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Strategies
Liberalization
Removal or reduction of those practices in trade that
restricts free flow of goods and services from one nation to
another. It includes dismantling of tariff (such as duties,
surcharges, and export subsidies) as well as non-tariff
barriers (such as licensing regulations, quotas, and
arbitrary standards).
Globalization
'Globalization' refers to 'a process of removing government-
imposed restrictions on movements between countries in
order to create an "open", "borderless" world economy'. The
process of globalization includes opening up of world trade
and increased mobility of persons, goods, capital, data,
technology, knowledge and ideas between nations. Ideally,
it also contains free inter-country movement of labor.
After liberalization-
breaking political barriers, integrating world capital and
financial markets, opening up international markets and freeing
import of technology and raw material. New opportunities and
challenges are thrown up. The opportunities are in the form of
increasing the sales and profit by exploring the customers in the
massive global market.
1. Devaluation
2. Disinvestment
3. Dismantling of The Industrial Licensing Regime
4. Allowing Foreign Direct Investment (FDI)
5. Non Resident Indian Scheme
6. Throwing Open Industries Reserved For The Public Sector to
Private Participation.
7. Abolition of the Monopolistic and Restrictive Trade Practice
(MRTP) Act,
8. The removal of quantitative restrictions on imports.
9. The reduction of the peak customs tariff
10. Wide-ranging financial sector reforms
WORLD TRADE ORGANIZATION
Functions
Among the various functions of the WTO, these are regarded by
analysts as the most important:
▪ Administering WTO trade agreements
▪ Forum for trade negotiations
▪ Handling trade disputes
▪ Monitoring national trade policies
▪ Technical assistance and training for developing countries
▪ Cooperation with other international organizations
PRINCIPLES OF THE TRADING SYSTEM
• Non-Discrimination.
• Reciprocity
• Binding and enforceable commitments
• Transparency
• Safety valves
THE IMPACT OF THE WORLD TRADE ORGANISATION (WTO)
Negative effects of globalization on Indian industry have
been:
• Rise in demand for labor and the rise in wage rates leading to
some increase in costs.
• Weakening power of the trade unions over labor in emerging
industries and growth sectors like IT, entertainment, internet
and mobile services, airlines, banking, insurance, banking
services.
• Too much competition in the market leading to continuous
pressure on raising productivity, enhancing consumer
service, improving product quality, in order to survive.
• Voluntary retirement for many public sector units.
• Too many sales person chasing customers.
• Too many cars on the road and traffic congestion.
• Growth of consumerism.
• Instability in profits due to too much choice among
customers.
• Shortage of power and infrastructure affecting
industrial expansion.
• Closure of inefficient units supplying costly and shoddy
products and loss of jobs.
• Problems of dealing with uncertainty in the
international market in terms of demand, supply and
prices.
Positive effects
Value Creation
ADVANTAGES OF MNCs
Many MNCs enjoy the benefits of,
• having strong international brands and the proven ability to
market those brands. Previous international experience has
provides the ability to market to diverse customers.
• strong financial abilities and proven management skills.
• multinationals from advanced economies can compete
against local firms using better technology.
• finally, multinationals often have the advantages that come
from economies of scale and economies of scope. The ability
to produce more efficiently due to having larger operations and
the ability to transfer resources across company areas
produce a strong competitive advantage for multinationals.
ADVANTAGES OF LOCAL FIRMS
Local firms bring a number of advantages, and those advantages are
often hard for foreign firms to duplicate.
• One of the most significant advantages possible for the local firm
is a cost advantage. The local firm is an expert in cost reductions
in that local economy.
• At the same time, the local firm has already developed a
distribution channel, and has established itself in the
consumer’s mind. Creating a competing channel of
distribution can be an expensive undertaking for the
multinational.
• The local firm has an intimate knowledge of the local market and
can fine- tune its product offerings to the needs of that market.
• Foreign marketers may be skilled at international marketing, but
the local firm has knowledge of the local market and its culture
that would take time for the multinational to acquire.
• The local firm can also appeal to consumer’s sense of nationalism
in order to promote its product over that of the foreign
multinational.
THE CASE OF BAJAJ AUTO
MANUFACTURING AS STRATEGY
MISSION
OBJECTIVES
Financial, Market, Manufacturing, Product Development
ENVIRONMENTAL SCANNING
Economic, Government and Legal issues
CORPORATE STRATEGY
Manufacturing strategy can be defined as “a coordinated set of
objectives and action programmes applied to a firm's manufacturing
function (deployment of manufacturing resources) and aimed at securing
medium and long term, sustainable advantage for firms over that firm's
competitors”.
Strategic Decision Areas comprising a Manufacturing Strategy
Category Decision Areas Scope
Structural Capacity Total capacity, capacity flexibility, shift patterns, temporary
Decisions subcontracting policies
Facilities Location, number and size of sites, focus of manufacturing
resources, allocation of tasks to sites
Process technology / Equipment, automation, connectedness, integration, technology choice,
Production configuration of equipment into lines, cells, etc., maintenance policies and
equipment the potential for developing new processes in-house , implementation,
subcontracted development
Vertical Integration Strategic make vs. buy decisions, supplier policies, supplier relationship,
supplier development, extent of dependence on suppliers, network behaviour
Manufacturing Strategy
Structural and Infrastructural
decisions
Manufacturing actions
Quality refers to achieving the company defect rate targets, i.e. manufacturing of products with high
quality and performance standards
Delivery refers to achieving delivery targets, i.e. meeting delivery schedules
dependability
Delivery refers to achieving delivery targets, i.e. reacting quickly to customer orders to deliver fast
Speed
Flexibility refers to the ability to cope with change or uncertainty and variety, i.e. reacting to changes in
product, changes in product mix, modifications to design, fluctuations in materials, changes in
sequence and volume
Others refers to after-sale service, advertising, broad distributions and broad product line