ‘strategic alliances’. Definitions are equally varied. An alliance may be seen as the ‘joining of forces and resources, for a specified or indefinite period, to achieve a common objective’.

Stages of Alliance Formation
A typical strategic alliance formation process involves these steps:
Strategy Development: Strategy development involves studying the alliance’s feasibility, objectives and rationale, focusing on the major issues and challenges and development of resource strategies for production, technology, and people. It requires aligning alliance objectives with the overall corporate strategy.
Partner Assessment: Partner assessment involves analyzing a potential partner’s strengths and weaknesses, creating strategies for accommodating all partners’ management styles, preparing appropriate partner selection criteria, understanding a partner’s motives for joining the alliance and addressing resource capability gaps that may exist for a partner.
Contract Negotiation: Contract negotiations involves determining whether all parties have realistic objectives, forming high calibre negotiating teams, defining each partner’s contributions and rewards as well as protect any proprietary information, addressing termination clauses, penalties for poor performance, and highlighting the degree to which arbitration procedures are clearly stated and understood.
Alliance Operation: Alliance operations involves addressing senior management’s commitment, finding the calibre of resources devoted to the alliance, linking of budgets and resources with strategic priorities, measuring and rewarding alliance performance, and assessing the performance and results of the alliance.
Alliance Termination: Alliance termination involves winding down the alliance, for instance when its objectives have been met or cannot be met, or when a partner adjusts priorities or re-allocated resources elsewhere.
The advantages of strategic alliance includes 1) allowing each partner to concentrate on activities that best match their capabilities, 2) learning from partners & developing competences that may be more widely exploited elsewhere, 3) adequency a suitability of the resources & competencies of an organization for it to survive.
There are four types of strategic alliances: joint venture, equity strategic alliance, non-equity strategic alliance, and global strategic alliances.
Joint venture is a strategic alliance in which two or more firms create a legally independent company to share some of their resources and capabilities to develop a competitive advantage. Equity strategic alliance is an alliance in which two or more firms own different percentages of the company they have formed by combining some of their resources and capabilities to create a competitive advantage. Nonequity strategic alliance is an alliance in which two or more firms develop a contractual-relationship to share some of their unique resources and capabilities to create a competitive advantage. Global Strategic Alliances working partnerships between companies (often more than 2) across national boundaries and increasingly across industries. Sometimes formed between company and a foreign government, or among companies and governments
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