techn abs and acq
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Technology Absorption & Acquisition
Meaning of Technology Acquisition
Technology acquisition is the process by which a company acquires the rights to use and exploit a technology for the purpose of improving or renewing processes, products or services. It does not include retailed or mass market off the shelf software which is generally governed by non-negotiable “shrink wrapped” licences.
Technology acquisition is a huge area and the productivity improvement fund targets a specific part of the technology acquisition process.
Companies applying for funding for technology acquisition under this fund will be required to have carried out their due diligence and identified the technology they wish to acquire.
The applicant company will also know the details of the licence agreement between the two companies and details of the costs involved as part of the application.
Methods of Technology Acquisition
Choosing the best source option for your company...
Internal technology sources...
External technology sources...
Combination of internal and external sources...
Choosing the best source option for your company…
Steps covered in Technology Acquisition
1. Assess local constraints and available technologies.
2. Evaluate costs and benefits and windows opened by each technology.
3. Acquire.4. Assimilate.5. Use.6. Adapt.7. Change.8. Create.
Factors In Technology Acquisition
Seller differences European suppliers more generous on basic
industry technology. US suppliers more generous on consumer
goods technology.Buyer participation in transfer process, even
turnkey project, is crucial.Technology not on open shelf, but protected by
secrecy and patents.Technology involves tacit knowledge, understood
only in use, not from recipe.Some technology elements may be non-tradable.
The process : technologyAcquisition
The introduction of technology in Customs processes proved to be essential to enhance the efficiency of its own work as well as to facilitate trade. Nevertheless, modern systems are not magic machines which can totally replace good, traditional techniques. They are just an additional tool, and are only as good as the way they are used.
The success of a modernization program is highly related to a proper preliminary needs assessment, careful technologyspecification, adequate capacity building policy and a proper purchasing process.
• Needs assessment: Obviously, it is essential to carefully review the actual situation and consider the needs for technology introduction:
• Technology and solutions available :Once the concept is defined and approved at Management level, the Customs Administration must look for the solutions available on the market.
• Project definitionWith a clear view of the project objectives and technology concept selected, the scope of the project has to be further studied and defined.
• Technology specification:Once the initial choice of the type of the technology is made, it is necessary to draw up a detailed technical specification which will adapt it to the identified needs and constraints.
• Project organization:From the moment Management decides to go ahead with the modernization program, a Project Management Team has to be organized and established. The Project Manager must be clearly identified and introduced to all internal and externalstakeholder
• Purchasing process:Every country has its own procurement procedure but some common guidelines can be established in order to ensure thatthe procurement process is transparent, fair and comprehensive.
Guidelines for a Contract:The following items are to be included in a contract:
1.Contract and Interpretation2.Subject Matter of the Contract3.Payment4.Intellectual property5.Execution of the Scope of the Contract6.Guarantees and liabilities7.Risk distribution8.Change in Contract elements
Lessons of Technology AcquisitionLengthy process, often 10 to 20 years.Mix of local and external inputs (purchase to
fill gaps).Lumpiness of technology in multistage
process.Challenge of adapting imported
management techniques.Importance of local learning and adaptation
Assessing local constraints Capacity stretching solutions Ability to scan world for need technology.
CASES TUDY:Tata motors acquisition of Jaguar
ABOUT Jaguar 1922 - Founded in Blackpool as Swallow Sidecar
company1960 - Jaguar name first appeared 1975 - Nationalized in due to financial difficulties1984 - Floated off as a separate co in the stock
market1990 - Taken over by FordLand Rover: an overview1948: Land Rover is designed by the Rover Car co1976: One millionth Land Rover leaves the
production line1994: Rover Group is taken over by BMW2000: Sold to Ford for $2.75 billion
TATA MOTORS: An overviewTATA GROUP is 150 year old, Previously Tata
Engineering and Locomotive Company, Telco.
India's largest passenger automobile and commercial vehicle.
Tata Motors was established in 1945Listed on the New York Stock Exchange in
2004. It is the 5th largest medium and heavy
commercial vehicle manufacturer in the world. listed in BSE, NSE & NYSE.
Why was Ford selling?The US auto major put the two marquees on the
market in 2007 after posting losses of $12.6billion in 2006 - the heaviest in its 103-year history
Jaguar was not able to provide any profit for ford because of the high manufacturing costs provided in the United Kingdom.
The strong boy Land Rover's profit, on the other hand, was driven by the record sale of 2.26 lakh vehicles, an 18% YoY growth in 2007.
Ford was combining both the brands since the products and manufacturing of vehicles for Land Rover and Jaguar was so intertwined.
Reasons for acquiring JLRLong term strategic commitment to
automotive sector.Opportunity to participate in two fast
growing auto segments.Increased business diversity across markets
and products.Jaguar offered a range of
“performance/luxury” vehicles to broaden the brand portfolio.
Benefits from component sourcing, design services and low cost engineering
The Deal Process12/06/2007- Announcement from Ford that it plans to
sell Land Rover and Jaguar. August 2007 - Major bidders were identified
Tata Motors, M&M, Ceribrus capital Management, TPG Capital, Apollo Management
India’s Tata Motors and M&M arrived as top bidders ($ 2.05b & $ 1.9b)
03/01/2008– Ford announces Tata as the preferred bidders
26/03/2008 - Ford agreed to sell their Jaguar Land Rover operations to Tata Motors.(2.3b)
02/06/2008– The acquisition was complete
TATA & THEIR ASPIRATIONS NEED FOR GROWTH
In the past few years, the Tata group had led the growing appetite among Indian companies to acquire businesses overseas in Europe, the United States, Australia and Africa - some even several times larger - in a bid to consolidate operations and emerge as the new age multinationals.
COMPETITIVE ADVANTAGE
Tata Motors was vulnerable to greater competition at home. Foreign vehicle makers including Daimler, Nissan Motor,
Volvo and MAN AG had struck local alliances for a bigger presence.
Tata Motors, which had a joint venture with Fiat for cars, engines and transmissions in India, was also facing heat from top car maker Maruti Suzuki India Ltd, Hyundai Motor, Renault and Volkswagen.
Financing strategyTata Motors could comfortably finance the
acquisition of Jaguar and Land Rover. The Indian automaker was sitting on a cash pile of over Rs 6,000 crore and generated free cash of over Rs 1,000 crore during FY07. It could easily use these reserves to raise more funds without endangering its finances.
At the end of last financial year, Tata Motors‟ debt-to-equity ratio was a low 0.56, giving it ample head room to raise more funds.
Low leverage of the auto biz provided funding flexibility
At the time financed the purchase through a $3bn, 15month bridge loan
Additional amount of US $ 0.7 billion was for engine and component supply, contingencies and working capital.
It intended to refinance the loan through long-term funds
valuable stakes in group companies Owns $400m of Tata Steel at current prices Owns stake in Tata Sons (Tata Group’s holding
company) worth at least $600m
Technology Absorption
Technology absorption :refers to the acquisition, development, assimilation, and utilization of technological knowledge and capability by a firm from an external source. The transaction occurs between transferring and receiving organizations.
Most technology in ‘latecomers’ comes from abroad, in mixture of two forms: Embodied: in capital goods, patents, blueprints,
designs, models and so on Tacit: knowledge that can be ‘transferred’ only by
close interaction and learning by new user
Using technology efficiently thus needs conscious effort by the enterprise & also the ‘system’ in which it works (suppliers, customers, technology support, training institutions and so on)
Technology flows forms:
Non-contractual: Public knowledge, fairs, conferences, migration, export activity and informal networks
Contractual: FDI related: (internalized) transfers within
multinationals or joint ventures with MNCs Arm’s length: equipment imports, turnkey projects,
licensing, subcontracting, franchising and other contracts
Role of internalized technology flows
Innovation is highly concentrated, by region, country and enterprise
MNCs lead in innovation: most R&D is performed by large firms and most innovative firms are globalized
MNCs dominate technology flows in all forms, but form depends on nature of technology: newest and most valuable technology is internalized, others licensed
Role of MNCs in global economy is growing steadilyFDI is growing faster than other economic
aggregates: national investment, GDP or exports MNCs control about 2/3 of world trade.
About 30-40% of this trade is within MNCs, and their role is particularly large in high-tech manufacturing
MNC export activity is taking new forms: ‘global production networks’, with very fine vertical specialization by function/component between countries
Local companies are also involved in global production networks, but only if they have very high levels of technological capabilities – and form strong ties with MNCs to access and absorb their technological know-how and management skills
What this means for: Developing & Transition economies
FDI is the most efficient way to access foreign technology if countries want ...
New, fast-changing proprietary technologies not available at arm’s length
Rapid access to new technology and subsequent upgrading, without local effort
Non-core components of operation (i.e. management, marketing, finance etc)
Access to MNC foreign markets, particularly to global production networks
For local firmsLicensing or joint ventures are desirable if:
Local firms are strong in base technologies but need particular new components of technology
They specialize in activities with stable technologies, where state-of-art technologies are available at arm’s length
They can export through foreign buyers (low technology products), sell undifferentiated products directly or have established brands
They subcontract to MNCs (OEM) or supply local components
Creating a technology culture in industry (difficult but necessary
Raise awareness of need for in-house technological activity and R&D
‘Technology foresight’ exercisesBenchmarking and technology audits R&D incentives: most countries make R&D
tax-deductible expense, many offer extra incentives. Effects mixed, but tax credits linked to incremental R&D seem best
Strengthening the technology infrastructure
Metrology, standards, testing, quality Quality standards vital (e.g. ISO 9000) Good standards institutions can help to diffuse
technology and quality awareness Advanced standards institutions are withdrawing
from testing into basic standard setting and research. They are helping create private service providers.
Metrology (measurement/calibration) is central to quality certification; international accreditation is vital to competitiveness
Local metrology capability reduces cost and raises response speed
Secondary metrology can be carried out by private laboratories, primary metrology has to be done in public institutions
Role for government in providing the public goods and creating private markets
The process : technology absorption
PROJECT FORMULATION: Prefeasibility report/project report Technology negotiations Approvals/clearances with Government Foreign collaboration agencies Funds from financial institutions Land Acquisition Clearances from State Govt. and other bodies for power etcPROJECT EXECUTION: Technology Transfer. Design/know-how, experts, training Use of Indian consultants Procurement of equipments, components and materials. Payments for technology, RM, and equipments. lProject implementation.
TECHNOLOGY ADAPTION: Trial runs Debottlenecking /rectifications Production based on selective imports of components/RM Indigenization of RM/ components, equipments. Adjust product/process technology to suit local conditions.TECHNOLOGY ABSORPTION: Analyze and unpackaged technology Investigate product/process designs and technology. Optimize technology for higher quality and performance. Design; develop components/raw materials/equipments. Use research linkages.
TECHNOLOGY IMPROVEMENT AND UPGRADATION: Improve product/process designs and technology for better
performance/utilization. Use Research linkages. Upgrade product/process to reach larger
scales/capabilities.
Absorption of datawarehousing technology(TERA DATA) by Continental
airlines
Continental’s comeback from “Worst to First” is an airline industry legend. Now the company is engaged in a new initiative to move from “First to Favorite.” To support this ambitious initiative,Continental tapped into its Enterprise Data Warehouse and expanded it to enable a real-time business intelligence capability.
In the first five years of operations, the EDW achieved an ROI of more than 1000% on a $25
million investment.
Todothis,Continental has changed the way it does business, transforming its decision-making process to include multidimensional views of the business.
Overcoming the Barriers
A company that once knew little about its important customers, set fares and schedules using only the limited conventional industry assumptions, conducted contract negotiations blind, and fought fraud only after the damage was done,
Continental today is one of the best managed airlines in the world. Its strategic and tactical decision-making analytics are on the cutting edge of the airline industry.
Factors contributing success
Customer Relationship Marketing providescustomer service finely tuned by segmentation.At any time, Continental can see a single, real-timeprofile of any of its customers and act accordingly. Employees are empowered with access to theinformation they need, when they need it, to getanswers and implement solutions. The result isemployees who do a great job and a spot on theFortune 100 Best Companies to Work For list forfive consecutive years.
Revenue Management maximizes revenue foreach flight by projecting demand by true originand destination, allocating seat inventory by fareclass, reducing overbooking and dynamicallymatching aircraft capacity. Operations acts on real-time information tomanage issues as they arise in the flight network,including delays, cancellations, equipmentchanges and last-minute staffing changes.
Crew Systems optimizes crew schedules to reduceunnecessary pay costs and provides critical
informationto reduce contention during contractnegotiations. Security takes proactive steps to prevent creditcard, frequent flyer, and internal and externalfraud. They analyze bookings and create profilesto identify and target suspicious behavior beforesignificant damage is done
References
Wikipedia.orghttp://wcoomdpublications.org/
downloadable/download/sample/sample_id/110/
http://technology.berkeley.edu/cio/fptis/sta/
http://gbr.sagepub.com/content/1/1/101.abstract\
http://rameshree.blogspot.in/2008/01/technology-absorption.html
Thank You
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