Solution Set End Term Examination Fourth Semester (MBA) May-June2009 Pa er !

ode" MS2#2 Pa er $d-#92#2 Time" # %ours ()* Ex lain any +our o+ the +ollo,in-" (a) Co-option (.) Three !/s in the artner sele0tion ro0ess
The +irst !" !om ati.ility Many MNCs talk of alliances in terms of marriages. The use of the term simply means that, as in a marriage, compatibility an the ability to resol!e problems an ifferences are key ingre ients to a prosperous relationship. "n fact compatibility oes not mean the relationship is al#ays harmonious. The inherent tension un erlying competitors$collaborators in an alliance make some friction ine!itable. %o#e!er, if some chemistry e&ists the marriage partners #ill likely manage their ifferences. The se0ond !" !a a.ility The capabilities of the potential can i ates are ob!iously of prime importance, an companies may #ant to compile a ossier on each an e!aluate their strengths an #eaknesses. 'mong the issues to consi er are( %a!e you checke for complimentary strengths) %as a multi-functional team scrutini*e the capabilities) "s compatibility inferring #ith a rigorous analysis) The third ! " !ommitment +in ing a partner #ith an e,ual sense of commitment to alliance is the thir keystone to success. -!en if partners appear capable an compatible, unless they are #illing to in!est the time, energy an resources to make alliance a success, the chances of !enture #eathering changing market con itions are slim. .e!eral companies suggest t#o important tips on ho# MNCs can test #hether their potential partners share a sufficient egree of commitment to the alliance( /oes the alliance fall #ithin a core business or pro uct line of the partner) /etermine ho# ifficult it #oul be for a potential partner to #ith ra# from the alliance

Maximum Mar&s" '0

(0) Enter rise 1esour0e Plannin- in $ndian industry)

-01 stan s for its acronym as -nterprise 0esource 1lanning. The main ob2ecti!e is -nterprise-#i e resource, #hich aims to integrate entire business system, all epartments, an all functionalities of the organi*ation. 3enerally all epartments in the organi*ation ha!e ifferent computer systems an this #as a bit ifficult task for the company to o the business but #ith the emergence of this soft#are application, businesses ha!e simplifie to a !ery large e&tent. This has helpe businesses to prosper in e!ery respect thus making the entire corporate sector to simplify in all respect. The integration of all the functions of the company is ue to implementation of erp soft#are solution.

"n most cases it has been seen that an -01 "n ia implementation takes three to si& months for any organi*ation but sometimes it also epen s on the si*e of the organi*ation. .uppose if a business organi*ation has to implement only 'ccounting mo ule, #hich is itself, an e&pensi!e application soft#are system may take less time to implement. .ometimes it epen s on the si*e of the mo ule to be implemente . 4hen -01 system is implemente , it is re,uire to change the #ays you o your business if you #ant erp to #ork in right #ay. .imilarly the employee of the company also nee s to change their #ay of #orking an follo# accor ing to the erp functioning. -01 "n ia is one such huge system that almost all kin s of business speciali*e in any in ustry #ants to implement in their organi*ation. They #ant to implement this in or er to smoothen their business functionality an thus create prosperity for their business. 5ou also nee to un erstan for #hat purpose you nee this system an also consi er ho# you #ill use it to impro!e your business system. "n an organi*ation, finance has its o#n set of numbers, sales has its o#n !ersion an all other ha!e their o#n re!enue figures an it is responsibility of the authority to analy*e all these figures. 'n -01 business system creates a single !ersion of all these #hich any user in the organi*ation can use to un erstan it fully.

Before ERP came into being, MRPs were found in the market to solve businesses. Manufacturing Management Systems were put into process in industries to solve business functionalities at every step. uring the time, a lot of research and development was going on and then this system converted into Material Re!uirement Planning system. "his system was an advanced version of manufacturing management system that came as a business solution. #ver the time there took numerous changes in the manufacturing industry in the sales, production department and others which led to the evolvement of Manufacturing Resource Planning and then later on came to be known as Enterprise Resource Planning. "ill date, Enterprise Resource Planning is functional in all kinds of industries with the businesses re!uirement analysis, planning and demand. "his system was designed with intent to plan the proper use of enterprise, resource and planning widely.

(d) Strate-i0 rationale o+ .uildin- strate-i0 allian0es

' strategic alliance is #hen t#o or more businesses 2oin together for a set perio of time. The businesses, usually, are not in irect competition, but ha!e similar pro ucts or ser!ices that are irecte to#ar the same target au ience. 'lliance means 6cooperation bet#een groups that pro uces better results that can be gaine from a transa0tion) 7ecause competiti!e markets keep impro!ing #hat you can get from transactions, an alliance must stay ahea of the market by making continuous a !ances.68 .trategic alliance is a primary form of cooperati!e strategies. 6' strategic alliance is a partnership bet#een firms #hereby resources, capabilities, an core competences are combine to pursue mutual interests.69 'lliances can be structure in !arious #ays, epen ing on their purpose. Non e,uity strategic alliances, e,uity strategic alliances, an 2oint !entures are the three basic types of strategic alliances. 2hy Strate-i0 Allian0es3 "n the ne# economy, strategic alliances enable business to gain competiti!e a !antage through access to a partner:s resources, inclu ing markets, technologies, capital an people. Teaming up #ith others a s complementary resour0es and 0a a.ilities, enabling participants to gro# an e&pan more ,uickly an efficiently. -specially fast-gro#ing companies rely hea!ily on alliances to e&ten their technical an operational resources. "n the process, they sa!e time an boost pro ucti!ity by not ha!ing to e!elop their o#n, from scratch. They are thus free to concentrate on inno4ation an their core business. Many +ast--ro,th te0hnolo-y 0om anies use strategic alliances to benefit from moreestablishe channels of istribution, marketing, or .rand re utation of bigger, betterkno#n players. %o#e!er, more-tra itional businesses ten to enter alliances for reasons such as geographic e&pansion, cost re uction, manufacturing, an other su ly-0hain syner-ies) 's global markets open up an competition gro#s, mi si*e companies nee to be increasingly creati!e about ho# an #ith #hom they align themsel!es to go to the market. Case Study Toshi.a Toshiba;s approach is to e!elop strategic alliances #ith ifferent partners for ifferent technologies.

(e) !om etiti4eness and its le4els

5nit-$ ()2 Ex lain an inte-rated +rame,or& +or 0om etiti4eness and de+ine 0om etiti4eness enhan0ement and sustenan0e ro0ess) Ans The 12 pillars of competitiveness
The eterminants of competiti!eness are many an comple&. +or hun re s of years, economists ha!e trie to un erstan #hat etermines the #ealth of nations. This attempt has range from ' am .mith;s focus on speciali*ation an the i!ision of labor to neoclassical economists; emphasis on in!estment in physical capital an infrastructure, an , more recently, to interest in other mechanisms such as e ucation an training, technological progress (#hether create #ithin the country or a opte from abroa ),8 macroeconomic stability, goo go!ernance, the rule of la#, transparent an #ellfunctioning institutions, firm sophistication, demand conditions, market size, and many others. Each of these conjectures rests on solid theoretical foundations and makes common sense. The central point, however, is that they are not mutually exclusiveso that two or more of them could be true at the same time. Hundreds of econometric studies show that many of these conjectures are, in fact, simultaneously true. This also can partly explain why, despite the present !lobal financial crisis, we do not necessarily see lar!e swin!s in competitiveness ratin!s, for example in the "nited #tates. $inancial markets are only one of several important components of national competitiveness. The 3C" captures this open-en e imension by pro!i ing a #eighte a!erage of many ifferent components, each of #hich reflects one aspect of the comple& reality that #e call competiti!eness. 4e group all these components into 12 pillars of economic competitiveness: First illar" $nstitutions The institutional environment forms the framework within which individuals, firms, and !overnments interact to !enerate income and wealth in the economy. The institutional framework has a stron! bearin! on competitiveness and !rowth.% &t plays a central role in the ways in which societies distribute the benefits and bear the costs of development strate!ies and policies, and it influences investment decisions and the or!anization of production. 'wners of land, corporate shares, and even intellectual property are unwillin! to invest in the improvement and upkeep of their property if their ri!hts as owners are insecure.( 'f e)ual importance, if property cannot be bou!ht and sold with the confidence that the authorities will endorse the transaction, the market itself will fail to !enerate dynamic !rowth. The importance of institutions is not restricted to

the le!al framework. *overnment attitudes toward markets and freedoms and the efficiency of its operations are also very important+ excessive bureaucracy and red tape,, overre!ulation, corruption, dishonesty in dealin! with public contracts, lack of transparency and trustworthiness, or the political dependence of the judicial system impose si!nificant economic costs to businesses and slow down the process of economic development. -lthou!h the economic literature has mainly focused on public institutions, private institutions are also an important element in the process of creation of wealth.The si!nificant corporate scandals that have occurred over the past few years, and the present !lobal financial crisis, have hi!hli!hted the relevance of accountin! and reportin! standards and transparency for preventin! fraud and mismana!ement, ensurin! !ood go!ernance, an maintaining in!estor an consumer confi ence.'n economy is #ell ser!e by businesses that are run honestly, #here managers abi e by strong ethical practices in their ealings #ith the go!ernment other firms, an the public.< 1ri!ate-sector transparency is in ispensable to business, an can be brought about through the use of stan ar s as #ell as au iting an accounting practices that ensure access to information in a timely manner. Se0ond illar" $n+rastru0ture -&tensi!e an efficient infrastructure is an essential ri!er of competitiveness. &t is critical for ensurin! the effective functionin! of the economy, as it is an important factor determinin! the location of economic activity and the kinds of activities or sectors that can develop in a particular economy. .ell/developed infrastructure reduces the effect of distance between re!ions, with the result of truly inte!ratin! the national market and connectin! it to markets in other countries and re!ions. &n addition, the )uality and extensiveness of infrastructure networks si!nificantly impact economic !rowth and reduce income ine)ualities and poverty in a variety of ways. &n this re!ard, a well/ developed transport and communications infrastructure network is a prere)uisite for the ability of less/developed communities to connect to core economic activities and schools. -ffecti!e mo es of transport for goo s, people, an ser!ices=such as ,uality roa s, railroa s, ports, an air transport=enable entrepreneurs to get their goo s to market in a secure an timely manner, an facilitate the mo!ement of #orkers to the most suitable 2obs. -conomies also epen on electricity supplies that are free of interruptions an shortages so that businesses an factories can #ork unimpe e . +inally, a soli an e&tensi!e telecommunications net#ork allo#s for a rapi an free flo# of information, #hich increases o!erall economic efficiency by helping to ensure that ecisions ma e by economic actors take into account all a!ailable rele!ant information.

Third illar" Ma0roe0onomi0 sta.ility The stability of the macroeconomic en!ironment is important for business an , therefore, is important for the o!erall competiti!eness of a country. 'lthough it is certainly true that macroeconomic stability alone cannot increase the pro ucti!ity of a nation, it is also recogni*e that macroeconomic isarray harms the economy. +irms cannot make informe ecisions #hen inflation is raging out of control. The go!ernment cannot pro!i e ser!ices efficiently if it has to make high-interest payments on its past ebts. "n sum, the economy cannot gro# unless the macro en!ironment is stable. Fourth illar" %ealth and rimary edu0ation ' healthy #orkforce is !ital to a country;s competiti!eness an pro ucti!ity. 4orkers #ho are ill cannot function to their potential, an #ill be less pro ucti!e. 1oor health lea s to significant costs to business, as sick #orkers are often absent or operate at lo#er le!els of efficiency. "n!estment in the pro!ision of health ser!ices is thus critical for clear economic, as #ell as moral, consi erations. "n a ition to health, this pillar takes into account the ,uantity an ,uality of basic e ucation recei!e by the population, #hich is increasingly important in to ay;s economy. 7asic e ucation increases the efficiency of each in i!i ual #orker. Moreo!er, a #orkforce that has recei!e little formal e ucation can carry out only basic manual #ork an fin s it much more ifficult to a apt to more a !ance pro uction processes an techni,ues. >ack of basic e ucation can therefore become a constraint on business e!elopment, #ith firms fin ing it ifficult to mo!e up the !alue chain by pro ucing more sophisticate or !alue-intensi!e pro ucts. Fi+th illar" %i-her edu0ation and trainin?uality higher e ucation an training is crucial for economies that #ant to mo!e up the !alue chain beyon simple pro uction processes an pro ucts. "n particular, to ay;s globali*ing economy re,uires economies to nurture pools of #ell-e ucate #orkers #ho are able to a apt rapi ly to their changing en!ironment. This pillar measures secon ary an tertiary enrollment rates as #ell as the ,uality of e ucation as assesse by the business community. The e&tent of staff training is also taken into consi eration because of the importance of !ocational an continuous on-the-2ob training=#hich is neglecte in many economies=for ensuring a constant upgra ing of #orkers; skills to the changing nee s of the e!ol!ing economy. Sixth illar" 6oods mar&et e++i0ien0y Countries #ith efficient goo s markets are #ell positione to pro uce the right mi& of pro ucts an ser!ices gi!en supply-an - eman con itions, as #ell as to ensure that these goo s can be most effecti!ely tra e in the economy. %ealthy market competition, both omestic an foreign, is important in ri!ing market efficiency an thus business pro ucti!ity, by ensuring that the most efficient firms, pro ucing goo s eman e by the market, are those that thri!e.The best possible en!ironment for the e&change of goo s re,uires a minimum of impe iments to business acti!ity through go!ernment inter!ention to be in place. +or e&ample, competiti!eness is hin ere by istortionary or bur ensome ta&es, an by restricti!e an iscriminatory rules on foreign o#nership or foreign irect in!estment (+/"). Market efficiency also epen s on eman con itions such as customer orientation an buyer sophistication. +or cultural reasons, customers in

some countries may be more eman ing than in others. This can create an important competiti!e a !antage, as it forces companies to be more inno!ati!e an customeroriente an thus imposes the iscipline necessary for efficiency to be achie!e in the market. Se4enth illar" 7a.or mar&et e++i0ien0y The efficiency an fle&ibility of the labor market are critical for ensuring that #orkers are allocate to their most efficient use in the economy, an pro!i e #ith incenti!es to gi!e their best effort in their 2obs. >abor markets must therefore ha!e the fle&ibility to shift #orkers from one economic acti!ity to another rapi ly an at lo# cost, an to allo# for #age fluctuations #ithout much social isruption. -fficient labor markets must also ensure a clear relationship bet#een #orker incenti!es an their efforts, as #ell as the best use of a!ailable talent =#hich inclu es e,uity in the business en!ironment bet#een #omen an men. Ei-hth illar" Finan0ial mar&et so histi0ation The present global financial crisis has highlighte the critical importance of financial markets for the functioning of national economies. 'n efficient financial sector is necessary to allocate the resources sa!e by a nation;s citi*ens as #ell as those entering the economy from abroa to their most pro ucti!e uses. "t channels resources to the entrepreneurial or in!estment pro2ects #ith the highest e&pecte rates of return, rather than to the politically connecte . ' thorough assessment of risk is therefore a key ingre ient. 7usiness in!estment is critical to pro ucti!ity. Therefore economies re,uire sophisticate financial markets that can make capital a!ailable for pri!ate-sector in!estment from such sources as loans from a soun banking sector, #ell-regulate securities e&changes, !enture capital, an other financial pro ucts. 'n efficient financial sector also ensures that inno!ators #ith goo i eas ha!e the financial resources to turn those i eas into commercially !iable pro ucts an ser!ices. "n or er to fulfill all those functions, the banking sector nee s to be trust#orthy an transparent. 8inth illar" Te0hnolo-i0al readiness This pillar measures the agility #ith #hich an economy a opts e&isting technologies to enhance the pro ucti!ity of its in ustries. "n to ay;s globali*e #orl , technology has increasingly become an important element for firms to compete an prosper. "n particular, information an communication technologies ("CT) ha!e e!ol!e into the general purpose technology of our time, gi!en the critical spillo!ers to the other economic sectors an their role as efficient infrastructure for commercial transactions.Therefore "CT access (inclu ing the presence of an "CT-frien ly regulatory frame#ork) an usage are inclu e in the pillar as essential components of economies; o!erall le!el of technological rea iness. 4hether the technology use has or has not been e!elope #ithin national bor ers is irrele!ant for its effect on competiti!eness. The central point is that the firms operating in the country ha!e access to a !ance pro ucts an blueprints an the ability to use them. That is, it oes not matter #hether the personal computer or the "nternet #as in!ente in a particular country. 4hat is important is that these in!entions are a!ailable to the business community. This oes not mean that the process of inno!ation is irrele!ant. %o#e!er, the le!el of technology a!ailable to firms in a country nee s to be istinguishe from the

country;s ability to inno!ate an e&pan the frontiers of kno#le ge. That is #hy #e separate technological rea iness from inno!ation, #hich is capture in the 89th pillar belo#. Tenth illar" Mar&et si9e The si*e of the market affects pro ucti!ity because large markets allo# firms to e&ploit economies of scale. Tra itionally, the markets a!ailable to firms ha!e been constraine by national bor ers. "n the era of globali*ation, international markets ha!e become a substitute for omestic markets, especially for small countries. There is !ast empirical e!i ence that sho#s that tra e openness is positi!ely associate #ith gro#th. -!en if some recent research casts oubts on the robustness of this relationship, the general sense is that tra e has a positi!e effect on gro#th, especially for countries #ith small omestic markets. Thus, e&ports can be thought of as a substitute for omestic eman in etermining the si*e of the market for the firms of a country. 7y inclu ing both omestic an foreign markets in our measure of market si*e, #e gi!e cre it to e&port- ri!en economies an geographic areas (such as the -uropean @nion) that are broken into many countries but ha!e one common market. Ele4enth illar" Business so histi0ation 7usiness sophistication is con uci!e to higher efficiencyin the pro uction of goo s an ser!ices. This lea s, in turn, to increase pro ucti!ity, thus enhancing a nation;s competiti!eness. 7usiness sophistication concerns the ,uality of a country;s o!erall business net#orks as #ell as the ,uality of in i!i ual firms; operations an strategies. "t is particularly important for countries at an a !ance stage of e!elopment, #hen the more basic sources of pro ucti!ity impro!ements ha!e been e&hauste to a large e&tent.The ,uality of a country;s business net#orks an supporting in ustries, #hich #e capture by using !ariables on the ,uantity an ,uality of local suppliers an the e&tent of their interaction, is important for a !ariety of reasons.4hen companies an suppliers from a particular sector are interconnecte in geographically pro&imate groups (clusters), efficiency is heightene , greater opportunities for inno!ation are create , an barriers to entry for ne# firms are re uce . "n i!i ual firms; operations an strategies (bran ing, marketing, the presence of a !alue chain, an the pro uction of uni,ue an sophisticate pro ucts) all lea to sophisticate an mo ern business processes. T,el+th illar" $nno4ation The last pillar of competiti!eness is technological inno!ation. 'lthough substantial gains can be obtaine by impro!ing institutions, buil ing infrastructures, re ucing macroeconomic instability, or impro!ing the human capital of the population, all these factors e!entually seem to run into iminishing returns. The same is true for the efficiency of the labor, financial, an goo s markets. "n the long run, stan ar s of li!ing can be e&pan e only #ith technological inno!ation. "nno!ation is particularly important for economies as they approach the frontiers of kno#le ge an the possibility of integrating an a apting e&ogenous technologies ten s to isappear. 'lthough lessa !ance countries can still impro!e their pro ucti!ity by a opting e&isting technologies or making incremental impro!ements in other areas, for countries that ha!e reache the inno!ation stage of e!elopment, this is no longer sufficient to increase pro ucti!ity.

+irms in these countries must esign an e!elop cutting-e ge pro ucts an processes to maintain a competiti!e e ge.This re,uires an en!ironment that is con uci!e to inno!ati!e acti!ity, supporte by both the public an the pri!ate sectors. "n particular, this means sufficient in!estment in research an e!elopment (0A/) especially by the pri!ate sector, the presence of high-,uality scientific research institutions, e&tensi!e collaboration in research bet#een uni!ersities an in ustry, an the protection of intellectual property. The interrelation of the 89 pillars 'lthough the 89 pillars of competiti!eness are escribe separately, this shoul not obscure the fact that they are not in epen ent( not only they are relate to each other, but they ten to reinforce each other. +or e&ample, inno!ation (89th pillar) is not possible in a #orl #ithout institutions (8st pillar) that guarantee intellectual property rights, cannot be performe in countries #ith poorly e ucate an poorly traine labor force (Bth pillar), an #ill ne!er take place in economies #ith inefficient markets (<th, Cth, an Dth pillars) or #ithout e&tensi!e an efficient infrastructure (9n pillar). 'lthough the actual construction of the "n e& #ill in!ol!e the aggregation of the 89 pillars into a single in e&, measures are reporte for the 89 pillars separately because offering a more isaggregate analysis can be more useful to countries an practitioners( such an analysis gets closer to the actual areas in #hich a particular country nee s to impro!e.

()# E4aluate the ma0ro-0om etiti4eness usin- *0Ps +rame,or& to identi+y and monitor ma:or dri4ers o+ 0om etiti4eness) Ans" A 0on0e tual +rame,or& +or -lo.al 0om etiti4eness
The function of a frame#ork is to enable the strategist to structure a problem through a fe# key situational !ariables or factor. %is task subse,uently is to i entify the hierarchy, priorities, an interactions bet#een the !ariables. Compare to a mo el, the !ariables in a frame#ork are imprecise an loosely-boun e . @nlike a mo el, no ceteris paribus con itions are assume an the user has the fle&ibility of testing his ecisions on the relationships un er !arying conte&ts. The 8E-1 frame#ork for globali*ation symboli*e the aspirations an nee s of employees an organi*ations in the ne# competiti!e settings. "t comes a long #ay from the initial impetus pro!i e to the sub2ect by Michael 1orter in his book Competiti!e .trategy (8FDE), an goes beyon his purely in ustrial organi*ation perspecti!e. The 8E-1s frame#ork integrates theory of strategic management an practice of business policy an pro!i es a structure for the practicing manager to e!aluate competiti!eness at regular inter!als. True to the !ision of a #orl class organi*ation, the central fulcrum in the frame#ork is a people-orientation-both insi e an outsi e the corporation. This approach presents a humane perspecti!e to issues at han an ifferentiates bet#een a Gsatisficing; approach an an Ge&cellent; approach. "t reali*es an reflects that mo ern economies an corporations thri!e mainly on inno!ation in all respects of !alue-augmentation-creati!e thinking at the esign stage, ensuring pro uction at highest efficiency an minimum costs, an satisfying the customer in a most effecti!e manner. The rest of the F1s are le!ere in a highly interacti!e mo e #ith people an amongst themsel!es. ' change in any of the 1s affects performance of the other le!ers an therefore

the final outcome for the organi*ation. The F-1s are( 1urpose, perspecti!e, 1ositioning, 1lans (A 1olicies), 1artnerships, 1ro ucts, 1ro ucti!ity, 1olitics, an 1erformance. Fi-ure-* Peo le" ;r-ani9ation is eo le 'n organi*ation is create by the people, it e&ists for the people, an continuously ra#s sanction from the people. The people focus implies that the primary purpose of an organi*ation can ne!er be to pro!i e employment at the e&pense of customers or society in general- a rill routinely e&ercise in thir #orl countries, an especially in "n ia by many public sector an go!ernment organi*ations uring the height of regulate economic regimentation. Pur ose 'ny human acti!ity must ha!e a purpose. Hrgani*ations efine their purpose ifferently. Hrgani*ational purpose as use in strategy making sense is interchangeable #ith mission, !ision, mission, core competence, strategic intent, an basic !alues. 7usiness gro#th is a conscious management ecision process an can be nurture through a statement of purpose on #hich ecisions are pi!ote . 3ro#th after a certain le!el are elusi!e intangible an ifficult to come by unless sustaine by professional management an entrepreneurial, ynamism, an sense of irection. Pers e0ti4e The nature of reality rests on the perceptions of the manager. Making a strategic choice an subse,uently managing its outcome epen s largely on the outlook of ecision maker. +or instance, making a choice bet#een economics an consumerism implying consumption of goo s an ser!ices an economics of pro uction through increase sa!ings an in!estments in permanent assets is a matter of alternati!e perspecti!e, although from a mathematical point of !ie# they shoul mean the same. 1erception of opportunities an threats an their type in turn, is largely affecte by the assumptions ma e by the manager about the #orl aroun him. "n facing global competiti!e challenges, it is important that the firm possesses a global perspecti!e, e!en though it might be competing an managing locally. ' global outlook keeps the manager informe an prepare for any e!entuality an not get surprise #ith technological inno!ations or managerial onslaughts. Positionin'n important imension in achie!ing #orl class competiti!eness relates to the positioning of the firm. This imension has high interface #ith organi*ational purpose, planning an perspecti!e resulting in efinitional confusion. 1ositioning of the firm is istinct from positioning of pro ucts in marketing. The term has remaine mostly confine to abstract strategic management literature espite its ob!ious critically to practice. 'n important imension in strategy is to un erstan G#here am ";, #hy " here, #here o " #ant to be, an ho# o " reach there;. "n other #or s, the strategic manager has to ascertain the e&isting position an future positioning of the firm. Partnershi s

The partnership approach suggests a sense of belief an trust in other person;s capability an skills. "t opens the oors for people to look beyon the usual routine responses, an create an en!ironment #here people !oluntarily come up #ith inno!ati!e solutions for seemingly intractable problems. 4al Mart, the no. 8 retail business in @.', emphasi*es on the key organi*ational !alue of treating each employee as an associate. -ach associate is encourage to act in epen ently by taking initiati!es as partners. The Partnershi Pers e0ti4e $nsert Fi-ure Produ0ti4ity ' country;s prosperity is in icate by the amount of !alue-a e goo s that are pro uce $ma e a!ailable for consumption. >abor pro ucti!ity is generally the accepte measure of !alue a ition #ith the assumption that the same in i!i ual #oul ha!e ifferent capacities in ifferent technological en!ironments an organi*ational conte&ts. Thus, capital an other factor inputs are assume to be reflecte in the final output of the #orker. "ncrease in pro ucti!ity through better management an organi*ation boosts the aggregate supply #ithout increase in inputs, thereby helping control inflation (it re uces the eman supply gap). 7y se!eral estimates, @.' has the highest labor pro ucti!ity in the #orl . 3ermany an Iapan are reporte to be lagging behin by as much as 9E percent for the manufacturing sector in terms of !alue a e per hour #orke (con!erte at purchasing po#er parity). Iapanese manufacturer ha!e higher pro ucti!ity in automobiles, chemicals an plastics, metal pro ucts an electronic e,uipment. "nno!ation base pro ucti!ity Time an space as a key resources Produ0t ' pro uct is a package of information #hich the customer interprets in his min #hile going through the process of consumption. Therefore, the concept of any pro uct must start #ith the customer min , an en #ith his total satisfaction. "n this efinition all pro ucts are ultimately ser!ices con!erte into information. +or #orl class performance, simply manufacturing pro ucts to the customers efine the ,uality parameters. 'll across the !aluea ition chain, the relationship bet#een suppliers an consumers (e!en #ithin the shop-floor epartments) goes beyon the usual contractual responsibilities. Ma&imum contribution can be e&tracte only through strategic partnering #hich in turn suggests an acceptance of mutual inter epen ence bet#een the management an the employees, the suppliers an customers, an the organi*ation an the society at large. 7eyon ,uality, pro ucts must offer customers a satisfaction to a le!el #here they become the best salesmen for the company fore!er. 4hile consuming a pro uct the customer ra#s relationships of the actual information (1ercei!e through consumption) #ith his apriori e&pectations, especially #ith the price that he has pai . Customers cannot therefore be treate as guinea pigs or Gtest ri!ers;. .er!ing the customer beyon pro uct-consumption. 1ro uct-partnership interface through team approach.

Plans (and Poli0ies) 1lans are maps #hich the organi*ation creates for gui ing its members to#ar s attainment of( Hb2ecti!es (#hich must be consistent #ith its mission-a ha*y, !ague i ea of #hat it #ants to be finally. The position it #ants amongst the competitors (#hich in turn must be consistent #ith the !alues hel by the main ecision makers)J an 0esponsibilities to#ar s society at large. Hne of the primary issues that any plan must a ress to is the type of tools, training, an incenti!es that #oul be nee e by the organi*ational team members. The plan ser!es the backgroun on #hich team #ork flourishes. 4orl class companies etermine as much as DE percent of a pro uct;s ,uality an costs uring the pro uct e!elopment stage. The high emphasis on planning sa!es re2ections, #astages, costs, an most important, permanent loss of customers. Coca cola has largest istribution net#ork in the #orl . The company illustrates the fine interface bet#een pro uct ,uality an planning. Politi0s The ortho o& organi*ational beha!ior school hol s that politics is an attempt to bypass the official channel or to influence outcomes for personal gains ("mplie ly, at the cost of organi*ational efficiency). %ence, this school hol s that, politics being a negati!e po#erbearing agent, shoul be iscourage . This cannot be true in a larger perspecti!e. 1olitical beha!ior, in the positi!e sense of the #or , is a highly emocratic an peaceful form of conflict resolution process especially useful in high-uncertainty en!ironments. "t signifies #illingness to a mit that others also ha!e their o#n nee s an aspirants, #hich may be in a consonance #ith my or organi*ational goals. $nsert +i-ure Per+orman0e "mpro!ing performance outcomes is the core of all strategic management theories. 'chie!ement of goals an ob2ecti!es is the basis of all strategic planning. "t is important to reali*e that ifferent stakehol ers #ill possess ifferent measures of performance. "n one respect performance is the epen ent !ariable #hose outcome rests on the interface of all the rest of F1s. 7ut, performance in business settings is ne!er an isolate outcome. "t gets affecte , an in turn affects, all other !ariables. 4orl class companies organi*e themsel!es an perform in a manner that accumulation of #ealth is an automatic conse,uence of policies an plans. +or #orl class performance, an organi*ation has to be clear about its strategic ob2ecti!es. .ome important yar sticks #ith #hich performance can be ob2ecti!ely measure are( Market .hare Time taken to e!elop an intro uce ne# pro ucts Technological Competiti!eness -mployee moti!ation an skills

 Throughput !alue-a ition !on0lusion The ten 1s are not only ynamic, inter-relate , but also o!erlapping. The task of the strategic manager is to strike a fit bet#een the !arious soft an har components appropriate to the organi*ational !alues an nee of the times. 't this stage, he has to himself become a specialist-entrepreneurial-!isionary-general manager.

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The name of the game in global competiti!eness is technological capability. This relates to the agility, an competencies that firms an other pro ucti!e enterprises in an economy apply in accessing, a opting, a apting an eploying technical kno#le ge to gain competiti!e a !antage. +irms an entities compete on the basis of their ability to learn an eploy technical kno#le ge to meet e!er-changing an stringent customer eman s. Technological capability is built from four broa sources( the e&isting kno#le ge base of pro ucti!e entitiesJ the ac,uisition of technology from outsi e the organi*ationJ their intensity of effort to e!elop technology in houseJ an the institutions, an systems that e&ist in the en!ironment #ithin #hich the pro ucti!e entities operate. +irms an other pro ucti!e entities currently face the ,uick san of a per!asi!e state of flu&. Technology is changing so rapi ly that firms ha!e to be constantly inno!ating in or er to remain competiti!e. "n fact, it is those firms that can become learning organi*ations that can stay competiti!e. Kno#le ge-base has to be constantly up ate . Technology effort has to be constantly intensifie for firms to maintain their competiti!e position an minimi*e the risk of obsolescence. The !ase o+ The $T $ndustry in $ndia)
The IT industry, particularly IT enabled services (ITES), in India has shown remarkable growth over the past decade and continues to show resilience even in the face of a global downturn in the sector. prowess, it may have found its competitive advantage in the area of knowledge"based services to which its factor endowments are uni#uely suited. $et, the tremendous potential and promise of this sector in spurring economic growth and national competitiveness may not be reali%ed, if the numerous obstacles to the sector&s growth are not removed. This paper traces the evolution hile India has not been able to match !hina in manufacturing

of the IT industry in India, its positives and negatives and its potential to contribute to India&s global competitiveness. Structural barriers in the national environment to the growth of this industry are identified and discussed. !onclusions and policy implications are presented.

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hy are some national environments more conducive to firm growth and prosperity than others hy are some national environments more conducive to firm growth and prosperity

than others' ((orter, )**+). ,ations, like firms, are uni#ue bundles of heterogeneous resources and capabilities. They seek to capitali%e on these resources and capabilities in order to build and maintain core competencies in certain industry sectors, which can provide a uni#ue identity to the country and lead to sustainable competitive advantage, if those resources and capabilities cannot be easily imitated. In the more open global trading environment of the -)st century, nations are under pressure to develop and market their .national brands. in order to .position. themselves favorably in the mental maps of demanding global consumers. / nation&s positive image in any particular industry may impact the ability of its firms to compete in global markets. Spillover effects may also benefit firms in other industries thereby enhancing the competitive advantage of national firms in general (0otler et al, )**1). !onsumers have positive or negative stereotypes associated with products 2 brands originating from different countries (3ackson, 4iswas and 5umb, )**6). 7or instance, 3apan has positioned itself in the minds of consumers as a nimble, global market leader in consumer electronics, automobiles, watches and so on. 3apan&s products have served as good brand ambassadors for the country and today the .8ade in 3apan. brand is associated with superior #uality at a competitive price. 4y contrast, India has operated for decades as a closed, private investment unfriendly socialist economy recogni%ed more in the global media for its poverty and s#ualor than for its achievements in science and technology. 7oreign investors perceive India as a difficult environment to do business. This may be changing, as a orld 4ank -++) report points out, .Indian technological sophistication, though still narrowly defined, has begun to alter international perceptions of the country. Instead of viewing India as a country burdened by decades of heavy"handed government regulation of the economy, foreigners now view the country somewhat more favorably, though not as yet

as a country where future growth will appro9imate that of !hina .... (8iller, -++)). !hina, its neighbor and closest competitor, in a matter of less than two decades has established itself as a manufacturing powerhouse in global markets, offering an unmatched price"#uality value proposition. hile India has not been able to match !hina&s manufacturing capability, it may

have found its source of competitive advantage in its knowledge"based industries, which capitali%e on the country&s rich source of human capital. Seeking to e9plain .competitiveness. at the national level, (orter ()**+) argues that there is a critical link between the national environment and firm level competitive advantage and that the answer to national competitiveness may not rest on the economy as a whole, but in specific industries. This paper, therefore will consider India&s IT 2 software industry and its potential to contribute to the country&s national competitiveness. It will analy%e the growth of the IT 2 software industry in India by tracing its evolution, the part played by a growing and vibrant private sector in IT2software services and software industry associations, such as the ,ational /ssociation of Software and Service !ompanies (,/SS!:8), and the role of the government in facilitating the sector&s growth. The #uestion facing the country is what the Indian government at the central and local levels and domestic firms can do to leverage this industry&s success to enhance national competitiveness in global markets. hile the

prospects and potential for this sector are high, the paper highlights the many barriers that have to be dealt with before the IT industry and the country reali%e their full potential. India&s political leaders have e9pressed their strategic intent to use the IT industry to create the ne9t information technology superpower. 3ack elch responding to the parado9 of

change and development in India remarked, .India is a developing country with developed country ;<= infrastructure.. The disconnect between the Indian political elite&s talk of India becoming the ne9t .information technology superpower. and skeptical outsiders such as 3ack elch of >eneral Electric could not be more stark. In a talk to Indian businesspeople, 3ack elch recogni%ed India&s .intellectual capital. and its sophisticated ;<= infrastructure, while pointing out the old economic concerns such as lack of power generation capacity and a communications infra"structure that could hamper growth (>ardner, -+++). elch&s

warning that India could fail to capitali%e on the information technology revolution, in spite of its prowess in software skills and ;<= capability should serve as a reality check for a country that is betting on IT to power its way into the new global economy.

India is still a developing country mired in developmental problems of poverty and illiteracy, yet has a nuclear arsenal and the world&s second largest pool of skilled software talent after the ?nited States. India&s achievements in science and technology, and the .emerging knowledge"based. industries have drawn the world&s attention to this developing nation of a billion people that has had difficulty keeping pace with the growth rates of the .tiger. and .dragon. economies of the /SE/, region, or that of !hina, its giant neighbor to the ,orth. ,ational competitiveness has long been an elusive goal for India@ it has been a forgotten investment continent, perhaps due to its economic insularity stemming from its autarkic policies. The past decade however has been one of sea change for India. / balance of payments crisis in )**) cataly%ed it into breaking out of its insular mold, forcing it to change course from insularity to economic liberali%ation. India is at last on the verge of freeing the tremendous potential of its human capital that has been an inherent, but untapped part of this sub"continent. hile India could not match !hina in manufacturing prowess, its

economic growth or its ability to attract foreign direct investment, it has discovered an untapped resource in its skilled human resource advantage, capable of powering the information technology revolution sweeping across the world. Aow the country uses this rich source of economic advantage will determine its economic fortunes at the beginning of this new century. 0apur and ;amamurti (-++)) analy%e the Indian IT sector&s competitiveness drawing upon the framework provided by (orter&s diamond of competitive advantage. They point out that India has become competitive in software because of its advantage in IT related, knowledge" based resources. It has plenty of the re#uisite factor conditions in terms of human capital, low wages, and English language capability. Since barriers to entry are relatively low for firms in the software 2 IT sector, there is healthy domestic rivalry to hone the players for demanding global markets. ;elated and supporting industries, such as the educational institutions that turn out world class technical talent, improving communications and duty" free access to component parts help the growth of this fledgling industry. eak domestic

demand is not a key problem, since strong ?.S. demand comprised of demanding customers fills the gap. In this paper, we will focus on the positives and negatives by considering the elements in (orter&s diamond that are weak or missing and hence could serve as maBor hindrances to the growth of this sector.

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The software and information technology industry in India is without #uestion one of the most dynamic sectors in India&s economy. The industry has been growing at 6+ percent annually since )**). orldwide, the sector is worth CD6+ billion with a proBected growth of

6+"E+ percent per year. Software services e9ports have been growing at -* percent in rupee terms even during the downturn in the global IT industry in -++). The growth engine seems to be the IT enabled services (ITES), which grew at E* percent this year compared to IT services, which grew at -- percent (=eccan Aerald, 3uly --, -++)). The sector consists of about )+++ companies employing -D+,+++ software engineers and, by -++D, is e9pected to employ four million people. The industry has grown at an annual rate of over F6 percent for the past three years and is e9pected to account for 1 percent of >=( by -++D (,asscom" 8c0insey -++- ;eport). The Indian IT sector&s growth since )**+ has been primarily e9port driven. E9ports for this sector in )*** totaled CF billion and is proBected to grow to C6+ billion by the year -++D. /ccording to ,/SS!:8 E- percent of the e9ports go to the ?nited States, -G percent to Europe, F.+ percent to South East /sia, G.6 percent to 3apan and the rest to est /sia, /ustralia, ,ew Healand and the rest of the world (www.nasscom.org).

In light of the recent global downturn in the IT sector, the ,asscom"8c0insey -++- ;eport notes three fundamental shifts in the IT industryI )) shift in near term demand from new application development to maintenance and product enhancement, -) significant increase in offshoring, and G) competition from emerging locations, particularly !hina. IT enabled services (ITES) include services such as customer care, web sales and web marketing, billing services and accounting transactions. ;ecent proBections for the growth of the ITES sector were scaled up from C)1 billion in the ,asscom"8c0insey )*** survey to C-+ billion (The Economic Times, 8ay )F, -++-). 8ultinationals, particularly from the ?.S. have been shopping India as a low cost outsource base for their labor"intensive IT related back office work and did so prior to the year -+++ for on"site work related to $-k issues. The Europeans have done the same for euro conversion. India&s advantage in IT related high technology, innovation and knowledge base, its large market, its well"developed ;<= infrastructure, its large pool of cost competitive technical talent and the sophistication of Indian IT vendors make it a desirable destination for IT firms from developed countries.

The growth and evolution of the IT sector has been incremental and organic in nature, but if it maintains its momentum and succeeds in reali%ing its proBected potential its impact on the economy and politics of India would be dramatic. 4ut, frankly this is a big .if.. The IT sector in India came into the global limelight by the on"site $-0 services performed by an army of Indian software engineers sent by Indian companies to write software code or to plug $-0 problems for foreign companies. hile margins from on"site work were necessarily low due

to the high cost of transferring personnel to overseas location, it gave India much needed visibility and an opportunity to showcase its IT capabilities on the global stage. !apitali%ing on the credibility built through $-0 work, Indian software companies have been steadily migrating up the value chain to provide more lucrative offshore services, i.e. work done in India. Indian firms now are developing proprietary software technology for e"commerce applications and other web based services for overseas clients. In the process they are proving that they are adept at scalability, while maintaining their competitive advantage in cost and #uality (8erchant, -+++). The offshore model (operations in India) is more profitable and also helps India build its local infrastructure to support a strong and growing IT sector. It includes IT enabled services, such as medical transcription, call centers, legal database work, logistics management and web"content development, which are labor intensive and re#uire IT skilled personnel. (In fact, your medical records for visits to your local (?S) physician may be transcribed in India). ?nited States (-++ out of the 7ortune 6++), and European firms now outsource this type of work to India to take advantage of the low cost labor and the time"%one difference in India, which allows the ?.S. or European firm to work on a -F"hour basis. /s Indian firms move up the value ladder they are offering higher value added services such as IT consultancy services. 8any Indian IT firms have set up overseas offices to offer customi%ed IT consultancy services and more lucrative e"commerce work to clients and to gain increased visibility. /nd often they have the goal of ultimately developing branded software products designed for e9ports, but this goal may not be reali%ed in the immediate future given the fact that marketing branded software in competitive overseas markets is heavily capital intensive (Taylor, )***). The IT industry in India is labor intensive and is well suited to its competitive advantage. Aowever, this may be changing as India&s attraction becomes more skills"based rather than cost"based, as leading players in the IT industry, such as ipro, seek a ?.S.

listing, set up overseas offices and make foreign ac#uisitions. Three broad characteristics are

said to define the new growth phase among the top players in India&s IT industryI a foreign stock market listing, a global base of customers, and a multinational workforce (8erchant, -++)). The industry may be able to move up to branded product development if it maintains its current upward momentum. The Indian IT industry as it matures and migrates up the value ladder is gaining depth and sophistication in its portfolio of capabilities. This is reflected in the fact that cost is no longer the sole competitive tool for these companies. Their depth and diversification is beginning to allow them to compete on #uality, speed, reliability and innovation. 8any Indian software companies are IS: *++) certified and are able to offer world class services at competitive prices. /s these companies moved from value"based $-0 activities to value"added e" commerce work their revenues are on the increase and the basis of competition is speed of delivery and faster cycle time, which supports a premium pricing strategy. The Indian IT industry also shows signs of consolidation and growth through overseas ac#uisitions, both clear signs of maturity in the industry.

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=omestic demand for software and for (!&s / recent analysis of the IT 2 software industry in India points out several areas of emerging opportunity in the domestic software market, such as the energy sector which is in the process of being privati%ed, services such as insurance, banking and financial services that see IT as a way to cost efficiency through cross"selling services, and e"governance drives by state and central governments that are interested in the spread of best practices and local language applications (=eccan Aerald, 3uly --, -++-). :n the Indian domestic front, the hardware market is growing as domestic (! sales and sales of servers, printers and notebook computers are on the increase. (! penetration in India is currently #uite low at G.E per )+++ compared with the ?.S. at GEG per )+++. Aowever, the buying power of India&s for"midable -6+ million middle class is substantial. 7irms such as Aewlett (ackard and I48 have entered the market focusing on this segment. /s the interest in home Internet use increases and the popularity of alternative channels of Internet access grows, such as .cybercafes. in Indian cities, the potential for rapid growth in urban areas is real. !learly, the key drivers of (! growth in India are the Internet users@ they

wish to enhance their computer skills and to use it as a tool in children&s studies.

hile (!

prices are still relatively high, (it is estimated that a (! costs -F months of per capita income in India vis"a"vis F months in !hinaJ) Indian households remain the fastest growing market for the (! manufacturers. The increase in corporate users and the government&s stated desire to move to incorporate computers in facilitating governance are also important factors in increasing demand in the hardware market. ;ole of state governments /ttracted by the infinite possibilities of growth and Bob"creation offered by this sector, Indian States have been vying with each other to offer a hospitable environment for IT rums, both foreign and domestic. E"governance has been gaining popularity in certain entrepreneurial States in India, such as /ndhra (radesh, where the state has e9pressed desire and interest in leveraging technology to spur development. The state&s web site states its mission in the following termsI ./ndhra (radesh will leverage Information Technology to attain a position of leadership and e9cellence in the information age and to transform itself into a knowledge society.. (www. apinfrastructure.com). The governor of this state, dubbed the .laptop minister. (5evander, -+++) has invested in a communications infrastructure to support e" governance and has succeeded in attracting 8icrosoft&s product development center and >E !apital&s international data center, which otherwise may have gone to the State of 0amataka, India&s first IT champion which now stands to lose that position as other states vie with each other to attract foreign investors to their backyard by investing in the right infrastructure mi9. !ompanies such as 8icrosoft cite better infrastructure as the primary reason for moving to /ndhra (radesh. 0ey cities such as 4angalore (0arnataka State), Ayderabad (/ndhra (radesh) and !hennai (Tamil ,adu) in the south are referred to as the .silicon triangle. for having the highest concentration of IT industry in the country. The reformist States in India are proving successful in attracting foreign investors as well as improve their infrastructure. Software associations The ,ational /ssociation of Software and Service !ompanies (,/SS!:8) plays a pivotal role in the growth of the software 2 IT sector. The mission of ,/SS!:8 is to be a one"stop provider of comprehensive information on all aspects of the software industry in India. /s a orld 4ank monies to

non"profit organi%ation, its goal is to facilitate India&s emergence as a front runner in the information technology industry. The organi%ation actively and effectively lobbies the government for improvements in IT infrastructure and changes in policy designed to promote the sector&s growth. Its web site nasscom.org provides a gateway to the IT policies of the various states in India along with information on past and upcoming events in the IT sector and industry research and news. It has a membership list that includes most of the IT companies in India and uses this information to match Indian companies with foreign IT companies and vice versa. ,/SS!:8 as an IT industry promoter is a key force for generating credibility in India&s capability to participate fully in the global IT industry. !apital sources / vibrant private sector to support entrepreneurial developments in the software2IT area is growing in India, where a mi9ed economy has created a deep"rooted free market sector in spite of heavy government control and ownership in certain key sectors. The e9pansion of this sector is helped by infusions of knowledge and capital from returning non"resident Indians (,;I) eager to share in the growth opportunities presented by the newly emerging IT sector. :f late, venture capital activity has been growing in India. 7oreign venture funds, some created by wealthy Indians based in the ?.S. such as The Indus Entrepreneurs (TIE) and !hrysalis 7und have entered India seeking to invest in technology start"ups with good prospects for growth. ,ewer varieties of venture capitalists are also moving into India with foreign capital to fund Indian startups. /t India, a K! founded by a Silicon Kalley ,;I calls itself a .business value accelerator. that seeks to provide value beyond capital. The K! has a Boint venture with Silicon Kalley based Aambrecht < Luist and a venture capital base of C6+ million (The Economic Times, ,ovember -), -+++). /merican firms with Indian subsidiaries, such as >E !apital and Intel are investing in new ventures in India that have the potential to sell their products. Intel has Bust announced that it will invest C)++ million in its India operations making it one of Intel&s largest overseas ventures. /s current restrictions on venture capital funds are eased by the government coupled with the change in market structure and the availability of risk capital for entrepreneurial firms this will increase growth and new venture creation in the IT sector.

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,ew world class educational institutions are being set up in the more reformist oriented states in India. In 8arch -+++, 8otorola signed an agreement to set up 8otorola School of !ommunication Technology at the Indian Institute of Information Technology (IIIT) in Ayderabad, one of the cities in the silicon triangle and capital of the state of /ndhra (radesh. The 8otorola School of !ommunication Technology is designed to be a state"of"the"art center to create new talent by providing advanced IT and telecom education. In addition, the school will offer research and development opportunities to innovate new approaches to wireless communications for the Indian market. (www.ap"it.com2iitmou.html). The Indian School of 4usiness located in Ayderabad, brainchild of ;aBat >upta, 8anaging =irector of 8c0insey and !o., is designed to provide business education in India in collaboration with the harton School, ?niversity of (ennsylvania and the 0ellogg School of 4usiness at

,orthwestern ?niversity. 4oth schools are supported and financed by leading companies in India and abroad, as well as the government. /s world"class educational institutions enter and locate in India to satisfy the educational need, it will impact the number and #uality of information technology graduates. Several leading IT firms from developed countries are outsourcing and out locating their IT re#uirements to India, a reverse brain drain of Indian ,;I&s is spurring new entrepreneurial activity in the country and the energies of the local entrepreneurial talent is being unleashed by the government&s willingness to provide incentives and rela9 regulatory controls for the IT sector. The government is serving to facilitate the industry&s growth having reali%ed that this may be the country&s best chance to improve its economic fortunes and to achieve global integration and economic parity with the developed world in the long term. To summari%e, the Indian IT industry&s competitive advantage derives from its depth of English speaking, well"trained human resource base, a powerful cost2#uality combination coupled with a growing ability to compete on speed of delivery. The .8ade in India. brand is gaining e#uity as the country scales up the value ladder to offer services that stand for high #uality and good value. /dded to this is the return of non"resident Indians (,;I) to India drawn by entrepreneurial opportunities in India&s growing IT sector. The brain drain, which has usually been estward, is now showing some reversal to India&s benefit. 8any of the estern markets, such as

returning IT professionals have e9perience in the well"developed

the ?.S. and Europe and will able to take back the fruits of their e9perience to India. 0apur and ;amamurti (-++)) argue that if India maintains its current momentum in IT, it could

emerge in the short term as a back office of global companies, and in the medium to long term move up to knowledge"based tradable services. ,umerous obstacles, however, stand in the face of this scenario and are discussed in the following section.

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In spite of the many successes in this area India faces numerous obstacles to growth of the IT sector in the short to medium term. /t the firm level, even star performers, such as Infosys sell very little packaged software. 8ost of its business is still in consultancy, one"time software proBects and in helping international vendors develop their own products ((hillipson, -++-). The capability gap could hinder Indian firms& global competitiveness and leave them vulnerable to competitors from other countries. /t the macro level, the government&s plans for privati%ation and deregulation of key sectors, such as banking and telecommunications are slow and halting due to a political process that demands consensus on these issues from various groups at different levels. 8any of the telecom providers of long distance services are still state"owned and under state"controlled international bandwidth, which is insufficient to meet the country&s needs. In the domestic arena, lack of competition in telephone service translates to lack of phone lines and high cost of local access. The high cost of local phone calls could be a maBor disincentive to Internet usage to those who have a (! and Internet access. The cost of Internet access is relatively high since usage is still metered. 5ack of bandwidth for data also influences availability, cost and speed of access. India&s total international bandwidth is only G6+84, compared with !hina&s F+>4 and -++>4 in the ?.S. (www.nua.ie2surveys). Interruptions and fluctuation in power supply compound the problem creating a maBor disincentive for growth of the domestic market for Internet usage and web"based retailing. Aigh #uality, reliable, and uninterrupted supply of power is critical to the sector&s growth. The local, domestic market for (!s is growing in India, but for 4-! internet commerce to grow in India, it re#uires a reliable delivery system, bandwidth for easy and fast access to data and graphics and higher levels of credit card usage to facilitate payment. In a recent report by the ?.S. government to facilitate Internet development, five key principles were outlined in a document titled, ./ 7ramework for >lobal Electronic !ommerce.. They include private sector leadership, avoidance of undue restrictions, establishment of a legal

environment based on a contractual model of law, recognition of the uni#ue #ualities of the Internet and facilitation of global e"commerce (www.ecommerce.gov). The government of India, recogni%ing the urgency of the sector&s growth to India&s economic development has stated its intention to follow many of the same principles set forth above in the ?.S. government report (India 4usiness :pportunities, -+++). / labor skills shortage could short circuit the IT sector&s growth, if the country does not take steps to deal with the issue on an urgent basis. The local shortage of trained and e9perienced IT human resources is bidding up the cost of labor, which could erase one of India&s key advantages. India currently trains ED,+++ software professionals a year and needs to have -.- million a year by -++D to meet proBected demand. !hina could emerge as a formidable competitor in this area, since the !hinese government has announced its intent to set up )++ IT training institutes in !hina (;amesh, -++)). /s the global IT industry grows, there is a shortage of trained IT human resources in the global market and developed countries, such as >ermany and 3apan are increasingly turning to countries like India to recruit labor for their domestic market. /s a global market lures Indian IT skills away with higher wages and more attractive benefits, the skill shortage in India could be e9acerbated. 5iteracy rates of Indian children at F6 percent are lower than many other /sian countries. India is bifurcated between a middle class that has the resources to access technical training and a maBority of the population with little or no formal education. Servicing a .wired. economy would re#uire a far more educated workforce (8iller, -++)).

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If information technology is to fuel India&s economic growth into the ranks of the developed countries, there needs to be a confluence of policy changes. /s the industry grows and matures, it faces bottlenecks to growth in the form of inade#uate power, weak telecom and transport infrastructure and even an e9haustible supply of IT talent, if educational institutions in India fail to rise to the challenge. In the critical area of power for instance, leading estern firms that entered in the aftermath of liberali%ation lured by the massive

power shortages in the conte9t of a growing economy are leaving India due to frustration with bureaucratic roadblocks, government pricing controls which prevent them from earning fair market returns, and disillusionment with a difficult market.

The Information"based new economy re#uires a free business environment, unhampered by old economy regulations. In order to reali%e India&s hopes for the IT sector, the government has to free the economy and allow economic and social change to transform the business environment. So far, the industry has succeeded against all odds. Aowever, the growth of India based multinationals would re#uire a freer, more entrepreneurial climate that is friendly to new venture creation that offers easier access to capital markets and hard currency, sets fewer bureaucratic and regulatory roadblocks and provides better IT infrastructure, i.e. telecom, power and transport. 8oving faster on privati%ing sectors, such as telecom and power and allowing for foreign competition would allow efficiency gains and technology leapfrogging. !omputeri%ing governance mechanisms would create domestic demand for IT products and services, while increasing the efficiency and responsiveness of government. The 8c0insey",/SS!:8 report published in -+++ makes the following recommendations for enabling the Indian IT industry&s growthI M 4uild a base of highly competitive .knowledge workers. M !reate a regulatory environment friendly to the IT sector M !reate India based IT multinationals M 4uild a world class telecommunications infrastructure M 4uild the .8ade in India. brand for IT products M Encourage entrepreneurship and new venture creation hat the government needs to do to foster growth of IT in IndiaI M Improve infrastructure, i.e., education, telecom, transport and postal system. M (rivati%e and deregulate key sectors such as banking, telecom, and power M /llow foreign competition in these areas formerly under State control. M !ut bureaucracy and red tape to facilitate 7=I and entry of foreign firms M Increase government spending on infrastructure, primary education, and health M !omputeri%e governance mechanisms when possible

The growth of the Internet economy will have a maBor impact on the physical economy. :ld economy roadblocks could block India&s passage to the new economy. IT has no political, economic, or social boundaries, and if India is to support its development it has to create the right environment for its growth. / slowdown in the Indian economy will further boost IT investment by old economy companies interested in increasing productivity. / slowdown in the ?.S. economy could have a similar effect by opening new opportunities for Indian IT firms with their dual advantage of a proven track record and low cost relative to the ?.S. /n interesting fact noted in the ,/SS!:8 -++- survey was the increase in software and service e9ports to the ?.S. despite a slowing of the ?.S. economy. If the IT sector in India is to grow and reali%e its potential, it has to be driven by a national agenda that includes various key stakeholder groups, such as business 2 private sector, and government at the central and state levels. The government needs to change its focus from a protectionist, regulation"driven .license raB. mind"set to one of fostering national competitiveness on a global scale. 4usinesses that are currently preoccupied with negotiating bureaucracy would then have the incentive to alter their focus to competing with world"class competition in an open economy. / strong IT industry, unfettered by domestic regulation, may very well power the country to global competitiveness.

()@ Ex lain t,o APo,erB roles o+ inno4ation) The Strate-i0 Po,er o+ $nno4ation
"nno!ation has been o!erlooke an neglecte for years by many companies as a key component of business strategy. +or too long, the primary thrust of strategic thinking an planning has centere on ho# best to become lo#-cost pro ucers. Hf course, re ucing costs an increasing operating efficiencies are important pieces of any smart business pu**le. 7ut inno!ation brings #ith it more potential po#er to reach strategic an financial goals. The role of inno!ation in setting an bolstering strategy has not been #ell un erstoo or accepte in the past. %o#e!er, signs of support for inno!ation are efinitely being seen in corporations. C-Hs are turning to inno!ation as a gro#th mo e for a ing incremental re!enues an profits to their income statement. 7ut, many still on;t think about inno!ation as a core business strategy.

-!ery C-H shoul seriously consi er inno!ation as a competiti!e #eapon for shaping business strategies. +or many years, C-Hs an strategic planners ha!e use Michael 1orter;s mo el for setting competiti!e strategy. 4hen many companies e!aluate their core competencies, they ten to assess their sources of competiti!e a !antage accor ing to some of the follo#ing areas Manufacturing economies 0A/ Technology Channel clout 7ran name e,uity /istribution le!erage 1rice competiti!eness The smart e&ecuti!e of the future shoul assess one more source of competiti!e a !antage-that is, the company;s potential for achie!ing competiti!e inno!ation. The T,o APo,erB 1oles o+ $nno4ation .enior e&ecuti!es shoul think of inno!ation as a !aluable corporate asset rather than a cost or a risk. "f you truly percei!e inno!ation as a source of competiti!e a !antage, it #ill more likely be !ie#e as a long-term in!estment rather than a short term cost. This long-term in!estment perspecti!e sets up the right min set for inno!ation to #ork effecti!ely. 4ithout it, inno!ation is percei!e as a high risk. 'n as a conse,uence, your managers #ill take the lo# risk approach of merely cutting costs or focusing on line e&tensions an pro uct impro!ements. 7roa ly speaking, there are t#o key po#er roles that inno!ation can play( (8) Competiti!e a !antage protection (C'1), #hich stems from competiti!e inno!ation, an (9) sharehol er, employee, an customer (.-C) satisfaction. The first, competiti!e a !antage protection, pro!i es a company #ith a long-term competiti!e insurance policy. Most importantly, it allo#s a company to play an offensi!e game in the market place rather than a reactionary game of al#ays trying to catch up to competition. !om etiti4e Ad4anta-e Prote0tion ' strategic approach for preempting, protecting against, or 2umping ahea of competition. Competiti!e a !antage protection enables a company to accelerate gro#th, e&perience incremental margin enhancement, an buil a itional core competency, #hich bolsters competiti!e a !antage. -&hibit 8 graphically epicts the role that competiti!e a !antage protection can play in shaping business strategy. "n each ,ua rant, competiti!e a !antage protection can play a significant role in enhancing competiti!e a !antage. -ach of the ,ua rants is escribe here( 1adi0al 7ea +ro--in-( #ith this strategy, competiti!e a !antage protection is aime at achie!ing ne# pro ucts that #ill leapfrog competition. The en outputs of this strategy usually are pro ucts or ser!ices that con!ey totally ne# consumer percei!e benefits. They are ra ically ifferent from anything currently offere in the market. Consumers or en -users #ill clearly percei!e the functional, emotional, psychological, or performance benefits of these ne# pro ucts as better or greater than those offere by any competiti!e pro ucts.

Bene+its =i++erentiation" competiti!e inno!ation can play a ma2or role in a ing ne# benefits, the e&isting or ne#ly e!elope pro ucts #ill pro!i e a ne# source for competiti!e a !antage. The egree of uni,ueness an benefit ifferentiation #ill most likely etermine the uration an strength of the competiti!e a !antage. Mar&et Share Simulation" there are many ifferent approaches for simulating market share, ranging from a !ertising an promotions to istribution channel i!ersification an pricing. %o#e!er, competiti!e inno!ation can also be use to buil market share by launching line e&tensions, flankers, an ne#-an -impro!e pro ucts. This approach offers en -users ne# reasons to purchase your pro ucts line rather than your competition;s. !ostC>alue Enhan0ement" !alue-engineering or cost-re uce ne# pro ucts an processes can also be achie!e through competiti!e inno!ation. .ometimes the lo#er cost benefit can be passe on irectly to consumers, resulting in a price re uction. 'lternati!ely, the cost sa!ings can be applie internally to boost gross profit margins. These incremental margin ollars can then be use to buil a#areness or stimulate trial through increase marketing.

Exihi.it-* ShareholderD Em loyeeD !ustomer Satis+a0tion The secon po#er role, sharehol er, employee, customer (.-C) satisfaction, pro!i es a means for increasing the satisfaction le!el of companies three key constituencies. "f satisfaction can be increase for these constituencies #ith increase profitability, it;s fairly safe to assume that the senior management #ill be re#ar e han somely. -&ecuti!e shoul a opt a ne# min set regar ing these three constituencies. This sharehol er-employee-customer trium!irate shoul represent the collecti!e group that e&ecuti!es are trying to best ser!e. The lea er of an organi*ation becomes a ser!ant #hose primary 2ob is to satisfy the nee s, e&pectations, an esires of this collecti!e group. The three constituencies fall on a continuum, from e&ternally to internally focuse , as sho#n in Exhi.it 2 SoD ,e 0an see the role o+ t,o o,er role o+ inno4ation

5nit-$$$ ()' =is0uss the im a0t o+ 6-20 summit in 7ondon on in4estment mar&ets and on o4erall e0onomy a0ross the -lo.e)

Global plan for recovery and reform (02/04/2009)

The official communi,ue issue at the close of the 39E >on on .ummit.

8. 4e, the >ea ers of the 3roup of T#enty, met in >on on on 9 'pril 9EEF. 9. 4e face the greatest challenge to the #orl economy in mo ern timesJ a crisis #hich has eepene since #e last met, #hich affects the li!es of #omen, men, an chil ren in e!ery country, an #hich all countries must 2oin together to resol!e. ' global crisis re,uires a global solution. L. 4e start from the belief that prosperity is in i!isibleJ that gro#th, to be sustaine , has to be share J an that our global plan for reco!ery must ha!e at its heart the nee s an 2obs of har -#orking families, not 2ust in e!elope countries but in emerging markets an the poorest countries of the #orl tooJ an must reflect the interests, not 2ust of to ay;s population, but of future generations too. 4e belie!e that the only sure foun ation for sustainable globalisation an rising prosperity for all is an open #orl economy base on market principles, effecti!e regulation, an strong global institutions. M. 4e ha!e to ay therefore ple ge to o #hate!er is necessary to(

restore confi ence, gro#th, an 2obsJ repair the financial system to restore len ingJ strengthen financial regulation to rebuil trustJ fun an reform our international financial institutions to o!ercome this crisis an pre!ent future onesJ promote global tra e an in!estment an re2ect protectionism, to un erpin prosperityJ an buil an inclusi!e, green, an sustainable reco!ery.

7y acting together to fulfil these ple ges #e #ill bring the #orl economy out of recession an pre!ent a crisis like this from recurring in the future. B. The agreements #e ha!e reache to ay, to treble resources a!ailable to the "M+ to NCBE billion, to support a ne# ./0 allocation of N9BE billion, to support at least N8EE billion of a itional len ing by the M/7s, to ensure N9BE billion of support for tra e finance, an to use the a itional resources from agree "M+ gol sales for concessional finance for the poorest countries, constitute an a itional N8.8 trillion programme of support to restore cre it, gro#th an 2obs in the #orl economy. Together #ith the measures #e ha!e each taken nationally, this constitutes a global plan for reco!ery on an unprece ente scale.

1estorin- -ro,th and :o.s

<. 4e are un ertaking an unprece ente an concerte fiscal e&pansion, #hich #ill sa!e or create millions of 2obs #hich #oul other#ise ha!e been estroye , an that #ill, by the en of ne&t year, amount to NB trillion, raise output by M per cent, an accelerate the

transition to a green economy. 4e are committe to eli!er the scale of sustaine fiscal effort necessary to restore gro#th. C. Hur central banks ha!e also taken e&ceptional action. "nterest rates ha!e been cut aggressi!ely in most countries, an our central banks ha!e ple ge to maintain e&pansionary policies for as long as nee e an to use the full range of monetary policy instruments, inclu ing uncon!entional instruments, consistent #ith price stability. D. Hur actions to restore gro#th cannot be effecti!e until #e restore omestic len ing an international capital flo#s. 4e ha!e pro!i e significant an comprehensi!e support to our banking systems to pro!i e li,ui ity, recapitalise financial institutions, an a ress ecisi!ely the problem of impaire assets. 4e are committe to take all necessary actions to restore the normal flo# of cre it through the financial system an ensure the soun ness of systemically important institutions, implementing our policies in line #ith the agree 39E frame#ork for restoring len ing an repairing the financial sector. F. Taken together, these actions #ill constitute the largest fiscal an monetary stimulus an the most comprehensi!e support programme for the financial sector in mo ern times. 'cting together strengthens the impact an the e&ceptional policy actions announce so far must be implemente #ithout elay. To ay, #e ha!e further agree o!er N8 trillion of a itional resources for the #orl economy through our international financial institutions an tra e finance. 8E. >ast month the "M+ estimate that #orl gro#th in real terms #oul resume an rise to o!er 9 percent by the en of 9E8E. 4e are confi ent that the actions #e ha!e agree to ay, an our unshakeable commitment to #ork together to restore gro#th an 2obs, #hile preser!ing long-term fiscal sustainability, #ill accelerate the return to tren gro#th. 4e commit to ay to taking #hate!er action is necessary to secure that outcome, an #e call on the "M+ to assess regularly the actions taken an the global actions re,uire . 88. 4e are resol!e to ensure long-term fiscal sustainability an price stability an #ill put in place cre ible e&it strategies from the measures that nee to be taken no# to support the financial sector an restore global eman . 4e are con!ince that by implementing our agree policies #e #ill limit the longer-term costs to our economies, thereby re ucing the scale of the fiscal consoli ation necessary o!er the longer term. 89. 4e #ill con uct all our economic policies cooperati!ely an responsibly #ith regar to the impact on other countries an #ill refrain from competiti!e e!aluation of our currencies an promote a stable an #ell-functioning international monetary system. 4e #ill support, no# an in the future, to can i , e!en-han e , an in epen ent "M+ sur!eillance of our economies an financial sectors, of the impact of our policies on others, an of risks facing the global economy.

Stren-thenin- +inan0ial su er4ision and re-ulation

8L. Ma2or failures in the financial sector an in financial regulation an super!ision #ere fun amental causes of the crisis. Confi ence #ill not be restore until #e rebuil trust in our financial system. 4e #ill take action to buil a stronger, more globally consistent, super!isory an regulatory frame#ork for the future financial sector, #hich #ill support sustainable global gro#th an ser!e the nee s of business an citi*ens. 8M. 4e each agree to ensure our omestic regulatory systems are strong. 7ut #e also agree to establish the much greater consistency an systematic cooperation bet#een countries, an the frame#ork of internationally agree high stan ar s, that a global financial system re,uires. .trengthene regulation an super!ision must promote propriety, integrity an transparencyJ guar against risk across the financial systemJ ampen rather than amplify the financial an economic cycleJ re uce reliance on inappropriately risky sources of financingJ an iscourage e&cessi!e risk-taking. 0egulators an super!isors must protect consumers an in!estors, support market iscipline, a!oi a !erse impacts on other countries, re uce the scope for regulatory arbitrage, support competition an ynamism, an keep pace #ith inno!ation in the marketplace. 8B. To this en #e are implementing the 'ction 1lan agree at our last meeting, as set out in the attache progress report. 4e ha!e to ay also issue a /eclaration, .trengthening the +inancial .ystem. "n particular #e agree(

to establish a ne# +inancial .tability 7oar (+.7) #ith a strengthene man ate, as a successor to the +inancial .tability +orum (+.+), inclu ing all 39E countries, +.+ members, .pain, an the -uropean CommissionJ that the +.7 shoul collaborate #ith the "M+ to pro!i e early #arning of macroeconomic an financial risks an the actions nee e to a ress themJ to reshape our regulatory systems so that our authorities are able to i entify an take account of macro-pru ential risksJ to e&ten regulation an o!ersight to all systemically important financial institutions, instruments an markets. This #ill inclu e, for the first time, systemically important he ge fun sJ to en orse an implement the +.+;s tough ne# principles on pay an compensation an to support sustainable compensation schemes an the corporate social responsibility of all firmsJ to take action, once reco!ery is assure , to impro!e the ,uality, ,uantity, an international consistency of capital in the banking system. "n future, regulation must pre!ent e&cessi!e le!erage an re,uire buffers of resources to be built up in goo timesJ to take action against non-cooperati!e 2uris ictions, inclu ing ta& ha!ens. 4e stan rea y to eploy sanctions to protect our public finances an financial systems. The era of banking secrecy is o!er. 4e note that the H-C/ has to ay publishe a list of countries assesse by the 3lobal +orum against the international stan ar for e&change of ta& informationJ

to call on the accounting stan ar setters to #ork urgently #ith super!isors an regulators to impro!e stan ar s on !aluation an pro!isioning an achie!e a single set of high-,uality global accounting stan ar sJ an to e&ten regulatory o!ersight an registration to Cre it 0ating 'gencies to ensure they meet the international co e of goo practice, particularly to pre!ent unacceptable conflicts of interest.

8<. 4e instruct our +inance Ministers to complete the implementation of these ecisions in line #ith the timetable set out in the 'ction 1lan. 4e ha!e aske the +.7 an the "M+ to monitor progress, #orking #ith the +inancial 'ction Taskforce an other rele!ant bo ies, an to pro!i e a report to the ne&t meeting of our +inance Ministers in .cotlan in No!ember.

Stren-thenin- our -lo.al +inan0ial institutions

8C. -merging markets an e!eloping countries, #hich ha!e been the engine of recent #orl gro#th, are also no# facing challenges #hich are a ing to the current o#nturn in the global economy. "t is imperati!e for global confi ence an economic reco!ery that capital continues to flo# to them. This #ill re,uire a substantial strengthening of the international financial institutions, particularly the "M+. 4e ha!e therefore agree to ay to make a!ailable an a itional NDBE billion of resources through the global financial institutions to support gro#th in emerging market an e!eloping countries by helping to finance counter-cyclical spen ing, bank recapitalisation, infrastructure, tra e finance, balance of payments support, ebt rollo!er, an social support. To this en (

#e ha!e agree to increase the resources a!ailable to the "M+ through imme iate financing from members of N9BE billion, subse,uently incorporate into an e&pan e an more fle&ible Ne# 'rrangements to 7orro#, increase by up to NBEE billion, an to consi er market borro#ing if necessaryJ an #e support a substantial increase in len ing of at least N8EE billion by the Multilateral /e!elopment 7anks (M/7s), inclu ing to lo# income countries, an ensure that all M/7s, inclu ing ha!e the appropriate capital.

8D. "t is essential that these resources can be use effecti!ely an fle&ibly to support gro#th. 4e #elcome in this respect the progress ma e by the "M+ #ith its ne# +le&ible Cre it >ine (+C>) an its reforme len ing an con itionality frame#ork #hich #ill enable the "M+ to ensure that its facilities a ress effecti!ely the un erlying causes of countries; balance of payments financing nee s, particularly the #ith ra#al of e&ternal capital flo#s to the banking an corporate sectors. 4e support Me&ico;s ecision to seek an +C> arrangement. 8F. 4e ha!e agree to support a general ./0 allocation #hich #ill in2ect N9BE billion into the #orl economy an increase global li,ui ity, an urgent ratification of the +ourth 'men ment.

9E. "n or er for our financial institutions to help manage the crisis an pre!ent future crises #e must strengthen their longer term rele!ance, effecti!eness an legitimacy. .o alongsi e the significant increase in resources agree to ay #e are etermine to reform an mo ernise the international financial institutions to ensure they can assist members an sharehol ers effecti!ely in the ne# challenges they face. 4e #ill reform their man ates, scope an go!ernance to reflect changes in the #orl economy an the ne# challenges of globalisation, an that emerging an e!eloping economies, inclu ing the poorest, must ha!e greater !oice an representation. This must be accompanie by action to increase the cre ibility an accountability of the institutions through better strategic o!ersight an ecision making. To this en (

#e commit to implementing the package of "M+ ,uota an !oice reforms agree in 'pril 9EED an call on the "M+ to complete the ne&t re!ie# of ,uotas by Ianuary 9E88J #e agree that, alongsi e this, consi eration shoul be gi!en to greater in!ol!ement of the +un ;s 3o!ernors in pro!i ing strategic irection to the "M+ an increasing its accountabilityJ #e commit to implementing the 4orl 7ank reforms agree in Hctober 9EED. 4e look for#ar to further recommen ations, at the ne&t meetings, on !oice an representation reforms on an accelerate timescale, to be agree by the 9E8E .pring MeetingsJ #e agree that the hea s an senior lea ership of the international financial institutions shoul be appointe through an open, transparent, an merit-base selection processJ an buil ing on the current re!ie#s of the "M+ an 4orl 7ank #e aske the Chairman, #orking #ith the 39E +inance Ministers, to consult #i ely in an inclusi!e process an report back to the ne&t meeting #ith proposals for further reforms to impro!e the responsi!eness an a aptability of the "+"s.

98. "n a ition to reforming our international financial institutions for the ne# challenges of globalisation #e agree on the esirability of a ne# global consensus on the key !alues an principles that #ill promote sustainable economic acti!ity. 4e support iscussion on such a charter for sustainable economic acti!ity #ith a !ie# to further iscussion at our ne&t meeting. 4e take note of the #ork starte in other fora in this regar an look for#ar to further iscussion of this charter for sustainable economic acti!ity.

1esistin- rote0tionism and romotin- -lo.al trade and in4estment

99. 4orl tra e gro#th has un erpinne rising prosperity for half a century. 7ut it is no# falling for the first time in 9B years. +alling eman is e&acerbate by gro#ing protectionist pressures an a #ith ra#al of tra e cre it. 0ein!igorating #orl tra e an in!estment is essential for restoring global gro#th. 4e #ill not repeat the historic mistakes of protectionism of pre!ious eras. To this en (

#e reaffirm the commitment ma e in 4ashington( to refrain from raising ne# barriers to in!estment or to tra e in goo s an ser!ices, imposing ne# e&port restrictions, or implementing 4orl Tra e Hrganisation (4TH) inconsistent measures to stimulate e&ports. "n a ition #e #ill rectify promptly any such measures. 4e e&ten this ple ge to the en of 9E8EJ #e #ill minimise any negati!e impact on tra e an in!estment of our omestic policy actions inclu ing fiscal policy an action in support of the financial sector. 4e #ill not retreat into financial protectionism, particularly measures that constrain #orl #i e capital flo#s, especially to e!eloping countriesJ #e #ill notify promptly the 4TH of any such measures an #e call on the 4TH, together #ith other international bo ies, #ithin their respecti!e man ates, to monitor an report publicly on our a herence to these un ertakings on a ,uarterly basisJ #e #ill take, at the same time, #hate!er steps #e can to promote an facilitate tra e an in!estmentJ an #e #ill ensure a!ailability of at least N9BE billion o!er the ne&t t#o years to support tra e finance through our e&port cre it an in!estment agencies an through the M/7s. 4e also ask our regulators to make use of a!ailable fle&ibility in capital re,uirements for tra e finance.

9L. 4e remain committe to reaching an ambitious an balance conclusion to the /oha /e!elopment 0oun , #hich is urgently nee e . This coul boost the global economy by at least N8BE billion per annum. To achie!e this #e are committe to buil ing on the progress alrea y ma e, inclu ing #ith regar to mo alities. 9M. 4e #ill gi!e rene#e focus an political attention to this critical issue in the coming perio an #ill use our continuing #ork an all international meetings that are rele!ant to ri!e progress.

Ensurin- a +air and sustaina.le re0o4ery +or all

9B. 4e are etermine not only to restore gro#th but to lay the foun ation for a fair an sustainable #orl economy. 4e recognise that the current crisis has a isproportionate impact on the !ulnerable in the poorest countries an recognise our collecti!e responsibility to mitigate the social impact of the crisis to minimise long-lasting amage to global potential. To this en (

#e reaffirm our historic commitment to meeting the Millennium /e!elopment 3oals an to achie!ing our respecti!e H/' ple ges, inclu ing commitments on 'i for Tra e, ebt relief, an the 3leneagles commitments, especially to sub.aharan 'fricaJ the actions an ecisions #e ha!e taken to ay #ill pro!i e NBE billion to support social protection, boost tra e an safeguar e!elopment in lo# income countries,

as part of the significant increase in crisis support for these an other e!eloping countries an emerging marketsJ #e are making a!ailable resources for social protection for the poorest countries, inclu ing through in!esting in long-term foo security an through !oluntary bilateral contributions to the 4orl 7ank;s Oulnerability +rame#ork, inclu ing the "nfrastructure Crisis +acility, an the 0api .ocial 0esponse +un J #e ha!e committe , consistent #ith the ne# income mo el, that a itional resources from agree sales of "M+ gol #ill be use , together #ith surplus income, to pro!i e N< billion a itional concessional an fle&ible finance for the poorest countries o!er the ne&t 9 to L years. 4e call on the "M+ to come for#ar #ith concrete proposals at the .pring MeetingsJ #e ha!e agree to re!ie# the fle&ibility of the /ebt .ustainability +rame#ork an call on the "M+ an 4orl 7ank to report to the "M+C an /e!elopment Committee at the 'nnual MeetingsJ an #e call on the @N, #orking #ith other global institutions, to establish an effecti!e mechanism to monitor the impact of the crisis on the poorest an most !ulnerable.

9<. 4e recognise the human imension to the crisis. 4e commit to support those affecte by the crisis by creating employment opportunities an through income support measures. 4e #ill buil a fair an family-frien ly labour market for both #omen an men. 4e therefore #elcome the reports of the >on on Iobs Conference an the 0ome .ocial .ummit an the key principles they propose . 4e #ill support employment by stimulating gro#th, in!esting in e ucation an training, an through acti!e labour market policies, focusing on the most !ulnerable. 4e call upon the ">H, #orking #ith other rele!ant organisations, to assess the actions taken an those re,uire for the future. 9C. 4e agree to make the best possible use of in!estment fun e by fiscal stimulus programmes to#ar s the goal of buil ing a resilient, sustainable, an green reco!ery. 4e #ill make the transition to#ar s clean, inno!ati!e, resource efficient, lo# carbon technologies an infrastructure. 4e encourage the M/7s to contribute fully to the achie!ement of this ob2ecti!e. 4e #ill i entify an #ork together on further measures to buil sustainable economies. 9D. 4e reaffirm our commitment to a ress the threat of irre!ersible climate change, base on the principle of common but ifferentiate responsibilities, an to reach agreement at the @N Climate Change conference in Copenhagen in /ecember 9EEF.

=eli4erin- our 0ommitments

9F. 4e ha!e committe oursel!es to #ork together #ith urgency an etermination to translate these #or s into action. 4e agree to meet again before the en of this year to re!ie# progress on our commitments.

()E !riti0ally re4ie, the internationali9ation ro0ess o+ tele0om +irms on $ndian ori-in and identi+y .ottlene0&s in their :ourney to,ards -lo.al 0om etiti4eness)
The Telecom in ustry in "n ia, best escribe as a menagerie of relate business streams coming together to create an ecosystem, has borne #itness to significant change o!er the last fe# years. 4ith a burgeoning subscriber base, an o!er 89 to 8B million ne# subscriber a itions per month currently, "n ia is boun to remain one of the fastest gro#ing #ireless markets in the #orl . /isruption in pricing an enabling regulation helpe accelerate subscriber gro#th. "nternational players reali*e that not only #as "n ian telecom market large, but it #as profitable. Conse,uently, the last four to fi!e years ha!e truly been the years of internationalisation of telecom in "n ia. Marke by the entry of Ma&is Telecom ('ircell) in /ecember 9EEB, an Telekom Malaysia;s strategic partnership #ith .pice Telecom in Iune 9EE<, the sector has e&perience a flurry of mergers an ac,uisition acti!ity e!er since. +ollo#ing on from the lan mark Oo afone-%utch transaction in 9EEC, the last couple of years ha!e seen a combination of omestic consoli ation an international strategic partnerships both in-boun as #ell as outboun . .e!eral ne# omestic players such as @nitech, .#an, .hyam, .-tel, >oop, etc applie an got the ne# licences to enter the market an #ere open to international partnerships. Conse,uently se!eral international operators such as Telenor '.' (.#e en), .istema I.+CC>. (0ussia), -tisalat (@'-) an 7ahrain Telecommunications Company (7atelco), 7ahrain, successfully entere "n ian markets. Mean#hile, Iapan;s NTT /oComo picke up a 9<P stake in the si*eable mobile operations of Tata Teleser!ices as part of their "n ia strategy. Hn the omestic front, " ea Cellular;s purchase of .pice Communications brought together t#o #ell establishe regional players an conse,uent entry of Telecom Malaysia into " ea. "n the ne&t #a!e, "n ian players eci e to go global an starte e&ploring opportunities in 'frica an other emerging economies. The propose mergers of Mobile Telephone Net#orks .outh 'frica (MTN) #ith 7harti 'irtel >imite an then later #ith 0eliance Communications >imite , though unsuccessful, put "n ia firmly on the global telecom MA' map, lea!ing no oubt about the intention of establishe "n ian operators to foray into alternate high gro#th markets. 3oing for#ar , gi!en the large number of players in each circle, there coul be opportunities for players to consoli ate o!er the ne&t 9 to L years. Hn the operators; si e, the a !ent of L3 an 4iM'Q auctions is likely to initiate yet another spell of acti!ity #ith large capital re,uirement to fun licence fee an e&pansion plans. Hn the infrastructure si e, in the ne&t roun of e!olution, the nee to make ne# telecom operators !iable #ill ri!e solutions aroun acti!e infrastructure sharing.
Telecom sector: An overview
From public sector monopoly to an IUC regime and limited mobility Print this page

services, the Indian telecom sector has come a long way

The N D.< billion telecommunications market in "n ia has un ergone a ma2or transformation in the past couple of eca es. +rom being a complete monopoly of the public sector, to the breaking o#n of these monopolies, the telecom in ustry has #itnesse significant policy reforms. These reforms ha!e seen the entry of pri!ate players to make a foray in all kin s of telecommunications ser!ices, such as cellular an #ireless in local loop (4>>) ser!ices, in a ition to pro!i ing basic telephony ser!ices. %istory o+ re+orms" The telecom sector reforms so far ha!e been un ertaken in three phases. The first phase began in the early DEs, #hen pri!ate manufacturing of customer premise e,uipment #as gi!en the go-ahea in 8FDM. ' proliferation of in i!i ual .T/$"./$1CH net#orks also took place throughout the country, by #ay of pri!ate in i!i ual franchises. Mahanagar Telephone Nigam (MTN>) #as create out of the /epartment of Telecommunications (/HT) to han le the sectors of Mumbai an /elhi respecti!ely. ' high-po#ere telecom commission #as set up in 8FDF, an Oi esh .anchar Nigam (O.N>) #as ma e the international ser!ice pro!i er catering to all telecom ser!ices originating from "n ia. The secon phase of reforms in the telecom sector commence in 8FF8 #ith the announcement of a ne# economic policy. To begin #ith, the go!ernment elicense the manufacture of telecom e,uipment in 8FF8. "t also opene up ra io paging ser!ices in 8FF9. "n 8FFM, basic telephony #as opene to the pri!ate sector by granting si& companies #ith operating licenses. These companies #ere 7harti Telenet, -ssar Comm!ision, .hyam Telecom, %ughes Tele.com, Tata Teleser!ices an 0eliance. The National Telecom 1olicy announce in 8FFM #as part of this secon phase of reforms. "t emphasi*e @ni!ersal .er!ice an ?ualitati!e "mpro!ement in telecom ser!ices, among other ob2ecti!es. 'n in epen ent statutory regulatory #as establishe in 8FFC,

an pursuant to the policy intentions, "nternet ser!ices #ere opene up. This #as ho#e!er only in 8FFD, rather belate ly in comparison to the rest of the #orl . .ince then, more companies ha!e been gi!en the go-ahea to offer !arious telephony an other telecom ser!ices in the !oice an ata segments. The thir phase of reforms began #ith the announcement of the Ne# Telecom 1olicy in 8FFF. The un erlying theme of NT1 #as to usher in full competition through unrestricte entry of pri!ate players in all ser!ice sectors. The policy fa!oure the migration of e&isting operators from the era of fi&e license fee regime to that of re!enue sharing. The policy further outline the strengthening of the regulator, opening up of "nternational >ong /istance (">/) an National >ong /istance (N>/) ser!ices to the pri!ate sector an corporatisation of telecom ser!ices. 'ccor ingly, the year 9EE8 #itnesse the entry of pri!ate operators in offering basic telephony an N>/ ser!ices an the intro uction of a itional players, in e!ery cellular circle. This phase of reforms also sa# O.N>:s monopoly en ing prematurely in 'pril 9EE9, #hen the ">/ sector #as thro#n open to the pri!ate sector to heral the era of unlimite competition in the in ustry. ;ut0ome o+ re+orms" 4ith these reforms, the telecom sector began #itnessing a tren of gro#th ne!er seen before. 7asic ser!ices ha!e been opene for unlimite competitionJ more licenses ha!e been issue to the pri!ate sector for cellular ser!ices. Tele- ensity, too, has increase from 8.EC in 8FFB to 9.D in 9EEE an stoo at B.C9 as of 'ugust 9EEL. 4hile it is e&pecte to continue rising sharply in a !ery short perio , the issue of telephone accessibility remains to be a resse satisfactorily. The telecom sector has thus completely change , both in terms of co!erage, an efficiency of ser!ices offere . 1ro!ision of lan lines on eman in certain places, telephone e&changes going igital, an the acceptability of optic fibre an #ireless technology are but a fe# instances of the change that s#ept the in ustry.

"n the area of cellular ser!ices, the number of licenses stoo at four operators in each circle, #ith the ser!ices are being run in eighteen telecom circles an four metro cities. The state of Iammu an Kashmir #as the nineteenth telecom circle to be ma e operational, although this #as only in 'ugust 9EEL. The current subscriber base in the cellular market has risen to 8DL lakh as of .eptember 9EEL. The cellular ser!ice pro!i ers also pro!i ing a lot of !alue-a e ser!ices such as .M., location base ser!ices, etc, an these to no# form an important constituent of the cellular ser!ice pro!i ers; re!enues. "n the "nternet .er!ice 1ro!i er (".1) business, M<E licenses ha!e alrea y been grante , more than 9ME clearances ha!e been issue to set up their o#n international ata gate#ays. "n the first ,uarter of 9EELEM, aroun 8FM ".1s #ere operational of #hich ME ".1s #ere also pro!i ing "nternet Telephony ser!ices. "n the meantime, the pri!ate basic ser!ice pro!i ers ha!e starte a rollout of fi&e #ireless telephones. The rollout of these ser!ices along #ith the fast gro#th in the cellular subscriber base has affecte the gro#th of the fi&e line subscribers to a large e&tent. !urrent issues" %o#e!er, technological a !ancements in a sector o not in any #ay guarantee a smooth ri e for all the players in the in ustry. 'n the telecom sector in particular has seen more than its share of contro!ersies. "n fact, it may e!en be argue that the thir stage of reforms took place only ue to the problems face by the sector at that point of time. The most recent spate of contro!ersies took place as a result of the entry of more 4>> operators on the scene #ith lo# costs. This threatene the sur!i!al of cellular players #ho entere at a peak time. The ma2or #orry for the cellular in ustry #as that 2ust like the a !ent of .M. sa# the paging in ustry lose most of its businessJ the entry of 4>> #oul ha!e a similar effect on them. 's a result, in Ianuary 9EE9, the legal #rangling bet#een the cellular operators base on the 3lobal .ystem for

Mobile communication (3.M) an the basic operators pro!i ing limite mobility 4>> ser!ices commence . The first signs of the things to come #as #hen the cellular operators threatene not to offer interconnecti!ity to 4>> operators an block calls on those net#orks unless the go!ernment sol!e the issue of access charges. This #as follo#e by a spate of other issues, #hich re,uire clarifications, legal opinions, an eli!ery of 2u gements. Hf all the issues, t#o specific grie!ances of the cellular operators stoo out. +irstly, all cellular operators #ere ma e to pay an access charge of 0s 8.9E for e!ery L minutes for any call terminate in the net#ork of the basic operator. To pro!i e interconnecti!ity bet#een cellular an fi&e ser!ices, basic phone operators aske cellular operators for an access charge for terminating calls on their net#ork. Hn the other han , for calls ma e from a basic phone to a cellular phone, the basic operator pai nothing to cellular operators. The reason being that basic operators ha!e to pro!i e cheap telephonic ser!ices to far-flung areas, it coul not be ma e more e&pensi!e by paying access charges. Their other grie!ance #as #ith regar s to fee. 4hen cellular phone operators foraye into the telecom sector, they ha to pay hefty fees of aroun 0s LEEE crore for getting their licenses. Hn the other han , 4>> firms pro!i ing limite mobility ser!ices, ha to pay a measly 0s BEE crore. "t is this hefty fee, combine #ith a le!y of access charge, #hich has ma e cellular telephony more e&pensi!e. 's a result, the "nterconnect @sage Charges ("@C) regime #as e!entually ushere in. This also le to the system of the calling party paying for the calls ma e on all net#orks, #hether basic, cellular, or #ireless. %o#e!er, the initial set of "@Cs #as not foun to be efficient an easily implementable. This le to the announcement of ne# "@C by T0'" to#ar s the fag en of Hctober 9EEL. "n a ition to the "@C, T0'" also eci e to impose an access eficit charge. The players ha!e been gi!en a free han to eci e their tariffs by T0'", an it has announce its intention to interfere only in e&treme cases.

There #as another contro!ersy that surroun e the telecom sector in 9EEL, #hich #as regar ing the roaming facility being offere by limite mobility players. 't the time of the intro uctory launch of its 4>> ser!ices (0eliance "n ia Mobile) in /ecember 9EE9, 0eliance "nfocomm promise national roaming facility to its customers. 's 4>> ser!ices #ere esigne only to offer limite mobility #ithin a specific .hort /istance Charging 'rea (./C'), the a !ertisements put the cellular operators in a fi&. 'ccor ing to them, the offering of roaming ser!ices #as a clear breach of e&isting regulations. The Cellular Hperators 'ssociation of "n ia (CH'") e!entually mo!e the Telecom /isputes .ettlement an 'ppellate Tribunal (T/.'T) accusing 4>> operators for !iolating license con itions by offering roaming facility. The clarification gi!en by 0eliance "nfocomm that the company ha planne to offer multiple subscription to customers, thereby making the roaming facilities being offere #ithin the pur!ie# of the 4>> license #as e!entually not foun to be satisfactory by the authorities. The T/.'T !er ict on the issues relating to the co!erage pro!i e by the 4>> players #as gi!en in 'ugust 9EEL. ' ma2ority !er ict of the T/.'T, #hile clearing the 4>> limite mobility ser!ices irecte the 3o!ernment to restrict their mobility to a .hort /istance Charging 'rea (./C'). This ecision meant that the surrogate roaming facilities offere by the 4>> players #ere no longer permissible. ' itionally, the T/.'T also aske the 3o!ernment to look into the issue of pro!i ing a le!el playing fiel to all the intereste parties. 2hat the +uture holds" 4ith t#o of the three ma2or issues getting resol!e , the only issue that remaine #as pertaining to the isparity in the entry fees pai by the cellular an basic operators. This ga!e further impetus to ha!e unifie licensing for basic, cellular, an #ireless ser!ices, an e!entually, in a lan mark ecision, the 3roup of Ministers constitute to look into the issue appro!e T0'";s recommen ations on the same.

The players ha!e been gi!en the option of migrating to a ne# agreement un er the aegis of the unifie license, or continuing un er the pre!ious agreements. The cellular license has been broa ene , an these players no# ha!e the option to commence basic telephony ser!ices. The basic ser!ice pro!i ers in or er to a!ail of the unifie license, no# ha!e to pay the ifference bet#een the license fees pai by them an the fourth cellular operator, oing #hich #ill permit them to offer full mobility ser!ices. This process of unifie licensing #ill be complete in a perio of si& months, pro!i e there are no hitches. This mo!e is a positi!e step to#ar s a license free en!ironment in the telecom sector. 'n in all probability the future hol s a unifie license not merely a unifie license in select telecom ser!ices, but instea for all the ser!ices offere in the sector. "n No!ember 9EEL, the /epartment of Telecommunications finally issue the or er appro!ing unifie licencing. 0eliance "nfocomm ha to pay a penalty of 0s B9< crore for offering roaming facilities. 0eliance "nfocomm, Tata Teleser!ices, .hyam Telelink an %imachal +uturistic Communications are issue unifie licences. 0eliance "nfocomm recei!es licences for 8C circles an Tatas for si& circles, inclu ing t#o metros. %o#e!er, the seemingly mil penalty impose upon 0eliance "nfocomm continues to remain a bone of contention. 'n the cellular operators are not too happy #ith the ne# regime, an ha!e approache the .upreme Court for relief. Policy reform $or a dynamic sector, reforms are necessitated by dynamics of chan!es includin! technolo!ical innovations. The telecom sector in &ndia has been witnessin! a continuous process of reforms since 0110. 2urin! the recent years, various policy initiatives have been carried out to !ive boost to the sector. #ome of them are as under+ 3ational 4on! 2istance service was opened to operators5 w.e.f. 0%.6.7 .

 3ational $re)uency -llocation 8olicy 77 evolved. The monopoly of 9#34 in &42 terminated from :arch %0st 77 . 3ational &nternet ;ackbone <3&;= coverin! all states has been commissioned. &nstruction issued to all state *overnments to provide expeditious approval for >i!ht of way. *uidelines for "nified -ccess #ervice 4icence re!ime was issued on 00.00.7%. ?allin! 8arty 8ump <?88= re!ime was implemented w.e.f. 0st :ay, 77%. &ndian Tele!raph -ct was amended for establishment of "#' $und. 3onlapsable "#' $und created on -pril 77 . &"? re!ime introduced. #everal directives@re!ulations have been issued by T>-& re!ardin! different telecom services, their tariffs, )uality and internet services, which have contributed positively towards the !rowth of telecommunication sector. &#8s allowed settin! up submarine cable landin! stations for international !ateways for internet. >adio fre)uency spectrum mana!ement has been modernized and automated to efficiently address dynamic needs of the liberalized user. ;roadband policy was announced on 'ctober 0(, 77(. &#8s have been permitted to use under!round copper cables for establishin! last mile linka!es. $2& ceilin! has been raised to A(B for various telecomm services. The operation of -ut7mated spectrum mana!ement was commenced in Canuary 77,. -ccess service provider can provide internet telephony internet services and broadband services. They can use the network of 342@&42 service. 8rior experience in telecomm sector no more a pre/re)uisite for !rant of telecom service licenses. -nnual license fee for 3ational 4on! 2istance, &nternational 4on! 2istance, &nfrastructure 8roviders, 9#-T ?ommercial and &#8 has been reduced to DB of -djusted *ross >evenue <-*>= with effect from 70/70/ 77D. &8>83 #ervice permitted to &#8s.

 2elicensin! of .(7 / .(6%, *HE for indoor and outdoor use, ,.0, / ,.0% *HE for indoor use. :oreover, exemption@concessions have been !iven on the customs duty for importin! e)uipment as well as components etcF besides excise duty exemptions and benefit under indirect taxes. -ll these reforms and policy initiatives have certainly had positive effect on the !rowth of Telecom sector.

()F %o, to 0hoose an allian0e stru0ture3 Ex lain ,ith the hel su00ess+ul and one unsu00ess+ul strate-i0 allian0e)
W at is a strate!ic alliance

o+ one

$ebster%s defines &stratagem& as %a subtle piece of planning designed to &gain an end& and $ebster%s defines an &alliance& as the uniting of !ualities in a perceived relationship.% ' (n this conte)t, a strategic alliance is then the &uniting of !ualities in a perceived relationship to gain an end*result.& ( define a strategic alliance as an agreement to utili+e the strengths of both companies ,the strategyto build a bridge for customers to benefit ,the end- through mutual partnership ,the perceived relationship-. . winning strategic alliance creates a win for /ompany ., a win for /ompany B, and a win for the customers of the companies in alliance. .n alliance may be a consortium, but for the purposes of this discussion we will e)amine alliances between two organi+ations. "ow to # oose An Alliance $tr%ct%re "he following checklist outlines some of the most popular options that managements may want to consider in structuring their alliances. Alliance &oint 'ent%re

Many firms seek to establish separate legal entities-2oint !entures-for their partnerships. The essential feature of the 2oint !enture is the creation of entirely ne# entity. This is because entity possess its o#n i entity an management structure, complete #ith the inherent operating an strategic problems ine!itably presente by a ne# company. 'lliance partners can structure these !entures in infinite !ariety. %o#e!er, alliance practitioners ha!e i entifie some key common issues to e&amine #hen consi ering a 2oint !enture company( 0each an amiable e,uity break o#n. 0estrict alliance acti!ities Combine all functions +ocus narro#ly on pro ucts an markets 'llo# e&tra control in home markets

Fun0tional A-reements" 6arden G4ariety Allian0es .ome common features of functional alliances are outline belo#( Ioint Manufacturing Technical 'ssistance Ioint Marketing Cross /istribution Cross >icensing 0esearch 1ooling Consortia $s a Fun0tional allian0e enou-h Many companies buil ing alliances-regar ing of the strategies importance of the coalitionso not see the nee for either e,uity stakes or the creation of 2oint !enture. ' lea ing proponent of functional alliances is Oolks#agen. "n the past eca e the 3ermany base carmarker has s#itche from IOs to functional pacts R buil ing such links #ith Chrysler, Ool!o, Nissan an Toyota. 7ut functional alliances are not for e!eryone. .ome of the pros an cons inclu e the follo#ing( +unctional agreements are more fle&ible than alliances built aroun 2oint !enture or e,uity hol ings. They may be your best response to the nee s#ift changes in competition in the global market. -asily re-#ritable functional pacts allo# continual refocusing of an alliance. 1articipants can easily transform successful alliances into e,uity or IO base partnerships +unctional agreements are i eal for learning processes. !on4ersely" >ess commitment to the alliance is sho#n, functional agreements offer more scope for ba faith. +unctional alliances cannot hol common assets +unctional pacts eman an e&ceptional egree of mutual trust.
$%ccessf%l strate!ic alliances are %s%ally comprised of t e followin! feat%res: '. /lear benefit to both companies and customer. 0. Both companies increase the sale of ,defined- products and services. 1. /ustomers can clearly see who handles what ,to eliminate confusion-. 2. Both partners increase their visibility and strengthen the name of their company by forming the alliance. 3. "he alliance represents a revenue flow to one or both companies that would not otherwise occur. 4. "he alliance represents an outsourced cost5revenue structure in order to ma)imi+e a relationship, resource, or cost through leveraging a partner%s economies of scale and ability to more successfully deliver the relationship, resource, or cost structure. .s a strategic alliance manager for my former company, ( focused on technology companies with clearly beneficial reasons to partner with my company6 one or some of our strengths matched their weaknesses and one or some of their strengths matched our weaknesses. By partnering, we were giving a stronger option to our unified client. .lso, the economies of scale ,financial benefit-

of partnering outweighed the cost of keeping a service support structure in*house. .n e)ample would be a company who manufactures computer network e!uipment outsourcing the support of their e!uipment to my company, and in return, my company agrees to build a solution featuring their switches as a bundled product to the customer. "he result is the customer buys from my company, receives support from my company for the products we sell .7 support for the warranty from my company for the partner%s products.

T e Trian!le of $trate!ic Alliances

8ou will notice in the two diagrams ,above- that there is an intersection of needs, capabilities, and reach of two companies tapping the customer both in the same way can deepen the 9oint service offering. "his is one approach to offer to a client called the M:":.; #<ER;.8 .;;(.7/E. "ogether, we have two strong solutions become (R#7*/;. solutions. "hat%s more powerful and a win to all parties. 8ou may also have noticed that there are areas /ompany . touches the /ustomer where B presently does not touch, and vice*versa. "his is an e)ample of an E=P.7 E RE./> .;;(.7/E. E=P.7 E RE./> alliances enable one firm to touch more customers, find more needs, and potentially offer more services to that client through the strengths and capabilities of the other company as strategic alliance partner. ;ast, there is an area of intersect below the Ma)imum Benefit "riangle that many companies overlook. (t is where you%re both offering the same or similar solutions. "here may be ways to broaden this intersection by working together. "his can be mutually beneficial (? it increases the outreach or broadens the circle of influence for both /ompany . and /ompany B. (n addition, there are areas that do not intersect and are untouched opportunities and challenges. #ften, by starting with one service or product offering, a company can discover more ways to deepen these hooks into customer relationships to build a stronger business relationship. Every alliance has !uirks to work through. ?or e)ample, two companies with competing products5services will face communication challenges with their customers when they form an alliance. "he customer will be confused as to who or where to buy the product. "his type of alliance violates my rule number 1 * customer can clearly see who handles what. (t is important to have clearly defined processes for implementation as well as account management ,from both parties- to create successful alliances. .nother challenge in alliances is to define how much revenue will result and how soon it will occur ** the primary problem with alliances that break down. "he break down often occurs because /ompany . over*promises the amount of work in order to negotiate a lower*cost pricing structure and gain commitments from /ompany B, the provider of the service. "his causes breakdown

because one party begins to mistrust the alliance partner either because the revenue flow does not match the promised amount or because service levels are compromised due to broken commitment of revenue flow, which creates a lack of adherence to service level agreements. . few mishandled escalations for support can leave /ompany B disillusioned with /ompany .%s ability to support their products. "his results in fewer referrals to the service alliance. . good way to resolve this challenge is to establish defined metrics of success, monitor success, and recogni+e potential trouble spots to take corrective action. (t is also highly important to establish pricing based upon a scale of realistically achievable levels of volume. $ith a pricing structure based upon a scale, both sides are fairly protected. "here is a method to create accountability within each respective company. "hese alliances involve employees from both companies representing the alliance within each other%s organi+ation through cross*pollination of employees. "he presence of the employee from /ompany . on the team of /ompany B builds synergies and removes the potential for miscommunication. (t is also important to have shared office space, regularly scheduled meetings, and maintain clear lines of communication so that surprises are minimi+ed. (t has been said &an optimist and pessimist make the best partnership because one sees the profits while the other sees the risks.& So, the last key to a successful alliance is to make sure representatives from various parts of each company are intricately involved in building the solution. ( included the law department, business development, human resources, finance ,controller-, administration, manufacturing, operations, and sales when building alliances for ata @eneral and ecision#ne. ( also made sure my alliance partner had representatives from each area included on their decision teams. $trate!ic alliances can be beneficiary to yo%r company(s ima!e . "he last thing ( would want to do is spend 4 months to a year building an alliance only to announce it the week between /hristmas and 7ew 8ear%s ay. "his is the last, and perhaps most vital, aspect of a successful alliance. .nnouncing the new alliance to customers at the right time leads to ma)imum e)posure ,and success-. .nnouncing at the wrong time may have less than desired effect and draw fewer customers to the table. . good e)ample of the right time to announce the alliance might be during the key day of a trade show. Both companies must be committed to the success of both the promotion and the delivery of the alliance. $ith a 9oint commitment to promotion and delivery you ensure the success of the program. To recap ways to improve yo%r strate!ic alliance s%ccess) ma*e s%re to answers for t ese seven +%estions: ave !ood

'. (s there clear benefit to both companies ,financial, service5product, relationship- in building a strategic allianceA 0. (s the strategic alliance relationship clearly defined for customers to understandA 1. .re your companies networked peer*to*peer on multiple levels to strengthen the alliance bondA 2. >ow much strategic alliance business did you promise to deliverA >ow much can you fulfillA 3. >ave you developed a thorough S;. ,service level agreement- for the scope of work to be delivered through the strategic allianceA >ave you developed a plan for success ,with metrics to measure how you will define your strategic alliance successA 4. o you have clear and honest communication between all strategic alliance partnersA (s the management of implementation and continuous success of the program assigned to strong parties within each organi+ationA B. (s the image and success of the strategic alliance program being promoted by both partnersA

Building successful strategic alliances isn%t easyC however, they add to the success and value of your company. :se these seven steps to improve your alliances. $e often consult with companies on how to improve alliances and wish you success with your alliance aspirations. $%ccessf%l $trate!ic Alliance

Toyota-3M-T04 3M;s components i!ision has been supplying components to Toyota, #hile T04 has been participating in Toyota;s keiretsu strategy meetings. Toyota, mean#hile is selling 3M;s Ca!alier un er its o#n bran name in Iapan. %o#e!er, 3M has a 2oint !enture in Thailan #hich challenges Toyota;s ominance an plans to sell its .aturn se an in Iapan in 8FFC. !anon-%e,lett Pa0&ard They ha!e a common laser engine printer technology an %1 buys engine from Canon. %o#e!er, both compete in en pro ucts

()9 AStrate-i0 allian0es are .uilt on the marria-e meta horB) Ex lain Ans" 7uil ing on the Marriage Metaphor
-&ecuti!es continually characteri*e alliance as marriage, #hich con2ures up all sorts of re!ealing #ays to efine these arrangement( =e+ine the !on4entional !ou le" she stays at homeJ he goes out to the office each of the alliance partners performs a separate but complementary task. They are not irect competitors R at least, not at first. They may become competitors, though, especially as the alliance progresses. Hne !ersion of the con!entional couple is the arrange marriage. Hther parties arrange an super!ise the partnership. This often pertains to pro2ects in #hich e!elopment cost are enormous an customer nee s paramount, as in aerospace an efence. 'n e&ample of an arrange marriage is the 'irbus consortium. .ince the strategic irection comes from outsi e the alliance group, arrange marriages often suffers from chaotic management, #ith the partners sometimes at each other;s throats. The chaos oes not necessarily affect the success of the pro2ect, since the primary goal of most alliance management is effecti!eness, not smooth managerial style. !on4entional !ou les" an exam le) "n an alliance bet#een stan ar telephones an cables (.TC) an @. 4est, the t#o partners 2oine to bi for a licence to operate a ne#, lo#-cost, limite range portable telephone system in 7ritain. .TC ha

manufacturing capability, but lacke

the right operating e&perience. "t nee e

partner to gi!e it cre ibility as a consumer oriente operator. %o#e!er, other eligible british firms in this fiel #ere alrea y in the process of forming their o#n alliances. "n response, .TC allie itself #ith @. #est-solely for the purpose of entering the ne# personal communication fiel . "n late 8FDF @. 4est-.TC #on the 7ritish contract personal communications. This e&emplifies an alliance that stars out to be passi!e-little more than arm;s length tra e. 3aining success, it then turns ynamic, as functions merge an management interlocks. The !areer !ou le" he goes out to #ork-an so oes she---this is the alliance of companies that are not only in the same business, but also operating in e&actly the same business areas. Their ecisions to mesh their business assets imme iately eci e to co-operate because they becomes a sensiti!e issue, for linkage brings the threat of compromise competiti!eness. 7ut both partners usually percei!e that they can be more competiti!e in the global market place as an alliance than as separate companies. ' fairly eep le!el of collaboration usually characteri*es such alliances. "ne!itably, they also e!elop a characteristics problem( the lea erlaggar syn rome. The ;dd !ou les" the o couple formation allies t#o ifferent sorts of cultures. More likely than not, one partner is highly structure , iscipline rule go!erne an large. The other is likely to be small, unstructure an intuition go!erne . Neither partner irectly threatens the other as a competitor, but competition issues sensiti*e the alliance, particularly if one partner percei!es a risk of losing proprietary kno#le ge by allo#ing an unstructure corporate organi*ation access to it. H couple alliances fre,uently in!ol!e a fairly eep le!el of collaboration, an the o couple can e&pect corporate-culture tensions to arise bet#een the partners. 7ut the e&perience sho#s that the cultural issue is often of less imporatance than the business issue. The key ,uestion is( oes this alliance make business sense) "f the ans#er is yes then the participants can probably manage their inter-cultural problems. Just 6ood Friends" these career couples are too preoccupie #ith their separate careers to form full-time relationships. They are also alert to the potential for competition bet#een partners. Typically, the goo frien s are irect competitors,

in the same business. "f not current competitors, they #oul !ie #ith one another if they occupie the same geographic market. To balance the tra e off bet#een the imperati!es of competition an collaboration, this couple ten s to set its collaboration at a istance, an #ithin strict limits. Shot 6un 2eddin-" in most cases, partners enter alliances of their o#n !olition. 5et there is one e&ception. "n the shotgun #e ing, the couple has 2oine han s for one reason only-the loa e gun that is pointing iscreetly o#n the aisle. The shotgun #e ing is easily recogni*able-the companies blithely announce that they are buil ing their alliance on synergies that are absolutely irresistible (#hile in epen ent analysts fin these synergies har to pin o#n). @sually a hostile bi er or ma2or competitor lurks not too far in the backgroun . 7ut forming an alliance un er such circumstances oes not necessarily mean that the arrangement must fail. Nonetheless the !ery fact that the participants built the relationship for purposes other than the integration an le!erage of business assets ten s to result in higher attrition rate for shotgun #e ing.