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Technological Factors
Welcome friends. So, today we will discuss about one of the important factors thataffects International Business. So, in the earlier lectures we discussed about the effect ofeconomic factors, the effect of political factors, the effect of legal factors, the effect ofcultural factors on the international business and today we will be talking about howtechnology is and the change in the technological environment is impacting internationalbusiness in a significant manner right.So, I am sure when I am talking about technology few things have already come intoyour mind. For example, you must have started thinking about how internet has youknow entered into our life and how there have been major changes in e-commerceplatforms.There have been you know today the world has in telecommunications also throughtelecom the world has become such a small place and we are globally connected acrossthe world. So, things have become very easier right. So, today we will talk about howthese technologies have entirely changed the landscape of business right.(Refer Slide Time: 01:42)So, what is technology? Technology basically includes the tools which are both machineand ways of thinking right. So, when it is a machine it is a hard technology when it is athinking it is a soft technology available to solve problems and promote progress. So, thechallenge has been always that technology or anything for that it has always been donefor the development or improvement of mankind right.And so to solve this problems and promote progress technology has played a vital roleright and using this technology firms have made money right and economically theyhave made achievements right.So, if you look at the since the end of World War II the world has seen major advancesin communication, information processing and transportation technology including theexplosive emergence of the internet and World Wide Web right.So, these things that have come in the recent times has made magnificent changes in theentire connecting the entire globe and making the globe a very small place right. So, J.K. Galbraith defines technology as a systematic application of scientific or otherorganized knowledge to particular tasks.For example when the first time assembly line mechanism came. So, before that thingsused to take lot of time to would be done right, but with the assembly line mechanism thesame you know car makers or whoever it fore started it.So, the car makers now could assemble a car in much very less little time right.Similarly, the very famous Moore’s law for example, when Moore said Robert Mooresaid that you know the number of transistors would in a microchip would double every 2years right. He said our almost 18 months he said.Now, because of this change right, the you know the need that the phase has which it haschanged you see the phase in which are computers are working how fast they areworking millions of you know informations per second right they are able to cater tothat.So, all these has made our calculations are you know very easy for example, processingspeeds are very very high. So, that is why we are able to develop super computers. Youlook think of the bullion market, think about the world you know economy the you knowhow the currency changes every second every minute and how they have been calculatedso fast right.All these things have and from the physical side also if you see when for example, likecontainers and new designs in containers all these things have led to a distributionalchange and you know and access to information all these have changed dramatically.The type of technology in use, the level of technological developments, the speed withwhich new technologies are adopted and diffused the type of technologies that areappropriate, the technology policy etcetera are important to business to survive in thisglobal market.Today, almost I can see the all the young businesses that are coming up are workingthrough the internet right. So, if somebody is selling handicrafts over eBay or ifsomebody is selling jewellery’s on Meesho or somebody is selling you know istransferring money from one person to the others account for example, through Paytm inIndia or Google paisa you know. There are so many things. So, everything is aninvolvement of technology.(Refer Slide Time: 05:16)Now, you look at this you know importance of technology in International Business. So,telecommunications the it is one of the most important dimension of technologicalenvironment being faced by the international business. So, with the emergence oftechnological growth right for example, we earlier started with a you know very basictelecommunication systems.But, then today we are talking about we started with 2G, then 3G, 4G. Today we weretalking about the 5G right in some countries it has even started. So, the kind of fastnessand the kind of abilities we have developed in telecommunications has really you knowfastened thing right.Second is the transportation. So, for example, the development of the commercial jetaircraft and super freighters and the introduction of container right containerization orcontainers basically which simplifies the transshipment from one mode of transport toanother.All these things have and this is only not the hard side you know the other side. Forexample modular designs. So, this is a soft side technological we have thinking. Now,has changed the entire way transportation is happening in the world right. Because ofmodularization itself there has been almost a 5 6 percent of savings for the you know andoptimization or you know productivity improvement.Globalization of production. A satellite based communications system allows MNCs oreven any company for that to coordinate on a global scale. What its production it isplanning should be, how what is the cost accounting process, what is the financialplanning, how to market, how to service the customer and human resource for example,how should they maintain the human resource.Now, for example, look at. So, many companies today have for example, there areoffshore shops out here. For example, we have call centers for many US companies outin India just because we have a very economical human resource right. So, because ofthis most of the services have been done through the complaints have been handledthrough India right. So, this is the win-win situation for both. They are saving money andwe are also gaining employment and money.Globalization of markets. Low cost global communication network such as the WorldWide Web are helping to create electronic global market places right. Then e-commercebecause of the low entry cost of the internet it has permitted firms with low capitalresources to become global marketers.Think of an Amazon, think of Flipkart, think of Paytm you think of anything you want toyou know Makemytrip you know anything you think of today right all these has becomepossible technology transfer the final thing is it is a process that permits the flow oftechnology from a source to a receiver. So, how it is being done and what are theparameters involved in it will see.(Refer Slide Time: 08:10)So, this is how the world has become. Today the whole has come on your mobile right.A smart phone with an internet connection and the whole world is on your you know isclose to you right.(Refer Slide Time: 08:25)Some examples of disruptions brought in by technology. So, far this is just to make itmore interesting and clear. Travel websites such as Expedia right, Yatra and Makemytriphave eliminated the need for human travel agents right. Job recruiters have beendisplaced by websites like Linkedin, Indeed.com and Monster.Who would forget Uber and Ola and other car sharing apps which are giving traditionaltaxi and delivery companies a run for their money right. So, even today the in order tocompete with these people like Uber and Ola the taxi unions they are thinking of havingtheir own apps so that they can connect right. So, this is all happening. Airbnb and Oyoare doing the same in the hotel and motel industry right.Now, concepts like 3D printing is growing rapidly and the technology is becomes fasterand better right. So, with 3D printing tomorrow it is possible that you develop your ownhouse, you design your own house, you design your own pizza right anything.Traditional television distribution is being upended by distribution digital distributionoutlet us such as Netflix and Amazon Prime.Now, Apple Pay, Aipay, googlepay, M-Pesa etcetera are transforming the way we liveand connecting more people to market opportunities. So, the opportunities thattechnology has provided if somebody ask me I would say the greatest you know changemaker is technology in this world.There is nothing that can be compared with technology because when technology hasmade our life so simpler yet yes the complications are also there. But that is man made,but what has happened is it has largely made our you know transactions are you knowcommunications very very simpler right.(Refer Slide Time: 10:16)What is innovation which is connected with technology and how it is connected withinternational business? So, when I say a technology the world innovation automaticallycomes in right.So, innovation may be defined as the technical, industrial and commercial steps whichlead to marketing of new manufactured products and to commercial use of new technicalprocess and equipment. So, innovations is basically when you say it is like after theinvention right when there is a invention of a new thing right and then you get into ainnovation where you try to improve up on the existing product right.So, innovations help companies to increase the market share capture new markets right.So, you can innovate a product for a new market right. Create new segments in themarket and even try to create entirely new industries in the markets. Innovation isexpected to give a company a competitive advantage or success. So, all these are youknow basically this innovation we talk about is from the technological front right.(Refer Slide Time: 11:17)When I am talking about innovation there are 2 ways to understand one is the productinnovation and the process innovation. So, what is product innovation? It refers to achange in the product right. It can be in 2 different forms. First an improvement in theperformance of a product. So, you had earlier your mobiles right. So, these mobiles werevery dumb mobiles.Today, if I see if I compare with any old Nokia phone I would say it is a dumb phoneright. Today I have a smartphone in my hand and it is even same price or even lesser tothe earlier dumb phones, but it has got given me a so many different opportunities andyou know features.For example, in increase in digital camera resolution you see who could understand orthink about that Kodak like companies Polaroid like companies would be extinct. Acompany which was holding 80 percent of the market share in the world these companiesalmost you know the camera market today are nowhere.Just because technology they could not stand or move with the technology and there thenthey became obsolete right. So, today everybody who has a mobile can take a photoright. So, who would require the camera, the roles and alright.Second new features in a product for example, the new iPhone 7 has dual camera whichdoes not exist. So, these are all the product changes are that are coming up right. Inprocess innovation, what we are saying it involves improvement in the process ofproducing a product. So, what kind of changes we have made in the processes so that theproduct has become much simpler.For example, one of them which I just now and said modular design. So, earlier you weredesigning a product there was several parts. So, can you have can you make it modulesso that the shipment becomes easier. So, this is one. Reverse engineering also has helpedin understanding you know in the process innovation.So, it includes improved inbound logistics, better media planning, improvedmanufacturing process. For example, using instant demand data instant demand data toplan production is an process improvement right. Today you see most of the inventory isbeen managed at the vendors end right. You know concepts like just in time right. So, allthese have been possible because of this process innovation. It can lead to lowerinventory and lowest stock outs.An assembly line production process that breaks the manufacture of a good into stepsthat are completed in a predefined sequence. Assembly lines are the most commonlyused in the mass production of products. So, these are the process in changes that hashappened so which may be is not visible to the end customer. But, in the B to B it is veryimportant how the you know firms are making new changes new waves in changing theentire way of producing a product.(Refer Slide Time: 14:09)The last thing we will be talking about is transfer of technology. Now, what is this?Technology transfer is the process by which commercial technology is disseminated ok.So, this will make the form of technology transfer transaction which may or may not belegally binding contract may not be a legally binding contract.So, Blackeney says this. Now, import of technology is also known as technology transferwhich involves the sharing of skill, knowledge and facilities among government andbusinesses so that this technological developments are accessible to a wide range of usersfor commercial and welfare purposes.So, technology transfer is simply you know trying to pass or disseminate the technologyfrom one user to the other right. So, if somebody for example, most of the technology weget from the other developed nations or even some of the developing nations are a hugeboon for a country like India which can reduce the cost of production of may be itsmedicines, may be the basic equipments that are needed.So, this adds to a lot of social and you know economic welfare. Technology transferactivities includes processing and evaluating invention disclosures, filing for patents,technology marketing, licensing and so on right.(Refer Slide Time: 15:29)Now, what are the forms of technology transfer? Internalized form and externalizedform. Internalized form in this form the control resides with the technology transferor theowner right holding the majority or full equity ownership. So, when you are talkingabout technology it is very important to understand who holds the power.So, in this case it is the owner who holds the full equity or the majority the power. Itinfluences the sales. It is integral part of the global strategy and control on the investmentdecisions. Now, what is the externalized form? It refers to the joint ventures with localcontrol, licensing strategical alliances and international sub contracting. So, it is more ofdecentralized now right.(Refer Slide Time: 16:17)How the channels? What are the channels of technology flow? How does technologyflow? What is the how does it disseminate? So, some of the ways are for example,through FDI right, through licensing, through franchising right. So, earlier you know wehave also discussed several times, but still through this technique organization transfer itis technology to target nation through it is subsidiary right by investing themselves.For example, Toyota Motors bought it is technology of invisible mirror through it issubsidiaries in various countries. Now, what is licensing? License is to provide for theuse of technology to the user. So, the user can use this the license to use the technologybasically the license provided to use the technology under which only a licensee holderlicense holder can use the technology.For example, softwares like OS of Windows or Linux etc. comes with a specific codeand identity of the system through which they can be used on authorized system only bythe authorized user of that system. So, today you talk about all those you know differentsoftware products and the antiviruses and all.So, there is a license connected. So, the permission is given to use it right. Franchising isalso quite similar to licensing where organization set up their own franchises and transferthat technology to the franchisee say that it could be own also it could be some otherperson, but there is like a lot of control in involved.So, the franchisee operates on behalf of the organization. Under this the company has thecontrol the franchisee only carries the name and trade mark. For example, you can be afranchisee of KFC, McDonalds it will be largely controlled, the quality and everythingwill be controlled by the parent company, but what you can do is you can use that nameand the brand name the brand name and the trademark right.(Refer Slide Time: 18:09)Again management contracts, contract manufacturing, joint venture also a few of theother techniques for example, in management contracts the technology is transferredunder certain terms and conditions or by establishing projects for the host and trainingtheir people to operate it and transfer the control to the host.So, in the management contracts for example, you see it can involve a wide range offunctions as technical operation and of a production facility, management of personal,accounting, marketing services. Examples schools, sports, facilities, hospital, officebuildings, malls, large businesses have onsite cafeteria restaurants etcetera. So, what itsays basically management contracts are given. So, they tend to give this service right onbasis of a fee.Contract manufacturing is an is outsourcing entire part of manufacturing operations. So,pharmaceuticals, personal care products the iPad and iPhone which are products fromApple are manufactured in China by Foxconn right. Hence, Foxconn is a contractmanufacturer.So, in India also for example, if you see Nike as a lot of Nike, Puma, Adidas all the theyare made in India in several places like Tiruppur and all where they work as a contractmanufacturer they work for these companies at again a you know some fees or somemoney they are paid. So, why these companies give it because it is helpful to them. So,that the because the cost of manufacturing the labor cost are very cheap in India. There is a tendency of transfer outdated technology to developing countries. There is aobsolescent in advance. This is a serious problem that is happened and is an impact oftechnology transfer that many of the in the especially the pharma industry most of thedrugs that we get are the are coming from the first world countries in the second youknow.So, the first these drugs are basically they are considered to be obsolescent in some of thenations also. Similarly, in some of the technologies which are obsolete in the firstdeveloped nations are then moving in to the developing and the not so developed nationsright.So, these are some of the issues or criticism against the technology transfer, but it is not aproblem of technology transfer. It is how you handle technology transfer which is awhich results in all these problems ok. Information technology and globalization. Thishas completely changed the landscape today.(Refer Slide Time: 22:26)Now, you see that information technology has redefined the global business throughinternet, the www you know sites email cyber space information super highways cadcam right cap and online transactions. So, all these have changed the entire way businesshave being done.This facilities help the global companies in reducing the size of inventories becausetoday you are so well connected that every change in an inventory is known to you right.So, unnecessary capital blockage and you know inventory buildup is not desirable or notrequired it can be handled well through you know this technologies.Reduce delivery time, reducing unproductive waiting time right, reducing the incident ofstock outs and lost sales. So, all these problems today has been can be handled wellbecause of the reach of information technology right. You see MIS for example, islargely helping.It is a collection of systems, hardware, procedures and people that all work togetherprocess, store and produce information that is useful to the organization. So, today evenif there is you know if a single even a you know packet of oil goes out from the shelf. So,the distributor comes to know about it and this reflects in the company’s productionprocessing again.(Refer Slide Time: 23:51)So, all these things are tremendously helping. How to respond to market have changedhas become much faster. So, reducing rush order; that means, there are no certain spikesof demand because you know there is a smooth flow of your orders.Until unless there is a sudden demand in the sense the there is a necessity which has beenwhich cannot be calculated there is a general you know this is a truly you know increasein demand which has and this is in a very short time because of some catrastophy ornatural disasters something that is a separate issue. Otherwise more or less it can becontrolled.Cutting down over production, reducing unnecessary movements. This is called time inmotion right ah. Study reducing paper, work planning production levels accurately allthese are very richly very nicely done because of this in developments.For example, you see a smartphone alone provides half the human population access toartificial intelligence from search and translation to cloud computing, geolocation, freeglobal video calls, digital photography, free uploads to social network sites, free accessto global knowledge. A million apps for a huge variety of purposes and many othercapabilities that were unavailable to most people only a few years ago.So, all these things has I mean sometimes I feel as if we have come into completely newworld a new thought process right everything has changed. Now, how we leave how wecannot leave in the way we use to 15 years back may be. It is as you know as good asthat if the change has become so dynamic, so fast that you we have to cope with it and itis not difficult, it is so easy right.(Refer Slide Time: 25:40)Now, with all these when we talk about the technology we have to understand thetechnology cannot go alone. It has to be a sustainable way of doing things. So, how theenvironmental factors are also affected. So, natural environment is the ultimate source ofmany inputs such as raw materials, energy which business firms use in their productiveactivity.As Watrick and Wood observe the natural environment ultimately the source and supportof everything used by business every raw material every life sustaining factor everythingright. The geographical and ecological factors such as natural resource endowments,weather, climate conditions, topographical factors, locational aspects, port facilities areall relevant to the businesses.So, how there has for example, recently there was a you know the Amazon Fire whichhappened that created a lot of issue and debate right. How this could have been avoided?How this should be further such conditions should not arise? So, all these things werediscussed. So, natural environment place a very vital role right.The depletion of these resources and creation of pollution disturbance of the ecologicalbalance have cause great concern for governments as well as companies. For exampletoday I would not mind saying Delhi has become one of the you know capital of Indiahas become a very difficult place for business people to leave in or any person for thatright and automatically when it affects the citizens automatically that also affects thebusinesses.So, foreign companies would be thinking twice before even starting an operation inDelhi because of the huge air pollution concerns and the water scarcity issues right. ForIndia for example, the firms producing cotton textiles are mostly located in Bombay,Madras and West Bengal where a weather and climatic conditions have conducive to theproduction of cotton.So, cotton requires black soil which is largely prevalent in the Maharashtra and WestBengal you know region. In regions, where there is high temperature in summer where isvery high temperature this is a good deal of demand for dessert coolers, air conditioners,business firm set up industrial units around this producing these products.So, all these things have changed the way business the change in you know the weatherconditions also has given rise to new forms of business right. For example, who wouldhave thought one day that I would be buying a oxygen cylinder or a let us say a purifierair purifier why would anybody be thinking 20 years back 30 years back.But, today that may become the next big thing right and it could be a hot cake and itcould be a very important product. Because looking at the kind of you know thepollution levels going up air purifier will become a mandatory thing for any householdright.(Refer Slide Time: 28:32)And auto hub located near Pune city in Maharashtra right Chakan houses industrial parksdeveloped by MIDC Maharashtra Industrial Development Corporation. The well knownauto industry names in the Chakan industrial belt include Germany based VolkswagenDaimler along with Indian auto like Mahindra and Bajaj right.It was in 1995 in the US automobile giant Ford Motors set up its plant in Chennai thatmarked the arrival of the city has an auto hub right. Since then the region post host plantsof BMW, Royal Enfield and Renault, Hyundai, Mitsubishi and Daimler. Tamil Nadu isone of the top automobile hubs in the world with Chennai having an installed capacity toproduce 1.4 million cars per year.Nissan, a Japanese car maker is all set to inaugurate it is India design centre in Chennai.So, automobile clustering started in this region. Sorry, my spelling. In these region, dueto it is proximity to the coast, availability of power supply, skilled labour pool andexceptional infrastructure right.So, all these things we can see you have understood the technology has been a majorforce that has changed the way business has been is been done and technology will makemany more changes. Tomorrow may be many people there is always a fear thetechnology will make us unemployed.But, there are the truth is it has never happened because there has been new things whichhave come up and new ways of doing businesses and new services that are been requiredby the general public.So, businesses have only grown rather you know it has, but still now I have not been ableto see if I compare about 50 60 70 years back where about the Indian you knowlandscape and think people where in a much worst condition right if economically, interms of hunger, malnutrition everything.Yes, pollution these levels have gone up, but otherwise the basic needs where verydifficult to be met by many people in India, but today India is in a much better condition.So, it has not rather taken away the you know the wealth of people rather it has added thewealth. So, people today are in a better condition. They are able to pay for their youknow needs and wants.So, all these has made life much better. Yes, it nothing goes without it is flaws also. So,there flaws would be there, but then that is not part of my course. Thank you very muchfor the day.Thank you.