ASSIGNMENT

Course Code : MS-94

Course Title : Technology Management
Assignment No. : 94/TMA/SEM-II/2010
Coverage : All blocks

(This assignment is contributed by Mr. Leo Lingham. Top contributor at allexperts site.)

Note: There are five questions in this assignment. Attempt all the questions and send them to
the Coordinator of the Study Centre you are attached with.

1. Technology has become an integral part of any business unit. Keeping this statement in
mind discuss the role of technology in designing the business strategies of a firm.
Illustrate your answer with the help of an example.
Solution:
Technology has become an integral part of any business unit. Keeping this statement in mind
discuss the role of technology in designing the business strategies of a firm. Illustrate your
answer with the help of an example.

FIRST STAGE--DEVELOP THE PLAN.

BUSINESS PLAN.

A Business Plan is a document that describes in detail how your business is set up. Business plans
cover your business structure, your products and services, your market research and marketing
strategy, and your complete budget and financial projections for up to five years. Both startups
and existing businesses require business plans. Developing these documents requires a lot of
research and number-crunching.

You need a business plan for two primary reasons. First, spending the time to do this work
clarifies your thinking, provides you with information previously not considered, and gives you a
workable strategy to follow for the period covered by the plan. Your business plan is your
blueprint to success -- it outlines the steps to move from business idea to business success. And if
your research reveals that your idea isn't destined for success, then better to know it now then a
year from now when you have lost thousands of dollars. You can spend your time planning
another idea that could have a better future.

Secondly, if you are hoping to raise funds through a business loan, a venture capitalist, an angel
or an incubator, don't even consider approaching these moneylenders unless you have a
thoroughly researched business plan in your hand. Experts estimate that it takes approximately six
weeks to develop a business plan, so whipping one up the day before your appointment with the
banker won't work.

what the main points of the bplan ?

HOW TO WRITE A BUSINESS PLAN

1.BUSINESS MISSION what is your mission for your business venture?

2.BUSINESS PRODUCT I SERVICE

-what are your products/service [describe]
-how will you deliver it [with staff or on your own]
-what will be the PRICE structure
-what will be your fixed overheads [ electricity/ water/ etc]
-what will be your variable overheads [ stationery etc
-what will be the quality of your product / service
-will there be unique offers, which no one else offers

3.BUSINESS CONTEXT
WHAT is happening in your industry
--is it growing or is there demand or is it stagnant?
-how fast it is growing?
-what kind of products / services are being offered?
-what prices are being charged
-what is the quality of the service
-what is the capacity I is it in excess of the demand. etc

4.BUSINESS ENVIRONMENT
-who are the potential competitors
-what is the degree of competition
-what is the basis of competition-~price/ quality /facilities etc
-how easy is it to enter the competition
-what are the barriers for entry
-how do they market their product / service -detail please etc etc

5.BUSINESS MARKET
-WHO are your potential customers
-what is the purchasing behavior of the customers (good service /quality/speedy etc]
-what factors affect the buying behavior of the customers
-what are the preferences of the target market
-is there a seasonal trend [season / lean periods/ high demand period etc]
-what isthe demographic trends [gender/ age/ profession/ etc]
-what products/ services are in demand in the market
etc etc
6.GOVERNMENT BUSINESS REGULATIONS
-What regulations affect this business --creditation /location/ qualifications etc

7.BUSINESS SALES
-what opportunities do you see for your business
--please define quantitatively and qualitatively
-what are your targets
-what is your sales objectives[ forecast for 3 years at least]
sales forecast by units/dollars [for three years]
-what factors are likely to affect your sales objectives
-sales minus cost of sales= gross contribution[ rough estimate]

8.BUSINESS STRATEGY
-in your terms, how do you plan to achieve these objectives
-what strategy would you adopt

9.BUSINESS MARKETING WHAT will be your marketing objectives

-what will be your marketing strategy
-what will be your promotion plans
-what media are available etc etc

10.BUSINESS SALES DEVELOPMENT

-will you have a sales team or you plan to handle yourself
-will you telemarketing
-will you use online marketing
-will you use direct marketing
-what customer service support you plan to offer etc etc

11.BUSINESS OPERATION
how do you plan to run it
-what will your operational policies etc

12.BUSINESS ORGANIZATION
what is the planned organization --over three years
-what will be the structure
-how many/ type of staff will be employed over 3 years -salary guidelines
-what functions /who will perform it etc etc

13. FINANCE REQUIREMENTS

-funds available
-funds required in total
-funds needed
THESE QUESTIONS ARE MEANT TO FACILITATE YOUR THINKING ON THE SUBJECT
OF YOUR
PRODUCTS / BUSINESS.

The answers to the above questions will help you to develop

The business PLAN.
======================================================
As you develop the plan, and deal with
-product/service
-business context
-business environment
-business market

YOU REACH FOR TECHNOLOGY AS PART OF

YOUR STRATEGY.
BEFORE YOU ADOPT THE TECHNOLOGY,
YOU GO THROUGH THIS PROCESS.
========================================
Part 1: The Necessity of Technology Transfer

1. Strategic Management & Business Strategy

Recently, The rapid development of information & communication technology based on the
internet
is presenting to corporations the urgent problem of adaptation and survival in the fast-changing
competitive environment. The so-called strategic management is a series of decision making
activities and procedures in establishing and executing effective strategies for the pursuit of
corporate missions and achievement of aims. The decision making process where the
opportunities
and threats of the environment faced by or expected to be faced by ones company are combined
with the internal capabilities of the company. It is a method of achieving corporate aims in an
uncertain competitive environment whereby schemes and plans are established to enable
competition in a more favorable situation than other companies. The favorable situation means
securing attractive business areas and possessing continuous competitive advantage, and the
fundamental factors and required conditions .

Fundamental factors Required conditions

Recognizing and setting favorable
positions
Opportunities & threats from the external environment
Optimizing business area setting Concentration of internal competencies for the
realization of competitive advantage
Maintenance of dynamics Systematization & action process, capability to enable
dynamic change required
The strategies in business area are established in consideration of these fundamental factors and
required conditions. Based on these business strategies, specific technology acquisition strategies
are determined. That means, corporate competitiveness can be secured through effective
connection between business strategy and technology acquisition strategy. Especially, If we
examine the technology acquisition process in terms of corporate management strategy, there are
5
stages in the decision making process including technology management
strategy establishment, derivation of required technology based on the established technology
management strategy, analysis of internal technology development capability in relation to
derived
technology issues, technology acquisition strategy establishment based on the established
technology management strategy, internal development & technology outsourcing in accordance
with the established technology acquisition strategy etc.

Corporate technology acquisition procedure

Technology Management Strategy
Derivation of Technology Needs
Evaluation of Current Technology
Acquisition Strategy Establishment
In-house Development
Outsourcing / Technology Transfer
Outsourcing / Necessity of Technology Transfer
Early Product Release / Market Preoccupation
R&D Costs Reduction
Risk of Uncertainty Minimization
Gap Confirmation
Decision on the Required Technology Order of Priority
Confirmation of Potential Route for Technology Acquisition
Especially, for the successful performance of technology transfer & outsourcing in this series of
technology acquisition procedures, precisely understanding the business sections established in
the
technology management strategy and the order of priority in technology said to be the most
significant factor.
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2. Technology Outsourcing
Outsourcing is the supply of various management resources required in corporate activity from
not
internal but external sources through contracting. In the case where technology related
management resources are externally supplied, it can be considered as technology outsourcing.
There is no opposition to the view that technology outsourcing will rapidly become widespread
following the recent changes in the management environment. It is because there is no other way
but to adapt and find countermeasures to the changing management environment for survival, and
achieve essential corporate aims whether it is a corporation or not. As the atmosphere in relation
to
the necessity of technology outsourcing increases, the demand for industries in technology rises,
and this calls upon the supply of technology. That is, when there is demand business
opportunities
are created, and this kind of business opportunity, in most cases, attracts and absorbs market
participants. The general subjects of technology outsourcing are as follows.

Technology outsourcing subjects

-2 Complete corporations & technology required for
commercialization (production, sales etc.)
-3 Sectional & key factor technology which can supplement
in-house technology
-4 Technology services required in the technology development
& commercialization process
-5 Research facilities & equipment
-6 Research personnel
-7 Other technology related management support

The technology transfer business formed in accordance with the demand increases in this kind of
technology outsourcing can make it simple and efficient along with market activation. If the
required
technology can be supplied easily and competitively, this can reduce the need and scale of in-
house
R&D, and will be useful for companies in securing competitiveness through the preoccupation of
opportunities in the market. Furthermore, in terms of costs, there is a strong point in that cost
savings can be gained with the reduction in R&D organization maintenance costs.
summarizes the management environment factors that promote this kind of technology
outsourcing.

The necessity of technology outsourcing

Necessity Details
Technology integration & combination Many key technologies are needed in line with the
technology integration &
combination trends, however all these cannot be developed in-house
Reduction in technology life Increased risk in technology development due to reduced life cycle
of
technology products, quick appearance of similar or substitute technology
Rapidly changing market demands There is a need to speed up new product release through
externally
supplied technology in order to meet market demands and preoccupy
opportunities
Reduction in technology acquisition costs There is a need to reduce R&D costs by outsourcing in
order to be competitive
Diversification of risk In order to diversify the risk in relation to the uncertainty of modern times,
there is a need for risk avoidance through the diversification of R&D
-------------------------------------------
3. Technology Transfer
Modern times can be commonly called a society of knowledge and intellectual value. Instead of
the
natural objects or objects visible to the eye, the unseen knowledge of the brain and the application
of knowledge are the main focus of modern society.
Attention is given to other applications which affect awareness of economic value, this is called
intellectual property. Intellectual property which meets the predetermined requirements and
develops into a legal right is called intellectual property right. Intellectual property in current
society
is important especially in solving economic problems but there are standard limitations in their
creation and production. Therefore, in most cases it can be considered that demand is larger then
supply. Its economic value is dramatically increasing compared to the past and in proportion to
this,
an era will come where intellectual properties will turn into money.
As described above, technology in business require strategic management dimensions for active
transaction for it to be traded like commodities. Also, to encourage an environment of increasing
performance for technology transfer, business opportunities like consulting and advice from
various
relevant experts, technology introduction and recommendations etc. must created. Technology
transfer is more difficult and specialized than transfer of general goods, and there are greater
possibilities to increase professional services and business opportunities. As a result,
corporations,
organizations, and individuals commercializing the supply of technology transfer information,
introduction and agency, and various specialized services, consulting etc. between the technology
provider and the demanding party, are appearing. Services that can be provided by specialized
businesses in relation to technology transfer consulting etc. are very diverse, but when these
services are properly provided and activated the bottleneck phenomenon in technology
distribution
disappears, and the era where technology is transferred like goods can come about more rapidly.
In
relation to technology transfer fixed price is received for professional advice and consultation and
the business areas provided can be divided into three stages management strategy, technical
analysis, negotiation and contracts. The arrangement of these major tasks.

Major consultation tasks for each stage

Necessity Details
Strategy establishment
-8 Establishment & consultation on technology management /
commercialization strategies
-9 Solutions for major technology issues
-10 Establishment of technology implementation strategy

Consultation on technology analysis

-11 Sorting and recommendation technology requiring implementation
-12 Technological & economic analysis of technology implementation subjects
-13 Determination & analysis of rights in relation to technology implementation
subjects
-14 Proposals of major technology transfer condition settings & negotiation
function domain

Consultation on negotiations & contracts

-15 Establishment & consultation on negotiation strategy of major conditions
-16 Examination & construction of draft contracts
-17 Agency of related certifications & permit lodgments
-18 Technical fee calculation and remittance (payment) support tasks
=====================================================

Part 2: The form and strategy of Technology Transfer

1. Types and Characteristics of Technologies subject to Technology transfer

Assets that have economic value can largely be divided into tangible assets, which have specific
form, and intangible assets, which do not have specific form. Here, the technology to be
transferred
can be included in the intangible category. The concept and the category of Intangible technology
is
very wide and flexible. In a narrow sense it means manufacturing site, manufacturing method,
confidential skill, and know how, and in the wider sense it means the entire intellectual property
which has economic value. With the aim of creating smooth technology transfer and distribution
the
technology transfer promotion law which was established , defines technology
as patents registered in accordance with relevant laws such as the patent law, utility models,
designs, semiconductor allocation design, capital assets based on technology, software and
intellectual assets technology as well as design, whereby these are deemed to be the objects of
technology transfer.

Traditionally, commodities subject to commercial transfer were focused on tangible assets,

intangible assets like as technology subject to commercial transfer comparatively became more
frequent only recently. It is true that the innate limitations in the transfer of technology and other
intangible assets have prevented the development of technology transfer. However, it is also true
that because of these characteristics, business operation using unique methods and strategies is
possible rather than transfer of tangible assets. As a result, it can be said that planning and
executing business strategies based on the understanding of the various characteristics of
intellectual property is a short cut to business success. One of the most noticeable features of
intellectual property is that, initial research and development requires much time and money, but
during usage and distribution only small expenses are necessary.

If additional expenses required for duplication & reproduction for use and distribution are
insignificant, all revenues generated here can be considered as profits. Because of this, the
technology and intellectual property could have high economic value. These characteristics of
intellectual property are

Characteristics of intellectual property

-Not visible and does not have physical form
- Recovery value is relatively high because of the limitations in creation
and production due to the high level intellectual origin
-Evaluation and valuation is very difficult, and transfer price and
conditions are decided through negotiation rather than by the market.
-Exclusive with announced conditions, exclusive legal right is possible
- Time and money consumption during initial creation, development, and
production is high, but costs involved in duplication & reproduction for
use and distribution is low enough to be negligible
Characteristics
of intellectual
property
- Life cycle is relatively short, value fluctuation is severe
-----------------------------------------------------------

2. Methods of Technology Transfer

(1) Method of technology sale or transfer

Technology transfer & acquisition is the transfer of rights in accordance with a contract, and of
these
a transfer for a consideration is the called the sale of technology. By the sale of the relevant
technology, comprehensive control and management is handed over to the buyer who pays the
price (sales price). Besides the difficulty in working out the value and the process of patent
registration, this is similar to product sales. Not just the already registered patents but also the sale
of patents in application can become the subject of a transfer (simply by recording patent
application number). The owner demands a high and fixed price for full transfer of rights to the
buyer but the buyer will not easily agree unless the buyer is convinced of the economic value &
potentiality of utilization of the patent. As a result, , it is usual that sales only
occur in special circumstances.

Motives for the transfer & sale of intellectual property (patents etc)
- in the case where the owner of the patent does not have the capability to
execute and there are problems in licensing to a 3rd party
- in the case where there is a problem in developing a basic patent into a
commercial product
- in the case where it is disposed for early recovery of the R&D costs
- in the case where it is difficult to produce the finished goods, based on partial
patent
- sales by specialized technology development and sales companies in the
ordinary course of their business
- in the case where an individual inventor raises research & invention funds
In the case where profit is sought with a transfer or sales of patent rather than the technology
licensing, the greatest problem is the determination of sales price. Because it is different from a
running royalty based on business results like in the licensing method, a one-off fixed sales price
is
difficult to determine prior to the implementation of business. Methods of determining the sales
price
range from the relatively simple cost approach (total cost + appropriate profit) to very intricate
methods where opportunity cost and even the expected profits are included, but in reality it is
decided by the negotiations within the scope of the prices proposed by the parties involved in the
sale.

In the transfer & sale of patents, the sales price is important but there is also a need to closely
regulate the payment (receipt) procedures & methods. The sale & transfer of patents require the
contract agreement between the two parties, but is only effective when registered with the
Intellectual Property Office. However, cases of non-cooperation with regards to registration after
the
receipt of the sales price, or obstacles in payment receipts after registration is complete cannot be
excluded. Finally, in the case of a patent sale based on contract where there are two or more joint
owners, the sale or transfer is not possible without the agreement of the other owners, and this is
the problem with joint ownership of patents. So, with the sale of patents etc. following the
payment
method

Payment method of the sales price for patents etc

- Method where the sales price and the patent rights registration are exchanged
- Method of payment and receipt simultaneously with the notification of the completion
of transfer registration
- Method of payments in the course of a specified time frame after transfer registration,
but to be more secure, a payment guarantee from a 3rd party such as banks etc.
(2) Technology License
License is also called a method of permit to execute, and is a system that the holder of the
technology rights gives permission to another party in relation to the execution rights of the
relevant
technology based on a contract. It means, the parties that give and take the execution & usage
rights enter into a licensing contract, and on the premise of the specified conditions including
payment of technical fees for a specified period etc. the permission for the execution & usage
rights
is given. After the period is over, execution and usage becomes invalid. If we compare it to
products,
it is similar to leasing or hiring.

Sales and licensing methods are mostly used in technology transfer, but there are the following
differences between the two parties and these are directly connected to the selection issue. In the
case of sales where the entire right including the possession right etc. is comprehensively
transferred, and the supplier generally requests a very high transfer price, but the purchaser of the
technology hesitates due to the high fixed price on technology which success is uncertain.
However,
in the case of licensing, the concept is to permit the execution and usage of the technology, so the
price for its use (usage fee or royalty) becomes much lower. In the viewpoint of the technology
provider, only the execution right is given with the possession right intact, so execution permits
can
be given in other areas or to other parties, thus can be satisfied with only the low technology
usage
fee, and it is favorable for the parties seeking the license as they can make payment of the usage
fee in accordance with the business results.

Domestically, technology transfer is mainly conducted in the sales method because the licensing
method of technology transfer is not properly recognized. However, because of the limitation of
the
sales method as previously explained, there is a need for the spread of recognition as well as the
development & propagation of transfer techniques.

----------------------------------------------
(3) A forms of technology transfer where it is conducted together with capital, management,
know-how etc
Even if technology is purchased or licensed, the success in the commercialization of the relevant
technology is not guaranteed, especially if the in-house utilization capability is insufficient. This
is
more the case with highly advanced technology. To solve this kind of problem, there is a need for
a
method where technology transfer are made together with other management resources including
capital, management know-how, equipment, core components etc. In this case, technical fees can
be separately dealt with or transfer can be made including a part or the entire technical fee in
relation to equipments, components etc. It worth paying attention to the recent trends in foreign
countries where there is a rapid conversion from the previous technology only implementation to
this kind of collective implementation.
-------------------------------------------------------------------

(4) Purchase, M&A of corporations possessing technological capabilities

Although technology and related management resources can be taken as transfer subjects
individually or collectively, on a wider sense, selling or purchasing companies with outstanding
technology can be seen as a form of technology transfer. Even in reality, there are many cases of
attempts to purchase or M&A companies possessing the required technology to achieve the aim
of
securing technology competitiveness rather than choosing the licensing or individual strategies to
obtain technology. Likewise is the position of the company or the person with the ownership of
the
technology. Rather than trying to deal just with the technology alone, a strategy which combines
the
technology, related equipment, technical personnel, and other assets all into one is sometimes
chosen. This kind of technology transfer through sales & purchase of companies that possess
technology is chosen in the case where quick measures are required if the speed of technology
development (change) is very fast or the life cycle of related technology & products is very short.
This method of technology transfer is expected to greatly increase centered on small venture
enterprises as management with technology considerations comes into full scale and with the
acceleration of technology innovation. However, in this case, there is a limitation in that
technology
evaluation and value analysis of companies subject to sales & purchase are not easy.

----------------------------------------------------
(5) Technology transfer methods involving the sale of technology data such as plans,
microfilms etc
In the case where aims can be achieved by just acquiring a part of the particular technology
information, this can be used as a method to find simple technological solutions. This is often
used
in small scale projects.

-----------------------------------------------------------------------
(6) Technology transfer method using technical personnel as the medium
Like with industrial asset rights, if there is no requirement of active involvement by the
technology
provider and except when technology has been documented and objectified, technical personnel
can directly be involved in the technology transfer. Transfer technology through invitation and
deployment of technical personnel, resolution of technological issues through the employment of
technical personnel etc. fall into this category. There are many cases where this method is used as
a supplement together with the previously explained methods.
Of the numerous methods above, by which method to conduct the technology transfer depends on
the type & characteristics of the relevant technology to be transferred as well as the position and
strategy of each party. In specific cases, it is important to conduct this efficiently and using an
appropriate method by comparatively analyzing the strengths and weaknesses of these technology
transfer methods.

===============================================
Part 3: Technology Transfer Procedures & Methods

1. Transfer Procedure
The fundamental technology transfer procedure can be classified into 6 stages , and the
characteristics of each stage can be summarized .
Specific procedures of technology transfer post management
negotiation & contracting
marketing
PACKAGING
technology valuation/selection
discovery of technology

Major tasks in technology transfer procedure (1)

Stage Major Tasks

Discovery of technology
-19 Discovery of competitive technology
-20 Transfer request or arranging & securing technology that is possible to transfer
but is not possessed in-house

Technology valuation & demand selection

-21 qualitative/quantitative value valuation of the secured technology
-22 Analyze possibility of clash with a 3rd party owned technology
-23 Establish transfer strategy in accordance with the technology type & form
-24 Preliminary matching of technology demand/supply
-25 Pre-analysis of whether the transferred technology can secure competitiveness
if seeking to transfer overseas

Negotiation & contracting

-26 Establish strategy and consult on major conditions of the negotiation
-27 Examine and draw-up drafty contract
-28 Agency of related certification & permit lodgments
-29 Calculate technical fee and remittance (payment) support tasks

Packaging
-30 Draw-up technology information document for the smooth execution of
technology marketing
-31 If possible include prototype

Technology transfer (sale)

marketing activities
-32 Prepare marketing materials for technology transfer
-33 Conduct activities such as the participation in Techno mart
-34 Analyze methods to expect maximum effect with minimum cost
-35 Discovery and contact of potential demanding parties
-36 Research & analysis of demanding party (party seeking to implement)
-37 Prior-proposal of technology transfer conditions to the parties seeking to receive
the technology transfer

Major tasks in technology transfer procedure

Stage Major Tasks

Technology transfer
negotiations &
contract
-38 Propose of transfer conditions (Team Sheet)
-39 Establish negotiation strategy
-40 Negotiate on technology transfer conditions & details
-41 Draw-up & analyze draft contract
-42 Different for each depending on the type & form of technology
Post management
-43 Monitor compliance to the conditions of the contract
-44 Actual inspection & report

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2. Licensing method in technology transfer
The concept & necessity in relation to the licensing method of technology transfer and its
differences to sales has already been explained. Here, the types, strengths & weaknesses etc. of
licensing , is concisely summarized to assist in planning, preparing, and
analyzing the licensing method of technology transfer.

Types, strengths & weaknesses of the technology licensing method (1)

Type Strengths & Weaknesses

Exclusive license
-45 The licensor provides the right to the licensee to exclusively use
within the contract area & period
-46 It is a standard practice to include strict conditions such as
minimum sales amount, minimum technical fee, restrictions in
economic product dealings etc. as issuance of an identical
license to a 3rd party is not possible
-47 Decide whether to accept by comparing additional conditions
such as the actual benefit of the exclusive license, minimum
technical fee etc. (this is in the position of the technology
implementing party, and the supplier of the technology should
view this in reverse)

Non-exclusive license
-48 This is a method where the licensor reserves the right to
provide the license not only to a particular licensee but also to
other 3rd parties
-49 It is a method generally favored by the licensor
-50 It is a method where the licensor & licensee can choose as a
one-off without other burdens
-51 In the position of the licensee (technology implementing party)
should arrange so that there are no separate burdens such as
minimum technical fee etc.

Sublicense
-52 The technology implementing party who has been given the
license can offer a sublicense to a 3rd party under the
sublicense provision
-53 It can be used efficiently when a single technology is diversely
utilized in terms of usage, purpose, and area
-54 Must have a basis on the contract

Types, strengths & weaknesses of the technology licensing method (2)

Type Strengths & Weaknesses

Cross licensing
-55 This method can be chosen when parties have a need to
mutually exchange and use particular technology which the
other party possesses
-56 There are free of charge licenses and if one party profits due to
economic differences, the other party is compensated for the
difference
-57 Technical fee reduction and competitor elimination effects can
be gained through the formation of cooperative alliances
-58 Need the basic capability to recognize mutual necessities

Package licensing
-59 A method where many technology licenses are added to a
single contract, and a method where technology, equipment,
components, capital etc. are comprehensively provided
-60 Favored by the technology provider
-61 There is the benefit of gaining the required management
resources all at once, but the cost burden is large
-62 Requires attention because there is a high probability of
violating the fair trading related laws

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3. Cross licensing strategy
Cross licensing is the mutual exchange of specific licenses between relevant parties. For example,
A company provides a license to B company for the use of its technology and simultaneously
receives a license for the use of B companys technology, and this becomes a mutual execution
(cross execution). The fundamental background for seeking cross licenses is for economic
reasons
whereby time and costs can be significantly reduced by borrowing each others technology rather
than developing and possessing it as technology becomes more integrated, combined, and
advanced.

In planning, analyzing, and executing cross license contracts, how the technology to be
exchanged
(usage right) will be assessed and appraised is the core issue. In using exchanged technology, the
economic value of the technology of both parties is the core issue. If the economic value of the
technology of both parties is identical, licenses can be exchanged without cost, but if the
technology
value of any one party is greater than the other, one party must compensate the other for the
difference. When analyzing and appraising the economic value of the technology to be mutually
exchanged, the factors summarized must be taken into consideration.

In the case of cross licensing of patents, there are no problems if the patents of both parties are in
existence for the same period of time, but if the effective period of the patent of any one party
expires first or is invalidated during that period, there is a need to specify a condition beforehand
to
compensate the party which incurs loss in economic value due to the termination of the patent.
The
future need and opportunities for cross licensing are expected to increase in accordance with
technology becoming more integrated, elevated, and advanced and as competition becomes
intense, and the rise in demand by foreign businesses for technology and patents that Korean
cooperation owned.

Matters to be attended to cross license contracts

- number of patents (scope)
- number of products using the patent (business quantity)
- effective period for each patent
- value of the invention (the proportion of the entire invention in the
section including the patent)
- whether it is from a new inventor, or an improved invention (the
strength and independence of the patent)
- the validity level of the patent (possibility of invalidity)
======================
Planning and preparation: Gearing up for procurement
Establishing need
Market consultation
Assembling the teams and partnerships needed to manage the process
Project definition
Selection of procurement procedure
Determination of contract award criteria
Notification and prequalification (if applied)
Initial advertisement and contract notice, inviting expressions of interest
Assessment of expressions of interest
Definition of shortlist
Tendering
Issue of tender invitations
Arranging for dealing with clarification requests from bidders
Receipt of tenders
Evaluation
Formal tender opening and checks for compliance with requirements
Tender evaluation of quality and price
Arranging tender presentations (if applied)
Negotiating with selected tenderers (if applied)
Selection of the most economically advantageous tender
Contract Award
Notification to successful tenderer
Notification to unsuccessful tenderers
38
Appeal process
Signing of contract
Contract Management
Monitoring that delivery meets specification
Evaluation (distinguish from tender evaluation above, this is the process evaluation, self
evaluation)
Draw lessons that might improve future procurement projects

2. Briefly discuss various routes of technology transfer. Take an organization of your choice,
which has adopted a specific route of technology transfer for its product Discuss the merits and
demerits of adopting the specific route by the organization for its product.

TECHNOLOGY

Exponential Growth of Technology in developing nations has played a significant role in all
round development and growth of economy in the country . Technology can either be developed
through own research and development or it can be purchased through indigenous or imported
sources. Most countries have opted for a judicious mix of indigenous and imported technology.
Purchase of technology is commonly called Technology transfer and it is generally covered by
a technology transfer agreement.
Technology transfer means the use of knowledge and when we talk about transfer of the
technology, we really mean the transfer of knowledge by way of an agreement between the states
or companies. Transfer does not mean the movement or delivery; transfer can only happen if
technology is used. So, it is application of technology and considered as process by which
technology developed for one purpose is used either in different applications or by a new user.

Technology generally would comprise the following elements:

Process Know how
Design Know how
Engineering know how
Manufacturing know how
Application Know how
Management know how

Different Routes of Technology Transfer

Technology transfer appears in various formswlicensing, the setting up of spin-off companies,
joint ventures, or cooperation with public bodies.
To license the technology to a user under contract is the most straightforward method. In return
for the right to use the technology, the contracting party would pay to the seller an up-front fee,
or a royalty based on turnover or profit, or equity in the company, or a combination of these.
In cases where ready licensing to existing companies is not viable, the University has found it
beneficial to either incubate these projects in-house, launch spin-off companies on its own, or
encourage the launch of start-ups by project staff.

Technology Inflow Routes

Over the period, some of the important commonly accessed routes for technology inflow through
offsets to the recipient countries are following:
Co-development and Co-production
Co-development and co-production is seen as a very effective mechanism in state of the art
technology induction and absorption. In joint development programs, the access to technology
that individually the partnering companies / countries could not have developed is realized at
substantially less cost and time. The joint development also ensures that the part of production
work along with the jobs it creates is ensured to the Indian partner also.
By this process, the companies / countries will become partners at specific contribution levels.
There are financial benefits connected with the contribution, the primary benefit being the access
to advanced technology and an advanced product. Further, it provides the Indian vendors with the
necessary skill sets through their contribution in the joint program.
Joint Intellectual Property (IP) rights and shared international market space should be part of the
negotiated contract thereby providing international exposure and a fair share of the resultant
revenues to the Indian firms.
Sub- contracting / Contract Manufacturing
Sub-contracting / contract manufacturing occurs when a foreign vendor procures defence-related
components, subsystems or products for export from industries in countries where the vendor has
to meet offset obligations.
In the short timeframe sub-contracting / contract manufacturing is an effective mechanism in
bringing the technology. This could, however, get limited to fabrication, assembly and related
services. The sub-contracting can either be through Build to Print or Build to Spec.
Build to Print: The foreign vendor provides the complete documentation package to the (Indian)
defence industry. The documentation package could include manufacturing drawings, Quality
requirements, Test methods, Acceptance / Rejection criteria, etc. The Indian industry executes the
task based on user-supplied data, being able to source / manufacture the parts, assemble and test
the sub-assemblies / product before they are delivered. The design issues, if any, is an essential
responsibility of the supplier while Indian industry could share the responsibility for design
verification, especially while implementing modifications to the original documents.
Build to Spec: The foreign supplier provides the detailed Technical Specification, Quality
requirements, etc. to the (Indian) vendor who undertakes the design, development, manufacture
and supply of the product. This method may also go through the phases of development of
prototypes, user trials and evaluation, etc. as applicable to the product or sub-assembly.
During contract negotiation stage the IP related issues are to be resolved so as to avoid legal
problems later.
Joint Ventures
The technology inflows can be affected through establishment of Joint Ventures (JVs). However,
the investment level remains a critical factor affecting the success of a Joint Venture. In a Joint
Venture with foreign equity participation restricted to 26 per cent, the OEMs, since they guard
their IP, may inhibit / hesitate the collaborating partners to bring in cutting-edge technology.
There are instances where the JVs have become non-functional due to technology obsolescence,
with the foreign partner limiting his investments and continue up gradation to his technology.
Licensed Production
The transfer of technology (ToT) to a local defence industry capable of absorbing the technology,
if implemented in true sprit, where both the supplier and the recipient are competent
organizations, the local industry will be able to further develop the technology and this result in
leapfrog on the existing technology lag. However, it has been experienced / seen that the
absorption of technology and later its enhancements are often critical issues in its implementation.
From the sellers viewpoint, he would be throwing away his competitive advantage if he transfers
all of the technology related to the product being sold. Further, from sellers perspective, he
would be giving away know how to a partner who may later become his competitor. The seller
therefore, may estimate the opportunity cost excessively causing avoidable increase in ToT costs.
Also, precise verification of technology cost is difficult due to non-availability of sufficient
details.
Invariably, the depth of technology being transferred becomes selective at the hands of seller. The
proprietary items included by the seller in the TOT contract results in buyer being dependent on
the seller. The buyer is unable to leverage the ToT. There are always gaps between the needs /
expectations of the buyer and the offer from the seller.
While these aspects are primarily applicable to hardware related programs, the issues become
further complicated where there is substantial software content also. Generally, the executable
codes of software are transferred to the buyer who will be able to copy the same for
implementation in another module. The know why is not normally part of the transfer without
which the buyer can not carry out any enhancement /modification of the product for its
uninterrupted usage or even marginal up-gradations to overcome obsolescence related issues
during its service life.
Maintenance ToT and Training
Long-term customer support activities have become mandatory. The training of local industrial
partners and user agencies in maintenance of the system through applicable level of technology
transfer ensures effective and committed maintenance support. The establishment of Maintenance
Repair and Overhaul (MRO) Facility on partnership basis is an option to achieve this objective.
By this the local defence industry acquires the technology and offers maintenance support to the
user agency on a long-term basis. Establishment of training facilities like flight simulators and
user-training centers by the foreign vendor in partnership with local defence industry will
adequately meet this requirement. It will also be necessary to stock and maintain adequate
quantity of spare parts for meeting D-level maintenance requirements.
===========================================
The organisation I am referring to

The organization, I am familiar with is a

-a large manufacturer/ marketer of safety products
-the products are used as [personal protection safety] [ industrial safety]
-the products are distributed through the distributors as well as sold directly
-the products are sold to various industries like mining/fireservices/defence/
as well as to various manufacturing companies.
-the company employs about 235 people.
-the company has the following functional departments
*marketing
*manufacturing
*sales
*finance/ administration
*human resource
*customer service
*distribution
*warehousing/ transportation
*TQM
---------------------------------
THIS ORGANIZATION WHO WANTED TO MANUFACTURE
SPECIAL TYPE OF ''BREATHING APPARATUS'' FOR THE
MARKET, DECIDED TO MANUFACTURER A GERMAN BRAND
UNDER CONTRACT MANUFACTURING.

Contract Manufacturing
Contract manufacturing occurs when a foreign vendor procures defence-related components,
subsystems or products for export from industries in countries where the vendor has to meet
offset obligations.
In the short timeframe ,contract manufacturing is an effective mechanism in bringing the
technology. This could, however, get limited to fabrication, assembly and related services. The
sub-contracting was Build to Spec.
Build to Spec: The foreign supplier provides the detailed Technical Specification, Quality
requirements, etc. to the (Indian) vendor who undertakes the design, development, manufacture
and supply of the product. This method may also go through the phases of development of
prototypes, user trials and evaluation, etc. as applicable to the product or sub-assembly.
THE BENEFITS WERE

-local control over design changes.

-local manufacturing means control over production.

-local training of the workers/ staff.

-local service training.

-meet the customer requirements.

-tailor made distribution to the customers.

-rational stock/ inventory build up.

-reduction in transportation cost.

-much easier to conduct user trail.

-more sales / profit.

==================================
THE DEMERITS ARE
-the IPR was still with the german supplier.
-any development in the technology was still with the german supplier.

3 What are the major benefits that an organization can have from effective absorption of imported
technology? Give example in support of your answer.
Time, capital cost and uncertainty
The "productionizing" of a standardized imported technology by experienced personnel may
require a considerably shorter time than the commercialization of an indigenously developed
technology from scratch.
The former is also subject to less uncertainty and risk of failure because it has been proved and
standardized.
With imported technology it is possible to phase the project cost over a period of time. Normally,
such projects begin with the assembly of imported kits, and the manufacturing process is
indigenized gradually as markets are developed with the products assembled from the kits.
In contrast, an entrepreneur using indigenous technology has no such option. He must provide for
the entire project cost at one go and develop markets from scratch. Once he enters the project, he
cannot quit if the market does not pick up, while the one still selling the product assembled from
imported kits can. The choice of local technology in preference to foreign alternatives, therefore,
may prove to be time-consuming, more capital-requiring and subject to greater risk. Public policy
should devise some instrument to offset these disadvantages to make utilization of local
technology more attractive.

Finance - technology nexus

The ability of technology and equipment suppliers to provide financing (suppliers' credits) plays
an important role in technology selection, particularly for large capital-requiring projects.
Technology suppliers from industrialized countries are usually willing to provide or arrange
financing on soft terms from their respective country's export-import banks or other institutions.
Their bids are often backed up by their home government's bilateral aid agreements.

The local technology or equipment suppliers with no matching ability to provide credits are,
therefore, easily outmatched, even with comparable prices and capability. In the past few years,
local engineering industry has, indeed, lost numerous orders to foreign firms in fertilizers, power,
and steel projects because of lack of finance. It is, therefore, imperative that a fund be created to
provide financing for projects using local technology and equipment to mitigate the problems of
local suppliers in providing credits.

Market power of foreign technology

The prospect of using an internationally reputed brand- or trade-name gives a tremendous edge to
foreign technology over the local ones, particularly in consumer goods. Though the guidelines for
foreign collaboration stipulate that no foreign brand-names will be allowed to be used in domestic
sales? they are very much in use. In fact, a number of foreign collaborations are just "cover-ups"
for the procurement of the right to use foreign brand-names, and are being signed even in low-
priority industries such as cigarettes. In order to make sure that only genuine technology is
transferred to the country and the local technology does not face unfair competition from the
market power of foreign technology, foreign brand-names have to be eliminated altogether. The
present Trade Marks Act is seemingly vague on what constitutes a foreign brand and hence needs
amending.
A useful way to define this would be to consider as foreign any brand-name that was in use
abroad before its registration in India and any owned by foreign organizations, whether or not any
royalty is paid for its use.
OTHER BENEFITS FROM THE IMPORTED TECHNOLOGY
TO CONSIDER ARE THE FOLLOWING:
-imported technology based products could satisfy
the unmet demand in the market, which means
*more market share.
*more sales.
*more profit
FOR THE ORGANIZATION.
-------------------------------------------------------
-there is a perceived values for products based on
imported technology, which means
*more market share.
*more sales.
*more profit
FOR THE ORGANIZATION.
--------------------------------------------------------------
-there is definetly improved quality in the products
made from imported technology, which means
*more market share.
*more sales.
*more profit
FOR THE ORGANIZATION.
--------------------------------------------------------------
-the imported technology helps in building product cost effeciency,
which mean cheaper products,
*more market share.
*more sales.
*more profit
FOR THE ORGANIZATION.
-----------------------------------------------------------------------
-the imported technolgy based products gives the organization
the competitive advantage, which means
*more market share.
*more sales.
*more profit
FOR THE ORGANIZATION.
-----------------------------------------------------------------
-the imported technology based products gives the resellers
the motivation to sell more of the products
*more market share.
*more sales.
*more profit
FOR THE ORGANIZATION.

The concept of ''linkages'' mean

The act or process of linking.
The condition of being linked.
A connection or relation; an association. A negotiating policy of making agreement on one issue
dependent on progress toward another objective.
THE LINKAGES ARE ESSENTIAL TO THE
''TECHNOLOGY MANAGEMENT GROUP''
BOTH EXTERNAL AS WELL AS THE INTERNAL.

EXTERNAL LINKAGES ARE REQUIRED FOR

ROADMAPPING OF THE TECHNOLOGY.

Utilizing roadmaps to gain better alignment, identifying

the gaps that arent easy to see, locating the white spaces
and deciding what to do about them, and educating all of
ORGANIZATION to the pluses of roadmapping are a few of our
coming challenges.

Roadmaps are working now in industry and they are beginning

to gain a stronghold in science. Just as engineers first scoffed at them, so will
some scientists. But who better than scientists to experi-
ment with an experiment that can strengthen sciences
support and accelerate its generation of knowledge charged with
these key initiatives:
-manage and prioritize portfolios of
advanced technical work,
-allocating funding for advanced technology,
-decrease time to market for new technology,
-eliminate project duplication globally,
-improve communications,
-increase the number of projects reaching production,
-and improve efficiency and effectiveness.
Project management required a new philosophy. There
needed to be less bureaucracy, more simplicity, and fas
action. There needed to be more visual tools; it was
increasingly difficult to manage projects as lists of lists.

Linking advanced technology development timing to the

product plan is a key success factor. Previously, many
advanced technology projects could be directed by the
internal Group. Projects now had to be completed with a number of suppliers, all
of which acted in their best interests. TMG was faced
with challenging objectives and required a new mindset,
processes and relationships.

Implementing Technology Roadmapping

To accomplish these objectives, Technology Planning, a
subgroup of the TMG, decided that technology roadmap-
ping would be implemented.
Technology Planning collected examples of past internal
roadmapping projects. Also looked externally by
joining the MATI (Management of Accelerated Tech-
nology and Innovation) consortium .

After producing the initial roadmaps, it was realized that

different groups had different data requirements.
- Senior management wanted a high-level overview,
-functional groups wanted detailed items specific to their area, while
-FLOOR GROUP wanted to know just what would be
available for their units. Similarly, large cross-
functional project teams also wanted only that data
pertinent to their projects. Consequently, the format was
modified to include more information. The oval was
converted to a rectangle; the left edge signified the
project start with the right edge indicating readiness for
first application. A solid border showed that a project
was funded. Unfunded projects received dotted borders.

Data for Roadmaps

The next challenge involved infusing the roadmaps with
data. Data had to be global to eliminate redundant
projects. It was critical that the data be timely, accurate
and meaningful. A real-time, web-based database was
created for existing and planned projects. Each database
entry contained such items as a project title and descrip-
tion, budget, development stage, key personnel,
technical impact, cost, and planned applications. The
database provided a single site for access to the latest
information on all projects and could be accessed from
anywhere within the corporate intranet.
The initial reaction was not overwhelming! While some
groups agreed it would benefit other groups, it was
argued that the database did not help the initiating group.
For some, it looked like more work. To obtain buy-in,
funding was tied to up-to-date data. It was explained that
if there was not information in the database, then there
must not be a need for funds. This move underscored the
value of keeping the database current. For the first time in
anyones memory, we had a comprehensive list of the
advanced technical work occurring around the globe.
Once the projects database was functioning well online,
We developed enhancements. Speed was increased;
unnecessary fields and screens were eliminated to
improve data entry and new data fields that had not pre-
viously been considered were added. The database was
linked to similar tools across the organization. Uses of
the database were expanded to include financial
budgeting, marketing, planning, engineering (especially
cross-functional use of technology), purchasing, and
manufacturing.
In addition, sections were added to the database for ideas
and needs. The ideas database archives product concepts
from both internal sources and suppliers, for customer
features as well as technical enablers. The needs database
contains requests for technology solutions from the
vehicle platform and marketing groups. The ideas and
needs databases provided thought-starters for new
projects that could populate the technology roadmaps.

Expectations of Roadmapping
There were several expectations and desired outcomes
from roadmapping. The process needed to ensure that
functional groups developed a plan for the big picture
and knew where they were heading technically. The
roadmap had to make the technology plan visible
especially for senior management. Marketing needed to
be involved early in the process. The roadmap should
review the global portfolio of projects and improve com-
munication within the organization. Furthermore, it was
expected that there would be an alignment of the tech-
nology plan with the vehicle product plan. We antici-
pated that roadmapping would improve the interaction
between engineering, procurement and the supplier
community for future technologies. Most important, the
technology roadmap provided a common framework for
meaningful discussions between key stakeholders about
both the technology development schedule and funding
issues.

Embedding the Roadmapping Process

Having decided to model its roadmapping efforts, we selected several functional engi-
neering groups for roadmapping.
Each group desired some specific attrib-
utes or characteristics for the roadmaps. Minor tweaks
and improvements to the format were reviewed and
adopted. It was then decided that a recommended
template for the maps would be provided; however,
modifications would be welcomed to make the roadmap-
ping process more useable and useful.

The roadmaps were generated manually as stand-alone

charts and were not linked directly to the database. This
was done to increase the early-learning potential for
changes rather than immediately creating a rigid format.
Early users requested computer-generated roadmaps. It
was decided to delay this request until the organization
had more experience with the roadmaps, especially
format and data. It was recognized that requirements for
the timeframe of the included roadmap were different for
different functional areas. For example, chassis and body
structure worked well on a ten-year time frame, but a
technology like telematics required a much shorter span.
Global rollout and initial reaction
The response to roadmapping was somewhat bipolar.
There were several positive reactions. Some groups
decided that minimal effort was necessary because the
information was already in the technology database.
They saw that the roadmaps provided a simple, graphic
way to describe future plans and the reasoning behind
funding requests. The linkage between different projects
such as 42-volt electrical architecture and electric power
steering were more evident and disconnects between
vehicle program timing and technology availability were
also clear. Potentially redundant projects became quickly
obvious. Yet, this created internal conflicts, as most
people are willing to eliminate duplicate projects as long
as the other project is the one that is terminated.
There were also negative reactions, however. Extreme
resistance was encountered in some groups. The primary
reason given was that they already had an excessive
workload and did not see the immediate advantage to
their group. The Technology Planning group offered to
help generate the roadmaps based on the data in the Tech-
nology Database. This quickly revealed that in a few
cases workload was the problem; however, in the
majority of cases there were more deeply rooted
problems within the functional area.
For some groups, once the projects were plotted on a
roadmap it was clear that all projects were short-term,
with no future vision evident. For those particular
groups, this was very embarrassing. The Technology
Planning group worked with groups having problems to
assist in defining and clarifying future technology
projects, even if they were not yet funded. Rationalizing
and prioritizing the advanced technology portfolio was
one of the reasons for starting the roadmapping process.
This fact led other groups to fear that some of their
projects might be cancelled during budget cuts when
compared to other projects on the roadmaps.

After the roadmapping process was in place, the next

question asked was, is this process a one-time event,
annual, quarterly, or continuous? Views within the
organization covered the entire spectrum of possibilities.
The annual budget process was an obvious time to update
roadmaps. We had implemented a process for starting
and stopping projects at any time during the year, so it
was advantageous to keep the maps up to date.
The Technology Planning group was responsible for
running a gate review process for all advanced work. The
process consisted of the following three gate reviews:
project initiation, concept selection, and application
ready. The gate review board was composed of directors
from all areas affected by the project, including engineer-
ing, planning, financial, purchasing, marketing, styling,
and the vehicle teams. An assessment of the relevant
roadmaps at each gate review was made a permanent part
of the process. Discussions centered on the relationship
between projects. Questions included how the project fit
with the longer-term vision, and would the technology be
ready and appropriate for the first proposed application?
With over 150 gate reviews held annually, this led to a
regular review of the roadmaps in a fairly consistent
fashion. In general, the roadmapping process and output
was well accepted and useful in the technology manage-
ment process. Roadmapping is still
undergoing continuous improvement.

Lessons Learned
Technology roadmapping takes significant effort and
senior management support is essential for effective uti-
lization in a global organization. The roadmapping
process must continually evolve with the changing needs
of the organization. In fact, the dialogue and communi-
cation necessary in the roadmapping process is probably
more important to the organization than the roadmap
itself. It is important to ensure that both the creators and
the users of the technology roadmaps perceive value in
the process.
With respect to the technical features of the roadmap,
ease of use for creators and ease of understanding for
viewers is more critical than the sheer volume of infor-
mation displayed on a single chart. Senior management
more easily assimilates graphic representation of the
technology planning information than highly detailed
reports. Finally, ensuring a common and accurate source
of the data for all maps that are created is essential to their
usefulness and credibility.

Computer-generated roadmaps
Timing was now appropriate to automate the generation
of the technology roadmaps from the on-line database.
Enough experience had been gained in format and
content to make it worthwhile to move beyond templates
to extracting and plotting the data directly. This would
encourage more users to create maps for many different
purposes and to have meaningful dialogue for what if
analysis.
Domain Mapping
Another concept just starting to gain traction was domain
mapping. Many advanced projects were essentially con-
tinuous improvement from the current state. Domain
mapping starts with an ultimate goal, even if the goal is
not believed to be attainable. Different partial solutions
leading up to the ultimate goal are then listed and plotted
on a timeline or roadmap. An example is the ultimate
goal of a vehicle that cannot have an accident or crash, no
matter what the situation. Technology does not yet exist
to solve all the issues of mechanical failure, driver error,
inclement weather, etc. but a number of technologies
could be listed that would lead to the ultimate solution.
This technique was useful in helping people to stretch
their thinking as to what might be possible. It was also an
excellent way to have marketing and engineering work
together to identify potential technologies that would
benefit the end customer .

THE ABOVE ANALYSIS IS THE REASON WHY

THE EXTERNAL LINKAGES ARE ESSENTIAL TO THE
''TECHNOLOGY MANAGEMENT GROUP''
=========================================
NOW WE LOOK AT THE INTERNAL LINKAGES.

Primary activities (line functions)

Inbound Logistics. Includes receiving, storing, inventory control, transportation planning.
Operations. Includes machining, packaging, assembly, equipment maintenance, testing and all
other value-creating activities that transform the inputs into the final product.
Outbound Logistics. The activities required to get the finished product at the customers:
warehousing, order fulfillment, transportation, distribution management.
Marketing and Sales. The activities associated with getting buyers to purchase the product,
including: channel selection, advertising, promotion, selling, pricing, retail management, etc.
Service. The activities that maintain and enhance the product's value, including: customer
support, repair services, installation, training, spare parts management, upgrading, etc.
Support activities (Staff functions, overhead)
 Procurement. Procurement of raw materials, servicing, spare parts, buildings, machines, etc.
Technology Development. Includes technology development to support the value chain
activities. Such as: Research and Development, Process automation, design, redesign.
Human Resource Management. The activities associated with recruiting, development
(education), retention and compensation of employees and managers.
Firm Infrastructure. Includes general management, planning management, legal, finance,
accounting, public affairs, quality management, etc.
Creating a cost advantage based on the value chain
A firm may create a cost advantage:
by reducing the cost of individual value chain activities, or
by reconfiguring the value chain.
Note that a cost advantage can be created by reducing the costs of the primary activities, but also
by reducing the costs of the support activities. Recently there have been many companies that
achieved a cost advantage by the clever use of Information Technology.
Once the value chain has been defined, a cost analysis can be performed by assigning costs to the
value chain activities. Porter identified 10 cost drivers related to value chain activities:
Economies of scale.
Learning.
Capacity utilization.
Linkages among activities.
Interrelationships among business units.
Degree of vertical integration.
Timing of market entry.
Firm's policy of cost or differentiation.
Geographic location.
Institutional factors (regulation, union activity, taxes, etc.).
A firm develops a cost advantage by controlling these drivers better than its competitors do. A
cost advantage also can be pursued by "Reconfiguring" the value chain. "Reconfiguration" means
structural changes such as: a new production process, new distribution channels, or a different
sales approach.
Normally, the Value Chain of a company is connected to other Value Chains and is part of a
larger Value Chain. Developing a competitive advantage also depends on how efficiently you can
analyze and manage the entire Value Chain. This idea is called: Supply Chain Management.

5. Explain in brief the various sources of procuring technology information Discuss the
advantages of any two of the information sources.

Procurement is an important administrative and financial function and process that allow a project
to obtain optimal value for financial resources expended on goods and services. The effective and
efficient use of financial resources in a competitive and transparent manner through a sound
procurement process contributes to the achievement of the operational and strategic goals of a
project. Efficient procurement practices generate savings on resources that would have been lost
through mis-procurement. Such savings makes it possible for a project to raise the amount of
financial resources that could be available for core operational activities of a project. This, in turn,
has the potential of maximizing the impact of the project.
As a function and a process, procurement involves interaction with the external business
environment. This explains why it very sensitive and could potentially be susceptible to abuse.
What this implies is that a projects procurement practice tends to present a reflection of aspects
of its administrative and financial management systems. These systems can be assessed by
stakeholders in terms of their professionalism, fairness, reliability and transparency. Should a
project cut a poor image as a result of questionable procurement practices, this can prejudice the
project of resources, constrain successful implementation of its activities, and most significantly
call to question the management of financial resources and the effectiveness of project
supervision by the funding agency. All this explains why procurement is not only a process, but
also, fundamentally, a function that requires considerable attention.

PROCUREMENT PRINCIPLES
The procurement of goods and services is guided by principles. To a large extent, these principles
provide the guide to best practices in the procurement process when properly applied. Four of the
core principles are: competition, separation of duties, transparency, and openness.
Competition
Procurement policy calls for competition among suppliers. For development funding agencies,
competition is met if at least 3 suppliers are invited to submit quotations, proposals or bids for the
supply of a good or service. However, competition can be waived. The circumstances under
which a waiver can occur are:
i. When the project on the basis of competent technical advice uses approved and standardized
equipment.
ii. When the price is fixed pursuant to national legislation or by regulation or regulatory bodies.
iii. When only one source of supply can meet the requirements.
In a project setting, the Procurement Officer will be required to provide written justification for
waiver of competition for endorsement by management. When the item to be procured exceeds
the limit stated in the Project Grant Agreement, a letter of no-objection must always be
obtained from the agency funding the project through the Program Officer responsible for the
project before the procurement action can proceed.
Separation of Duties
Separation of duties in the procurement process is an important financial control principle. No
one individual in a procurement process should be responsible for requesting a procurement
action, writing the specification of the item or scope of work, soliciting bids or proposals,
approving awards and payment, and taking delivery of the items procured. The beneficiaries of a
project fund should heed the need to separate duties. It is the responsibility of the Executive
Director of the project to ensure that the principle of separation of duties in the procurement
process is maintained at all times. In cases where there are staffing constraints, it may be difficult
to have effective separation of duties. However, the project should organize the procurement
process in a manner that does not give control to one individual and should provide for frequent
independent reviews by higher authority.
Transparency and Openness
Transparency and openness are key principles that should govern any procurement action. One
way to ensure transparency in the procurement process is to establish a Procurement Committee
that will evaluate tenders/ proposals/bids and award contract to the most responsive bidder. A
Procurement Committee can be ad-hoc or permanent, depending on the nature of the goods or
services to be procured, frequency of the procurement and the technical competence of the staff
involved. The principle of separation of duties also reinforces transparency of the procurement
process. Openness is effective when all suppliers are treated equally and receive the same amount
of information. The information related to any procurement should be readily available for
consultation and the procurement authority should be ready to provide any additional information
as required.

Mode of solicitation in competitive

procurement
There are basically three methods by which a Project can solicit proposals for the procure of a
good or service in a competitive procurement environment. These are Request for Quotations
(RFQ), Request for Proposals (RFP) and Invitation to Bid (ITB).
Request for Quotations (RFQ)
This mode of solicitation is used for the procurement of low value goods or services the value of
which is below the limit requiring the meeting of a Procurement Committee. The specifications of
such goods and services are usually clearly and precisely defined (standard goods and services).
In a request for quotations, solicitation is evaluated and awarded based on the quotation that
meets the technical specifications (including required delivery time) at the lowest price without
any negotiation with the suppliers. Thus, an RFQ is ideally used to procure standard goods and
services such as office supplies; furniture; simple and less expensive communication equipment
(telephone, fax); and security services, among others. RFQs may be faxed, mailed or collected
from the buyer or project that seeks to make the procurement.
An RFQ contain, at least, the following information:
The address of the suppliers/vendors.
The address of the project and contact person.
Date the quotation was requested.
The list of the items requested.
The expected delivery date.

Request for Proposals (RFP)

A request for proposals (RFP) is ideally used in a competitive or direct procurement of non-
standard goods and services independent of the amount involved. The RFP allows the project to
enter into negotiations with the suppliers.
RFPs are always used in cases of direct procurement (waiver of competition). They can also be
used in competitive procurement when only a short list of suppliers is invited to submit proposals.
In such cases the Procurement Committee must approve the short list of suppliers before the
solicitation takes place. The Procurement Committee assesses the financial and technical
proposals on the basis of value for money and awards the contract to the supplier whose
proposal gives the project the most value. Further discussions may be held with the selected
supplier for a refinement of the final offer.
The criteria for evaluation of the proposals, including weights for each criterion, must be
determined in writing by the Procurement Committee before the solicitation takes place. The RFP
is commonly used for the procurement of non-standard goods and services such as network
installations, renovations, PBX systems, consultant services, audit services, goods that require
after sales services not covered by a warranty, among others.
The RFP must go through the Procurement Committee for all procurements over the limit stated
in a Projects Grant Agreement. In the event that the direct procurement (waiver of competition)
is used, prior approval by the Procurement Committee must be obtained in addition to a no
objection letter from the funding agency, like ACBF.
An RFP should contain, at least, the following information:
Date the RFP was made.
RFP number.
Name, address of the potential suppliers.
Instructions on how to submit proposals.
Closing date.
Brief instructions concerning the format of the proposals (technical and financial).
Evaluation criteria where competition has not been waived stating the basis on which the award
will be made.
Scope of work or description of the goods or services to be procured or terms of reference.
Any other relevant information.
Invitation to Bid (ITB)
As a mode of solicitation, the Invitation to Bid is used in formal competitive procurement of
goods and services whose value exceeds a defined limit in the Projects Grant Agreement. This
mode of solicitation is used when the specifications of the goods and services are very clear and
precise. Publication of the ITB is made in major newspapers.
An ITB is used for the purchase of standard goods or services such as computer equipment, radio
equipment, office equipment, etc. The ITB must go through the Procurement Committee, which
will approve the form of bid, the mode of publication, the criteria for the evaluation of the bids,
open the bids once received, and announce the winning bid on the basis of the lowest price and
most technically acceptable offer. No negotiations with suppliers are undertaken.
An ITB should contain the following information, among others:
Name and contact address of the Project procuring the good or service.
Bid invitation reference number.
List of the items required (specification and quantity).
Name of the contact person.
The delivery terms
Warranty period.
Terms of payment.
Origin of the goods, if necessary.
The required delivery time.
Criteria for evaluation of bids.
Instructions on how to submit bids.
Closing date for submission of bids.
Brief instructions concerning the format of the proposals
(technical and financial).
Terms of reference or scope of the work.
Any other relevant information.

CHOOSING THE RIGHT MODE OF BIDS SOLICITATION

The main consideration in deciding whether to use an RFP or an ITB for a high value purchase is
the nature of the goods or services to be procured. Where the goods or services are standard in
terms of specifications, the ITB is the more appropriate mode of solicitation to be employed. An
RFP suits non-standard goods and services. The main factor to consider in the choice between an
RFQ and an ITB in the procurement of standard goods or services is the value of the
procurement.

RESPECT FOR PROCUREMENT PRINCIPLES

Irrespective of the mode of solicitation used, procurement should always be competitive, open
and transparent. Competitiveness is achieved when, at least, three responsive offers are received
from suppliers with due consideration for value for money (economy, effectiveness and
efficiency) and without regard to political or other non-economic factors. The comparability of
the offers is an important factor that should also be taken into consideration.
Transparency is usually achieved when the principle of separation of duties is strictly observed
and when a Procurement Committee is set up to manage the procurement process.
Openness is satisfied when every supplier without regard to political or other non-economic
factors receives the same amount of information from the purchaser and is allowed to submit an
offer. There should be fairness when comparing offers. Procurement information should be
readily available and the procurement authority should take responsibility for its decisions. All
information related to procurement, advertising, terms of reference or scope of work, minutes of
the Procurement Committees meetings, criteria for evaluation of the bids, offers received, and
copies of contracts awarded should be readily available.
PROCUREMENT DOCUMENTATION
the minimum documentation to be maintained for every item that is procured is a procurement
file consisting of:
Purchase Requisition Request.
Justification for waiver of competition and approval, if applicable.
List of sources solicited, if applicable.
A copy of each quote, bid or proposal.
Specified conditions for acceptance or rejection of late quotes, bids or proposals.
Evaluation criteria.
Report of the Procurement Committee on the procurement process, where applicable.
Authorized/signed purchase orders or contracts.
Amendments and supporting documentation, if applicable.
Any other pertinent purchase information.
Available information has shown that in most ACBF-funded projects, the foregoing
documentation is readily available. However, more effort has to be made to make them readily
accessible.
Purchase Request/Requisition
A purchase request should be maintained in all projects and used to initiate the process of
procuring goods and services. The purchase request earmarks funds for the procurement and must
be approved by the appropriate authority and certified by the finance department. A purchase
request cannot be certified, if funds under the grant categories are insufficient to cover the cost of
the purchase. The Requesting Officer, in collaboration with the Procurement Officer, prepares the
purchase request.
The purchase request should, at least, include:
Technical specifications of the goods or services.
Estimated cost of the goods or services to be procured.
Certification of availability of funds for the procurement.
Budget line and cost center.
Approval by the Procurement Authority.
No-Objection Letter
Notwithstanding the mode of solicitation, for any purchase over the limit stated in a Projects
Grant Agreement, a project should seek and obtain a no-objection letter from its funding
agency as is the case with ACBF before the purchase action can proceed. A no-objection letter
from ACBF, for instance, is a confirmation that procurement procedures have been duly followed
and that the Foundation agrees with the final recommendation of the Procurement Committee to
procure goods or services from a given supplier.
TIPS TO AVOID DELAYS IN PROCUREMENT
In order to avoid delays in the procurement of goods and services, a project should ensure the
following:
Timely request from it funding agency for a no-objection letter for the procurement of goods
and services above the limit stated in the Projects Grant Agreement.
The goods and services should be eligible under the Projects Grant Agreement.
Availability of adequate funds under the budget line to cover the cost of the goods and services.
Timely request for budget reallocation for overrun budget categories.
3.VENDORS WHO PROVIDE THE SERVICES.
4.AGENTS, WHO WORK FOR COMMISSION.
5.COMPANY REPRESENTATIVES.

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various sources of procuring technology information
THESE SOURCES OF INFORMATION INCLUDE
1.CLASSFIED ADVERTISEMENTS.
2.YELLOW PAGES.
3.VENDORS WHO PROVIDE THE SERVICES.
4.AGENTS, WHO WORK FOR COMMISSION.
5.COMPANY REPRESENTATIVES.
6.TRADE MAGAZINES.
7.TRADE EXHIBITIONS/ PROMOTIONS.
8.WEBSITES OF THE ORGANIZATIONS.
9.E-PROCUREMENT.
10.DIRECT MAILINGS FROM THE SUPPLIERS.
ETC.

THE ADVANTAGES OF THESE TWO SOURCES.

1.VENDORS WHO PROVIDE THE SERVICES.

2.COMPANY REPRESENTATIVES.
---------------------------------------------------------
-they are more reliable.
-they are transparent.
-they carry less risk.
-they offer competitive terms.
-they make personal presentations.
-they offer spot explanations.
-they understand your need better.
-they can be sensitive to your needs.
-they can offer quotations, on request.
-they can send you a proposal, if requested.
-they provide back-up service.
-they can provide training.
-they offer quality product.
-they reduce the mis-procurement.

THEY COVER MAJOR RISKS OR REDUCE THE RISKS.

Five types of risks:

1. Technological risks are all those risks that lead to noncompletion, underperformance
or false performance of the procured good and service. Due to its
more innovative nature, the risk lies in the technical characteristics of the service
or product or in its production, and thus originates in the suppliers side. This risk
appears of particular relevance in procurement of products in the fluid phase.
2. Organisational and societal risks: Organisational risks are all those risks of the
procurement failing or underdelivering for reasons situated within the
organisation that procures. Societal risks are those related to a lack of acceptance
and uptake by the users of the new or changed service delivered within society.
3. Market risks are to be found on the demand and supply side. The former occur
when innovations in public procurement are also intended to spill over to private
markets and those private markets are not large or responsive enough or do not
built up quickly enough to justify capacity investment. The latter are those that
potentially disrupt or delay operations such as political instability and volatile
labour market; potential threats that a competitor will take over a supplier and
potentially lock out supplies, risks related to delays and insufficient quality.
4. The financial risks in public procurement are related to uncertainty in meeting
target costs and the ability to secure the funds needed.
5. Finally turbulence risks in fact turbulence uncertainties as they are hard to
predict and measure are associated with large scaleprojects and emerge from
a range of unforeseen events that lead various actors in the whole process to reassess
their priorities or change their expectations.
The empirical evidence draws on 12 case studies, which were identified by the group as
offering interesting lessons for policy makers. They were not chosen following systematic
selection criteria and thus do not reflect a representative sample. While not claiming
general validity on the conclusions drawn out, they proved sufficiently diverse in many
dimensions and as such led to the identification of explicit and implicit risk management
practices.