International Business

(ECO-505)
Session-9-10

Technological Environment and

International Business

Dr. RKP/ IMI, Bhubaneswar

Technological and Economic Environment

Main Topics for Discussion

 Technological Environment in International
Business
 Impact of Technology
 International Technology Transfers
 Issues in International Technology Transfers
 Economic Environment and Technology Transfer

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 Technological Environment

 Technological Environment
◦ Technology – Lesser Inputs and Higher Output
◦ Use of Scientific knowledge to bring out need satisfying
products by the Industry
◦ Application of Science by Engineers
◦ Motive is socio economic gains (profit) where science is
in pursuit of knowledge and glory
◦ Technology imposes certain amount of Change on Society
◦ Sophisticated Production Processes

9-3
 Technological Environment
 Classification of Technology
◦ State of the art Technology – Equals or surpasses competitors
◦ Core technology – To maintain a competitive position
◦ Supporting Technology – Supporting Core Technology
◦ Emerging Technology – Currently under consideration

 The Technology Cycle

◦ Awareness Phase
◦ Adaptation Phase
◦ Advancement Phase
◦ Obsolete Phase

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 Technological Environment

 Impact of Technology
◦ Social Implications

◦ Economic Implications

◦ Plant Level Changes

9-5
Impact of Technology – Social Implications

 Social Implications
◦ High Expectations of Consumers
 More Safe more comfortable items expected at lesser cost
 Many more variants required which needs huge R&D

◦ System Complexity
 Complexity of servicing new Technology –Process failure
 Reliable Performance expected

◦ Social Changes
 Job displacement and Income Inequality (Software example)

◦ Social System
 From Manual driven work to Intellectual Driven Work (Perception towards work;
Mallikarjun’s Vegetable shop example)

9-6
Impact of Technology – Economic Implications

 Economic Implications
◦ Increased Productivity
◦ Need to Spend on Research and Development
◦ Job Profiles – More Intellectual and Knowledge Oriented; Concept of
Knowledge workers
◦ Problem of Technostructure – Motivation to employees become tough
in the light of enlightenment (Stickiness vs. Hopping)
◦ Increased Regulation and Stiff Opposition
◦ Rise and Decline of Products and Organizations
◦ New Business Boundaries
◦ Training of Scientists and Engineers –Quality of Graduates (China-India
Comparison; Correlation in the case of US Phds and Technological innovations)

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 Impact of Technology – Plant Level Implications

 Plant-Level Implications
◦ Technology and Organisational Structure
◦ Fear of Risk
◦ Resistance to Change (Example of Railways and many more)
 Psychological and Social commitments to existing Products and Process
 Capital Investment
 Complacent Top Management
 Industry Norms and Associations
 Powerful Trade Unions resistance

◦ E-Commerce
 Internet and E-commerce
 Shorter Time Period to Produce and Worldwide Transactions with less cost

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Impact of Technology – Plant Level Implications

 Plant-Level Implications
◦ Patenting – HUL with Highest patent files from India
◦ Globalization of Product
◦ Globalization of Markets
◦ Collaboration
◦ Use of Social Networking
◦ Use of Data Mining to Firms Advantages
◦ Use of Latest Communication Mobile Technology to gain
competitive Advantage at Plant Level

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 Technology Transfers

 International Technology Transfers

 Regional Technology Transfers
 Cross Industry or Cross Sector Technology
Transfers
 Interfirm Technology Transfers
 Intra-firm Technology Transfers
 Pirating and Reverse Engineering

9-10
 International Technology Transfers

 International Technology Transfers between

Countries
◦ Rich Countries to Rich Countries – Avoid Waste of time in
duplicating the technology (reinvent the wheel?)
◦ Usually Rich Countries to Poor Countries
◦ Labour Intensive, Natural and Organic Technologies from
Lesser developed countries to Developed countries
◦ Borrowing and Buying Technology much Cheaper and Cost
effective than reinventing the technology in its Adaptation
Phase

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 International Technology Transfers

 Parties in the Technology Transfers Process

◦ Home County’s Reaction to Technology Transfers
◦ Host Country’s Reaction to Technology Transfers
 Social Implications – Transmission of Culture of exporting countries
 Pollution, Urbanization and associated problems
 Most Importantly mindset of majority become pro home country inhibiting
social framework to create and work on original Indigenous technology
 Tendency to think eating pizza more sophisticated than Indian snacks
 Eating with Fork more sophisticated than using fingers
 Economic Implications – Payment of fee, Royalty, dividends, Interest, Salaries
to expats, tax concession etc. – Wealth drain from host country

◦ Strategies before Host Countries

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 International Technology Transfers

 Strategies before Host Countries

◦ Be Passive – Robustness of the Country is required to do
so
◦ Limit the Sectors open for Technology transfer
◦ Limit Amount of Inward Investment – 25% 49% etc
◦ Specification of Performance requirements
◦ Discourage Restrictive Clauses on Transfer of Technology
◦ Encourage Indigenous Technological Development
◦ Encourage Collaborative R & D

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 Technology Transfers Process

 Arrangements for Sales and Licensing

 Provision of Know-how and Expertise
 Provision of detailed Engineering Design and
Installation
 Purchase and Leases of Technology elements
 Technical cooperation Agreements

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 Issues in International Technology

 Foreign Technology Acquisition

 Creating Local Capability
 Globalization
 Terms of Technology Transfer
 Choice of Technology
 Barriers to Technology Transfers

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 Issues in International Technology

 Foreign Technology Acquisition

◦ Internal Technology Acquisition
◦ External Acquisition
◦ Combined Internal and External Acquisition
◦ Making a Decision on Acquisition
◦ Tacit Knowledge
◦ Internal R&D with Networking
◦ Reverse engineering
◦ Covert Acquisition with Internal R & D

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 Issues in International Technology

 Foreign Technology Acquisition

◦ Covert Acquisition
◦ Technology Transfers and Absorption
◦ Contract R & D
◦ R & D Strategic Partnership
◦ Licensing
◦ Purchasing
◦ Joint Venture
◦ Acquisition of a Technology Rich Firm

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 Issues in International Technology

 Choice of Technology
 Terms and Conditions of Technology Transfer
 Globalization
 Creating Local Capabilities
 Barriers to Technology Transfer
 International Technological Environment and
International Business

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Technology Transfer and Economic
Environment

 Economic Environment
 GDP and Growth in GDP
 Inflation and Technology Transfer (Rafale Deal
Example)
 Stability in Exchange Rate
 Employment Potential and Technology Transfer
 Availability of Resources (Price vs. Availability of Factors)

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Technology, R & D and Economic Environment

 Size of the Economy

 Growth Potential (Green Revolution Example)
 Economic Base, Technology Transfer and Growth Rates
 Sustaining the Production Levels at Highest Plateau
 Sustaining Employment at highest Plateau
 Creating Effective Demand for new products
 Challenges before Highly Developed Nations
 Role of Role of Technology Transfer and R & D in
sustaining High Growth Rates

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Resource availability and International Business

 Availability of Resources
 Inputs Availability vs. Prices
 Work Force Quality
 Quality work Force Availability vs. Wages
 Cost Factors in Production and Marketing
◦ Bella case; Posco Case; Arecelor Mittal Case
 Support and Ecosystem of the Host Country
 Work Culture, Technology and International Business

 Case Study on Bella Health Care

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 Case on Bella Health care

 Evolution of an Organization as it moves from lower

Value Addition activities (Assembling a Product) to
Higher Value Addition capabilities (Product
Development)
 Potential Sources of Challenges when working in
Cross Cultural Context
 Reasons to develop a product locally where they will
be eventually marketed – Adoption of a “local for
local strategy”

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 Case on Bella Health care

 What capabilities and resources does a company

need to develop new products?
 Which of these resources and capabilities does
Bella have?
 Why did Project Baton fail?
 Should Bella India take on Project TKO and
develop an EKG specifically for the local market?
Why or Why not?

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