Master of Business Management (Semester IV)MB0053 - International Business Management

Assignment Set- 2

1. Write a note on strategic objectives.

Definition

A broadly defined objective that an organization must achieve to make its strategy succeed.

Strategic objectives are, in general, externally focused and (according to the management guru Peter Drucker) fall into eight major classifications: (1) Market standing: desired share of the present and new markets; (2) Innovation: development of new goods and services, and of skills and methods required to supply them; (3) Human resources: selection and development of employees; (4) Financial resources: identification of the sources of capital and their use; (5) Physical resources: equipment and facilities and their use; (6) Productivity: efficient use of the resources relative to the output; (7) Social responsibility: awareness and responsiveness to the effects on the wider community of the stakeholders; (8) Profit requirements: achievement of measurable financial well-being and growth.

2. Discuss in brief the role of WTO in promoting international business.

10 benefits of the WTO trading system

From the money in our pockets and the goods and services that we use, to a more peaceful world — the WTO and the trading system offer a range of benefits, some well-known, others not so obvious.

The world is complex. This booklet is brief, but it tries to reflect the complex and dynamic nature of trade. It highlights some of the benefits of the WTO’s trading system, but it doesn’t claim that everything is perfect—otherwise there would be no need for further negotiations and for the system to evolve and reform continually.Nor does it claim that everyone agrees with everything in the WTO. That’s one of the most important reasons for having the system: it’s a forum for countries to thrash out their differences on trade issues.

That said, there are many over-riding reasons why we’re better off with the system than without it. Here are 10 of them.

The ten benefits

1. The system helps promote peace2. Disputes are handled constructively3. Rules make life easier for all4. Freer trade cuts the costs of living5. It provides more choice of products and qualities6. Trade raises incomes7. Trade stimulates economic growth8. The basic principles make life more efficient9. Governments are shielded from lobbying10. The system encourages good government

3. Write a note on various export promotion schemes by GOI. Software Technology Parks (STPs) Special Economic Zones (SEZ) Scheme

After the economic reforms of 1991-92, liberalization of external trade, elimination of duties on imports of information technology products, relaxation of controls on both inward and outward investments and foreign exchange and the fiscal measures taken by the Government of India and the individual State Governments specifically for IT and ITES have been major contributory factors for the sector to flourish in India and for the country to be able to acquire a dominant position in offshore services in the world. The major fiscal incentives provided by the Government of India have been for the Export Oriented Units (EOU), Software Technology Parks (STP), and Special Economic Zones (SEZ).

Software Technology Parks (STPs)

For the promotion of Software exports from the country, the Software Technology Parks of India was set up 1991 as an Autonomous Society under the Department of Electronics and Information Technology. The services rendered by STPI for the Software exporting community have been statutory services, data communications servers, incubation facilities, training and value added services. STPI has played a key developmental role in the promotion of software exports with a special focus on SMEs and start up units. The STP Scheme has been extremely successful in fostering the growth of the software industry. The exports made by STP Units have grown many folds over the years. Today the exports made by STPI registered unit during 2008-09 are INR 215571 Crores about 90% of total software exports from the Country.

THE STPI Scheme is lauded as one of the most effective schemes for the promotion of exports of IT and ITES. The 51 STPI centres that have been set up since inception of the programme have given a major boost to IT and ITES exports. Apart from exemption from customs duty available for capital goods (with a few exemptions) there are also exemptions from service tax, excise duty, and rebate for payment of Central Sales Tax. But the most important incentive available is 100 percent exemption from Income Tax of export profits, which has been extended till 31st March 2011. The strength of the scheme lies in the fact that, it is a virtual scheme, which allows, software companies to set up operations in the most convenient and cheapest locations and plan their investment and growth solely driven by business needs. STP Scheme is a pan India Scheme, which has centres spread across India, over 8000 units are registered under STP Scheme.

Benefits under STP Scheme:

Income Tax benefits under Section 10 A & 10 B of the IT Act upto 31st March 2011. Customs Duty Exemption in full on imports.

Central Excise Duty Exemption in full on indigenous procurement.

Central Sales Tax Reimbursement on indigenous purchase against from C.

All relevant equipment / goods including second hand equipment can be imported (except prohibited items).

Equipment can also be imported on loan basis/lease.

100% FDI is permitted through automatic route.

Sales in the DTA up to 50% of the FOB value of exports permissible.

Use of computer imported for training permissible subject to certain conditions.

Depreciation on computers at accelerated rates up to 100% over 5 years is permissible.

Computers can be donated after two years of use to recognized non-commercial Educational Institutions/Hospitals without payment of duty.

Export proceeds will be realized within 12 months.

Units will be allowed to retain 100% of its export earning in the EEFC account.

Special Economic Zones (SEZ) Scheme

In 2005, the Ministry of Commerce, Government of India has enacted the Special Economic Zone (SEZ) Act, with an objective of providing an internationally competitive and hassle free environment for exports. A SEZ is defined as a "specifically demarked duty-free enclave and shall deemed to be foreign territory (out of Customs jurisdiction) for the purpose of trade operations and duties and tariffs". The SEZ Act, 2005, supported by SEZ Rules, came into effect on 10th February, 2006. It provides drastic simplification of procedures and a single window clearance policy on matters relating to central and state governments. The scheme is ideal for bigger Industries and has a significant impact on future Exports and employment The SEZ Scheme offers similar benefits to SEZ units as compared to those under STPI in respect of indirect taxes, with some minor differences in operational details. There is a however a significant difference, in respect of income tax holiday. In SEZ Scheme the exemption from income tax is tapered down over 15 years from the date of commencement of manufacture. There is 100% exemption of export profits from income tax for the first five years, 50% for the next five years and 50% for the five years subject to transfer of profits to special reserves.The SEZ policy aims at creating competitive, convenient and integrated Zones offering World class infrastructure, utilities and services for globally oriented businesses. The SEZ Act 2005 envisages key role for the State Governments in Export Promotion and creation of related infrastructure. A few salient features of SEZ scheme are as under:

Special Economic Zones (SEZs) are being set up to enable hassle free manufacturing and trading for export purposes.

Sales from Domestic Tariff Area (DTA) to SEZs are being treated as physical export. This entitles domestic suppliers to Drawback/ DEPB benefits, CST exemption and Service Tax exemption.

100% Income Tax exemption on export profits available to SEZ units for 5 years, 50% for next 5 years and 50% of ploughed back profits for 5 years thereafter.

This scheme, which is ideal for bigger Industries, has a significant impact on future Exports & employment. STPI Directors are acting as Development Commissioners for IT/ITeS SEZs.

4. What do you understand by regional integration? List its types.

The growth of regional trading blocs has been one of the major developments in international relations in recent years. Virtually all countries are members of a bloc and many belong to more than one; more than one third of world trade takes place within such agreements.1 Regional agreements vary widely, but all have the objective of reducing barriers to trade between member countries and hence, implicitly, of discriminating against trade with other countries. At their simplest they merely remove tariffs on intra-bloc trade in goods, but many go beyond that to cover non-tariff barriers and to extend liberalisation to investment and other policies. At their deepest they have the objective of economic union, and involve the construction of shared executive, judicial and legislative institutions.

Boosting trade and income“To enhance the competitiveness of their firms in global markets” North American Free TradeAgreement (1992).“To create an expanded and secure market for the goods and services produced in their territories. To reduce distortions to trade” Treaty on Free Trade Between the Republic of Colombia, the Republic ofVenezuela and the United Mexican States (1994).“To modernize their economies in order to expand the supply and improve the quality of available goods and services, with a view to enhancing the living conditions of their populations” SouthernCommon Market (MERCOSUR) Agreement (1991).Boosting investment“To ensure a predictable commercial framework for production activities and investment” Treaty on Free Trade Between the Republic of Colombia, the Republic of Venezuela and the United Mexican States (1994).“Prerequisite for the stimulation of domestic, regional and foreign direct investment and theexpansion, growth and the development of the economies of each member state and the region as a whole” Kinshas Resolution on the Establishment of a COMESA: Common Market for Eastern and Southern Africa (1998).“A stimulus to the development of the national economies by expanding investment and production opportunities, trade, and foreign exchange earnings” Agreement on the Common Effective Preferential Tariff Scheme for the ASEAN Free Trade Area (1992).Stimulating development“To ensure in particular that these arrangements encourage the development of the less advancedmembers of the customs union and the diversification of their economies” South African Customs Union Agreement (1969).Democracy and Human Rights“To involve the peoples of the Region centrally in the process of development and integration, particularly through the guarantee of democratic rights, observance of human rights and the rule of law” Treaty of Southern African Development Community (1992).“To strengthen democracy and respect for human rights, sustainable and balanced economic andsocial development, to combat poverty and promote greater understanding between cultures”Barcelona Declaration Adopted at the Euro-Mediterranean Conference (1995).Regional Cooperation and Co-ordination

“To establish a firm foundation or common action to promote regional cooperation in South-EastAsia in the spirit of equality and partnership and thereby contribute towards peace, progress andprosperity in the region” The ASEAN Declaration (1967).“To foster coordinated action by the Parties in international economic fora, particularly in thoserelated to the processes of Latin American integration” Treaty on Free Trade Between the Republic of Colombia, the Republic of Venezuela and the United Mexican States (1994).Stimulate regional and global integration“To contribute the harmonious development and expansion of world trade and provide a catalyst to broader international cooperation” North American Free Trade Agreement (1992).“To facilitate the accession of Chile to the North American Free Trade Agreement” “To contribute to hemispheric integration” Canada – Chile Free Trade Agreement (1996).

5. What are the challenges faced by Indian businesses in global market?

Global Leadership Executive Action Report India has seen an increase in Growth Rate from 3% GDP to 5-7% GDP in the years since globalization of economic policy. As a result, Indian companies are doing more business outside India than before. The statistics, however, show few Indian organizations that are truly global in their reach and operations. There is a need to grow more Indian companies to reach global standards. The path to global leadership includes the need to benchmark globally and identify and meet the challenges for Indian corporations to become world class.

Building Ethical Leadership One of the priorities of The Conference Board has been to fight corruption in East Asia. The Conference Board has been undertaking Ethics Programs for the last twenty years and this has received enormous response. Last year alone, over a thousand people across the world attended the Ethics seminars. There is recognition that processes and systems complying with highest ethical standards are now an essential part of everyday practice in order to build an environment of trust and accountability. Most standards today, require a high level person with a financial interest in the company be responsible for ethics compliance. Understanding lessons in ethical leadership from Jawaharlal Nehru, sheds light on the fact that a leader is most effective when there is open debate on issues, leading to a consensus. In the absence of open debate, there is a danger of polarization of opinion and action. Arrogance of dictators usually results from isolation of leaders from the reality of public opinion. Ethical leaders maintain contact with people, touch with reality and they understand that implementation of issues requires patience and tolerance. Evolution of codes like Sarbanes Oxley (2002), have given impetus to ethics programs across the globe. The EU has proposed European Coordination Audit Oversight Board (ECAOB) to avoid US-style accounting abuses. In Japan, the Commercial Code Amendment (April 2003) allows large companies to adopt US style corporate governance structures and procedures. In UK, there are changes in the Combined Code (2003) that provide for at least half the board (excluding the chair) be composed of non-executive directors (NEDs) with significant recent and relevant financial experience, the separation of Chair and CEO, detailing of non-executive director’s role in shareholder consultation and in the Audit Committee. While the trend is to enhance the role of independent directors on boards of companies, the key to success in fostering ethical leadership lies in the true understanding of what really constitutes independence and building practices that enable boards to be relied upon to act independently. A key issue in the harmonization of global

governance practices is whether the system implemented is rule based or principle based. A rule based system will search for safe harbors in the continuance of existing business practices within the legal provisions, whereas a principle based system will have a focus on change and improvement through compliance with explanations for actions taken. The Conference Board global research project on Ethics Programs conducted over 163 companies in 24 countries, indicate that 97% of companies surveyed have these elements:

Codes of Conduct Communication of standards through training Methods to encourage employees to report violations to management Enforcement mechanisms through investigation and discipline Oversight and review to achieve ongoing improvement

The Conference Board research documents balance shifting to fiduciary responsibilities. Boards worldwide are forging new links between governance (traditional board responsibility) and compliance oversight • Governance (traditional board role) - board processes, review of company business and financial performance • Compliance oversight- review of management oversight of business conduct standards/performance

Board oversight of ethics programs can take the nature of evolving the objectives and design of ethics programs, or actually being involved in the implementation of operations of such programs to ensure effectiveness For Indian organizations, doing business across countries, the key issue will be to harmonize business practices in many countries to ethical guidelines relevant for that country. Increased scrutiny from stakeholders and societies will provide the impetus for compliance with growingly complex regulations. Organizations will find that a significant proportion of their efforts will be channelized in the direction of compliance and coordination with differing complex ethical codes across the globe.

The Contribution of Organizational Design to Global Leadership Business leaders are realizing Indian corporations going global need evolution of business strategy to meet business goals that go beyond geographic and economic boundaries. Often, organizations have looked at designing their organizations to minimize or cut costs of operations in various countries. However, truly global leaders realize that organization design drives business strategy and the need to fit strategy with organization design is imperative to carving out successful business strategies for globalization. Leaders need to move away from administrative focus that looks at organization designs based on hierarchical grades and hollow promotions based on ranks and grades through layers of management. The need is for creation of organizational designs that build accountability, and competence to meet business imperatives, and also create organizations that learn and grow. DMA Consultancy Limited has evolved a model that is comprehensive, conceptually integrated, consistent, field tested, IT supported, and has leading edge thinking. This model aims at creation of organizational designs that will work with seven levels of work design to build accountability and learning of identified competencies needed for global business growth. There is an increasing need to create organizational designs that empower talented individuals to reach their fullest potential. Traditional organizational hierarchies that stifle initiative and blur

accountability will have to move towards designs that facilitate individual performance through clarity of competencies and accountabilities.

The CEO Challenge: View from India

Executive Leadership in a Borderless World

The Conference Board’s global research on CEO Challenges (2004), views from around the world, required 539 CEO’s across the world to rank 62 challenges in order of being of the greatest concern and criticality in success and sustenance of business. These are: 1 Sustained and steady top-line growth 52% 2 Speed, flexibility, adaptability to change 42 3 Customer loyalty/retention 41 4 Stimulating innovation/creativity/entrepreneurship 31 5 Cost/ability to innovate 29 6 Availability of talented managers/executives 26 7 Tight cost control 25 8 Succession planning 25 9 Seizing opportunities for growth in Asia 23 10 Transferring knowledge/ideas/practices within company 23

Indian segment of the sample consisted of publicly traded and privately owned firms as well as small, medium and large companies from the manufacturing (Consumer and Industrial) sector, communications/Broadcasting/Publishing/Software/Internet sector, and Financial and other services sectors. Challenges of greatest concern to Indian CEO’s revealed in the survey, are:

1 Sustained and steady top-line growth 2 Stimulating innovation/creativity/enabling entrepreneurship 3 Cost/ability to innovate 4 Customer loyalty/retention 5 Keeping up with other, new technologies 6 Speed, flexibility, adaptability to change 7 Tight cost control 8 Speed to market 9 Competitive intelligence 10 Employee loyalty/commitment/job satisfaction

Indian CEO’s feel that, if we play it right, growth in a global market is possible for Indian companies. Indian corporations are increasingly learning to manage scale of operations on a global level without compromising on excellence and customer satisfaction. Indian organizations were always managed by an Indian workforce. Going beyond boundaries and operating in other countries also means dealing with a workforce that is more multi-ethnic, multi-racial, and has diverse configurations. Sustenance of excellence on the value chain against global standards is called for. Consequently, there is a need for creating speed and flexibility of response in harnessing the intellectual capital of the Indian knowledge worker. Companies are also waking up to the fact that they will come under greater scrutiny for compliance with high standards of corporate governance along with a focus on employee issues, and they will have to meet these standards in order to compete globally.

Globalisation is happening rapidly through the virtual route as well as the physical route. Knowledge is also being outsourced, Cable TV across houses has increased customer aspirations, and traffic to India is increasing. All this poses new challenges.

1. To have a global perspective is not just to be present in many countries across the globe, but also to have global thinking in terms of size of operations, quality, scale, processes, talent, and best practices. 2. Strategy and execution: principles of management written in the text books are perfect, the execution of these principles is difficult. 3. People management challenges for Indian CEO’s include creating and communicating a vision that is knowledge led and not person led, nurturing talent, building competencies, out of the box thinking, implementation of processes and methods. 4. Global CEO’s from India need to embrace technology developed throughout the world.

5. Leadership in managing diversity and complexity calls for managing differences through proactive problem solving strategies and not let the differences become a blaming game. 6. Performance management has to embrace new dimensions with benchmarking of competency standards globally. 7. Agility and flexibility in the management of cycles of change are the need of the hour. 8. Meeting regulatory compliances on an international scale is now a major concern for organizations. Compliances with laws from different countries and cultures adds to the complexity of operations and control.

Geographic boundaries are not economic boundaries. Leaders need to increase understanding about operating across boundaries, cultures, governments, etc. They need to adopt world wide global practices. The vagaries of the Indian and geopolitical environment for business can change the face of your business and global leaders from India need to be prepared for dealing with this uncertainty. Qualities imperative for leadership in a changing boundary less world: 1. Ability to lead and manage change in proactive and action oriented manner. 2. Global leaders from India need to learn to make decisions that are knowledge driven. 3. Need to adopt and adhere to best practices 4. With increased pace of development of newer and efficient technologies, those countries that are able to leapfrog the technology will be able to look ahead and innovate. Early adoption of technologies that are far ahead of Indian practices will hold the key to assimilating with practices across the world.

Indian CEO’s feel the India is poised to be one of the manufacturing hub of the world. Our skills in developing Information Technology solutions gave India the branding needed to awaken the rest of the world to our capabilities. It is now for us to ensure that the rest of the manufacturing will follow in the drive to grow our capacities to global standards. Manufacturing capability is not as attractive as IT. It was globally seen as stodgy, smoking dull unattractive slow-growing investment area. With the changing perceptions and the need of the developed nations for outsourcing manufacturing, what used to be a local, national manufacturing capability is now recognized as a critical competence for Indian corporations. Some of the biggest challenges for the manufacturing sector are:

1. To change image of manufacturing industry. Indian companies are fast realizing that their commitment to improving the quality of life and society is also the purpose of industry. Indian corporate investment in corporate social responsibilities will lead the change in image of the country. 2. The need is to attract and retain good people in the industry. Indian experiences with empowering young teams have paved the way to change the mindset of the older generation managers in India. 3. Building the belief that the future lies in solid manufacturing capability 4. Necessary to see which part of the supply chain is placed where. A need to structure parts of the supply change in the right part of the world for optimum efficiencies. 5. Pricing strategies have changed. Earlier there were two pricing dates coinciding with the post budget review, and a mid-term review. Today, the demand-supply gap demands more frequent pricing changes in response to the global demand supply situation.

6. Indian corporate houses need to rationalize diversified business portfolios based on criteria like position in market place, innovation leadership, potential for globalization, business bottom lines like return on capital, financial planning, shorter life cycles, and so on. The fundamentals of leadership have not changed over the years. A good leadership will establish a visionary direction for the company and build organizational architecture to translate positive visions to reality through system, process, procedure and structure. Capability for action and reflection, commitment to modesty, fierce resolve to action and adaptability to cross-border cultures will be critical. There are lessons to be learned from other regions across the globe that have successfully gone global. Indian organizations need to identify best practices from those that have successfully transited and adopt similar strategies. Indian organizations have a socio-cultural legacy of a feudal mindset. Such a mindset can grow to be an obstacle in the assimilation of a larger, global culture. Dissent in organizations is often discouraged as a result of this feudal outlook. Adoption of more globally accepted democratic values at the ground level would be necessary for Indian leaders. They would have to encourage dissent in the organization by adding a ‘listening ear’. For Indian organizations, global leadership imperatives are immediate and urgent. The need of the hour is to integrate with sound management practices that are globally accepted.

Enterprise Risk Management Indian companies going global are facing increasingly diverse business environments as a result of 1. global integration 2. no protected environment 3. multiple geographies/currencies/businesses 4. diverse operations 5. regulatory frameworks 6. investors 7. listing requirements 8. stringent disclosure requirements 9. management styles and culture changes

As operations of Indian firms spread across the globe, the exposure to vagaries of socio-economic-political changes in different countries increases the risk associated with such operations. Business leaders find the need to build risk mitigation into their globalization strategy and build business practices that are likely to succeed and not fall prey to risk, both known and unknown. The Conference Board has ongoing research on risk management practices across the globe. In a global operation, there is a very high likelihood that some employee is violating, however obscure, some state, local and possibly federal law in some country without knowing. With increased scrutiny, global corporations need to adequately oversee responsibility for risk factors with compliance requirements. Enterprise Risk Management (ERM) is the act of protecting or enhancing enterprise value by managing the risks that might impact that value with a coordinated and systematic approach that is organization wide and covers all types of risks. Such risk mitigation strategies should be embedded in the architecture of the firm. Blind spots in these risk mitigation strategies need to be looked at more closely. Potential sources of risk inside the organization as well as in the external space need to be identified and addressed.

The Conference Board has identified three sources of risk: Credit risk, Market risk and Operational risk. A research undertaken by Ethics Officers Association (http://www.eoa.org) covering 85 US company members revealed that 68% companies had conducted a risk analysis exercise at least once and 44% had conducted such an exercise three times in the recent past. The highly diversified Aditya Birla Group with operations based in India and spanning across 18 countries, has evolved Enterprise Risk Management (ERM) practices that identify and manage strategic, operational, stakeholder, financial and intangible risks. Some of the risk mitigation actions adopted include:

1. Accept risk: Managements consciously decide to continue operations with a consensus to accept risk inherent in the business 2. Transfer risk from one business to another or to a third party (insurer) 3. Decisions to eliminate risk by dissolving high risk businesses. 4. Acquire risk where the management has a core competency in managing this kind of a risk. 5. Reduce risk through improvement in controls and processes 6. Share risk through partnerships, outsourcing and other such processes.

Practical steps taken by the group for risk mitigation include: 1. Mitigation of Operational risk through various financial tools 2. Mitigation of Strategic risk through different strategic tactics in different units/countries. 3. Value chain integration: Backward and forward integration, presence in all segments of value chain. 4. Cost cutting measures to reduce financial risk 5. Portfolio diversification to spread risk across elements of portfolios in different countries 6. HR practices like talent retention and growth strategies, succession planning, organization health surveys.

Potential benefits accrued to the group as a result of ERM practices are at various levels: Provides for more consistent risk taking across businesses Reduces the Risk of Shareholders since Risk Transparency & Disclosure is Enhanced Establishes a Rational Basis of allocating Capital and Prioritizing Investments Maximizing ROE Reduces the Cost of Capital and Increases Shareholder Value Benefits Creates the basis for Rationally Priced Insurance & the ability to exploit a Captive vs. Traditional Insurance Enables the Rating Agencies to more rationally rate debt and equity Reduces the cost of D&O Insurance because of enhanced Corporate Governance Satisfies SOX and COSO Requirements keeping the Regulators & Investors happy Managing the Multiple Facets of Ethical Leadership Business leaders across the world have felt the need to engage with philanthropic initiatives for the betterment of society. Historically, ethics and philanthropy in the nineteenth century took the form of informal, benevolent actions on the part of merchants and business industrialists. The twentieth century saw the emergence of the industrial class and business conglomerates that generated wealth on an unprecedented scale and created business dynasties. The flavor of philanthropy in for such business houses led to establishments of trusts and charitable funds. The twenty-first century has now seen the emergence of a new generation of young entrepreneurs who want to invest in philanthropy and see the fruit of that investment in their lifetime. Correlation between ethics and philanthropy:

1. Level One: Company wants to be a good and diligent citizen 2. Level Two: Ameliorative charity – company wants to ameliorate the pains of society 3. Level Three: company institutionalizes their efforts through setting up of trusts which establish the reason for existence of the firm as a member of society.

The Gandhian perspective of ethics that emerges from the socio-cultural context of Indian business defines unethical behavior as: Politics without principle, wealth without work, commerce without morality. To take the metaphor of the Indian organization as a human being, organizational identity is derived also from the urges of the soul (atma). Business is like a human being: the body dies and the soul lives on. The mission of the company is to purify the atma (soul) and not only to beautify the body. Organizations are thus driven to not only meet business goals but also live as responsible and ethical members of a complex social web. The call of the atma is to a higher purpose of existence and creation of sustainable value systems that endure with time. Organizations naturally evolve to looking beyond business bottom lines and living as responsible and ethical citizens of society.

Managing Global Diversity

As Indian business goes global, operations across different countries will create a need for dealing with cross-cultural issues in a way that is sensitive to differences and creates organizational cultures with space for a global workforce. Indian companies like Infosys have followed the example of global firms and have taken steps to work with issues of social diversity with the purpose of creating firms that have inclusive work cultures. A network for women’s inclusivity has been set up to address concerns of women employees. The focus for some of these initiatives still in an infancy stage is largely on the management of gender and ethnic diversity. The focus on creating inclusive work practices on the dimension of age diversity is also an action area identified in the organization. Indian global pharmaceutical company, Ranbaxy finds that its presence in several countries poses a challenge to build the human bridge across social and cultural divides. They find that management of diversity is a growth imperative for Indian corporations wanting to go global. Their VIA (Values In Action) programme across the geographical boundaries aims at creating inclusive cultures.

While businesses do focus diversity management initiatives for the purpose of building inclusive work cultures, some of the pitfalls to watch out for are:

1. Diversity for diversity’s sake 2. Reverse discrimination 3. Business focus should not get diluted 4. No clear business aligned metric to measure diversity management. 5. Personal credibility of diversity professionals is important

Business Implications of Getting Global Leadership Right

Global businesses need to recognize that the seeds of failures are in the habits of success. They need to ask the question - Could our best practices be our Achilles heel? Often successes in one part of the world are not replicable in other parts. Speed and quality are indispensable qualities in the conduct of global business.

6. Discuss the various e- business models.

1. Ecommerce and Information Technology : E-business models Show 1 2. Learning objectives Define what constitutes a business model Identify different types of e-business models Confirm the relationship between business models for e-markets and e-businesses Apply e-business models to transport businesses or operations Analyse and make a balanced judgement on the e-business models being used by select companies Determine the alternative business models that may support different e-commerce strategies. 3. Our focus For the purposes of simplicity this module will focus on business models for businesses adopting e-commerce; that is, an e-business deploying ICT to enhance its commercial processes 4. Threats to e-business the changing needs of both traditional and online consumers the business strategies and offerings of both your new and existing business competitors; and the changing needs and offerings of suppliers, stakeholders and employees. 5. Leveraging an effective business response the business model you are operationalising through the activities of your business and the extent to which this business model encompasses e-business strategies; the business processes that have been established to express the business model; the nature of products and services offered; the skills and capabilities of business staff; and the technologies available 6. What is a business model? The ‘business model’ concept aligns with Peter Drucker’s (1994) concept of ‘the theory of the business’: he suggested that ‘every organisation, whether a business or not, has a theory of the business’. This theory is made up of ‘assumptions that shape [the] organisation’s behaviour, dictate its decisions about what to do and what not to do, and define what the organisation considers meaningful results’ 7. Why do we need an e-business model? The reason that business models are often considered as a part of e-commerce strategy development is that it is useful to investigate e-commerce strategies from a ‘whole of business’ perspective because this is the level at which the most significant threats and opportunities can be addressed. E-commerce also presents all businesses with new threats and opportunities and, consequently, a need to re-consider their existing assumptions about their customers, products, markets and business in general. 8. Definitions of a business model … a business model is a description of how your company intends to create value in the marketplace. It includes that unique combination of products, services, image, and distribution that your company carries forward. It also includes the underlying organization of people, and the operational infrastructure that they use to accomplish their work. (KMLab, Inc. 2000, referenced in Chesbrough & Rosenbloom 2002:6) A business model is your company’s logic for making money in the current business environment. It includes the value propositions you work out with all your important stakeholders and the operations you put in place to make good on your promises and to make use of what you get in return. (Linder & Cantrell 2001) A business model is a variation of the generic value chain underlying all businesses. A business model has two parts: (i) the business activities associated with making something (design, procurement, manufacturing, etc), and (ii) the business activities associated with selling something (customer identification, selling, transaction handling, distribution, delivery). (Magretta 2002:87) The method by which a firm builds and uses its resources to offer its customers better value than its competitors and to make money doing so. (Afuah & Tucci 2001:3) 9. Advantages of using a business model Improving your organisation’s focus. Establishing a framework for competing agilely. Positioning your firm to overcome industry discontinuities.

Redefining the competitive landscape. Overcoming human limitations. Rehearsal without risk versus limits of modelling Managing change 10. E-business Models 11. Cyveillance® view on e-business models 12. Advertising model Businesses with a significant amount of customer or consumer traffic can offer advertising services for other businesses. This can provide anything from a means to offset costs to a primary source of revenue. The Internet has enabled customers to self-identify themselves and their interests to information and service websites, thereby also allowing advertising to be directly targeted to their interests and needs. This can provide highly valuable marketing opportunities, and facilities for advertising can usually be established without significant extra cost above that of developing and having a business website. 13. E-retailing model This model is customer-facing, effectively positioning a business at the end of a value chain of other businesses and business activity. Being in this position can provide opportunities to align and assist other participants in your value chain with market intelligence. This is particularly important in situations where your value chain is competing with other value chains from other regions or overseas. 14. Channel model Focusing on maintaining existing business relationships and channels to market can be achieved by streamlining and value-adding the transactions that occur within existing channels to market using online technologies. 15. Affiliate model An affiliate model offers the equivalent of commissions to businesses that create customers. For example, Amazon.com and some web domain registration businesses offer commissions to businesses which direct customers and sales to their sites. This is also typical in businesses offering web domain name registration and website hosting services. This typically involves providing a link to your website and services along with some standard promotional material. 16. Franchise model This involves selling only via accredited agents and would be appropriate where there are particular standards of quality or service that need to be delivered by agents who are in closer contact with end-consumers. This approach has the advantage of leveraging the customer relationships of other businesses. This can be particularly useful when launching a business into new or overseas markets. 17. Subscription model This is the online equivalent of magazine subscriptions, with subscribers gaining access to Internet content or access to online software. For example, anti-virus software providers McAfee and Symantec offer annual subscriptions to their software and updates. Microsoft also offers subscription options for purchasing some of its software. A subscription model could also be used as a means to charge other businesses for accessing an electronic market and/or making their catalogue of goods available to buyers participating in that market 18. Timmers – Sorting e-business models by degree of functional integration and innovation 19. Timmers’ (1998) Business Models for Electronic Markets e-shops – promotion, cost reduction, additional demand, (seeking demand) e-procurement – additional inlet (seeking suppliers) e-auction – electronic bidding (no need for prior movement of goods or parties) e-mall – (collection of e-shops), aggregators, industry sector marketplace third party marketplace – common marketing front-end and transaction support to multiple businesses virtual communities – focus on added value of communication between members value chain service provider – support part of value chain, e.g. logistics, payments value chain integrator – added value by integrating multiple steps of the value chain collaboration platforms – e.g. collaborative design information brokers – trust providers, business information and consultancy 20. Wired for business —five successful e-business models e-business storefront : an entity in the e-business in which commerce occurs, margin is created and value is extracted, using

existing as well as new digital market channels – also known as a storefront – often has a ‘dot.com’ identity infomediary: an entity that brokers content, information, knowledge or experiences that add value to a particular e-business transaction – also known as content aggregators trust intermediary: an entity that creates trust between the buyer and the seller e-business enabler : an entity that provides a component or functionality and adjunct services to enable and lubricate other e-business storefronts or infomediaries infrastructure providers or communities of commerce: aggregate members across a set of complementary interests (products, content, and services) and markets – communities of enterprises organised around common interests through a common infrastructure 21. Composite e-business patterns (Endrei & Sadtler, 2004:8) 22. The classification of business models The user role. Interaction pattern. Nature of the offerings. Pricing system. The level of customisation. The economic control. The level of required security. The level of value integration. The value/cost offerings The scale of traffic. The degree of innovation. The power relationship. 23. B2C business models 24. B2B Business Models 25. Value relationships in different e-business models 26. The cornerstones of an business strategy for e-commerce Any business, technological or management strategy can be thought of as being directed at improving or maintaining these exchange outcomes. E-commerce is useful to the extent that it enables one of these two outcomes. In this exchange context, it is possible to identify four broad themes of e-commerce activity: Purchase and sale transactions. These exchanges involve transactions for the purchase and sale of goods and/or services, for example, buying a book online, subscribing to an online magazine, or buying a domain name. Information and service transactions. These exchanges involve one party providing information and services for the use of others via the Internet, for example, a search engine, an email service, a news site or a catalogue of products online. Human communication and collaboration. These exchanges involve people communicating and collaborating with each other for whatever purpose – business or social. Examples include email communication, chat/messenger services, online communities, virtual worlds, multiplayer online games. Organisational communication and collaboration. These exchanges involve the communication of information between organisations to facilitate joint outcomes and coordination. For example, EDI, automated reporting systems, reporting to government/regulators. 27. E-business typologies Each of the types of e-commerce exchange can be considered in the context of the four main classifications and therefore e-business approaches: business to customer (B2C) business to business (supplier) (B2B) business to employee (B2E) business to shareholders, government and other stakeholders (B2G/B2S). 28. Integrated view of an e-business model (Based on Osterlander and Pigneur 2002)