Management Contract


The Management Contract is an arrangement under which a company provides managerial know-how in some or all functional areas to another party for a fee that ranges from 2 to 5 percent of sales. International companies make such contracts with 1) firms in which they have no ownership, 2) joint venture partners, and 3) wholly owned subsidiaries. The last arrangement is made solely for the purpose of allowing the parent to siphon off some of subsidiary’s profits. This becomes extremely important when, as in many foreign exchange poor nations, the parent firm is limited in the amount of profits it can repatriate. Moreover, because the fee is an expense, the subsidiary receives a tax benefit.

My Consultancy–Asif J. Mir – Management Consultant–transforms organizations where people have the freedom to be creative, a place that brings out the best in everybody–an open, fair place where people have a sense that what they do matters. For details please visit www.asifjmir.com, and my Lectures.

Generic and Grand Strategies


Many businesses explicitly and all implicitly adopt one or more generic strategies characterizing their competitive orientation in the marketplace. Low cost, differentiation, or focus strategies define the three fundamental options. Enlightened managers seek to create ways their firm possesses both low cost and differentiation competitive advantages as part of their overall generic strategy. They usually combine these capabilities with a comprehensive, general plan of major actions through which their firm intends to achieve its long-term objectives in a dynamic environment. Called the grand strategy, this statement of means indicates how the objectives are to be achieved. Although every grand strategy is, in fact, a unique package of long-term strategies, some basic approaches can be identified: concentration, market development, product development, innovation, horizontal integration, vertical integration, joint venture, strategic alliances, consortia, concentric diversification, conglomerate diversification, turnaround, divesture, and liquidation.

My Consultancy–Asif J. Mir – Management Consultant–transforms organizations where people have the freedom to be creative, a place that brings out the best in everybody–an open, fair place where people have a sense that what they do matters. For details please visit www.asifjmir.com, and my Lectures.

 

Mergers and Acquisitions


Regardless of what form a business takes—be it a sole proprietorship, partnership, or a corporation—the chances are reasonably good that its form will evolve over time. Companies of all sizes and types achieve a variety of objectives by merging, dividing, and restructuring. The terms most often used to describe all of this activity are mergers, acquisitions, and leveraged buyouts. The difference between a merger and an acquisition is fairly technical, having to do with how the financial transaction is structured. Basically, in a merger, two or more companies combine to create a new company by pooling their interests. In an acquisition, one company buys another company (or parts of another company) and emerges as the controlling corporation. The flip side of an acquisition is a divestiture, in which one company sells a portion of its business to another company. In leveraged buyouts one or more individuals purchase the company (or a division of the company) with borrowed funds, using the assets of the company they’re buying to secure (or guarantee repayment of) the loan. The loans are then repaid out of the company’s earnings, through the sale of assets, or with stock. Leveraged buyouts do not always work.

Mergers and acquisitions represent relatively radical ways in which companies are combined. On a more modest scale, businesses often join forces in alliances to accomplish specific purpose. In a joint venture, two or more companies combine forces to work on a project. The joint venture may be dissolved fairly quickly if the project is limited in scope, or it may endure for many years.

A consortium is similar to a joint venture, but it involves the combined efforts of several companies. Cooperatives also serve as a vehicle for joint activities. In a cooperative, a group of people or small companies with common goals work collectively to obtain greater bargaining power and to benefit from economies of scale. Like large companies, these cooperatives can buy and sell things in quantity; but instead of distributing a share of the profits to stockholders, cooperatives divide all profits among their members.

My Consultancy–Asif J. Mir – Management Consultant–transforms organizations where people have the freedom to be creative, a place that brings out the best in everybody–an open, fair place where people have a sense that what they do matters. For details please visit www.asifjmir.com, and my Lectures.

Just about Technology Transfer


The type of technology transfer that takes place depends on which level of its value stock the firm is using to enter the new market. If the firm is exporting products as they are, then the knowledge that underpins these products is encoded in them. For example, If a German firm is exporting cars to China, knowledge of the car’s engines, transmission, electronic fuel injection, and cooling system, and the linkages between them, is already embedded in the car. So is knowledge of the manufacturing processes that were used to build the car. In either case, the technology transfer is said to be product embodies since the physical product itself is being transferred.

 

If a firm uses core products to enter the market, the results of the technology transfer are the same as those for exporting fully assembled products if all the firm does is sell the core components to the emerging economy. If it uses the core components to build products for the foreign market, the firm must also transfer the knowledge of how to link the components and manufacture the end product. In the automobile example, the German firm not only exports the drive trains for cars, it also transfers the manufacturing knowledge that is needed to produce the cars locally. The manufacturing knowledge is said to be process and people embodied. The process being transferred is in the form of equipment, flowcharts, blueprints, microcodes, software, routines, and the knowledge embedded in employees. It is more tacit than product-embodied knowledge. The transfer of such knowledge requires personal interaction between the transmitter and the receiver and relatively more absorptive and delivery capacities than the transfer of the more explicit product-embodies knowledge.

 

If the firm decides to transfer capabilities and the knowledge that underlines them, then the knowledge is a lot more people and process embodied than product embodies. It also has a much larger tacit component to it than the other forms of transfer. This suggests that most of the measures for improving the effectiveness of technology transfer apply. For example, prior to the transfer, employees of the receiver nation can be sent to the transmitter country to study at universities, or to work at research centers or related industries to better prepare for receiving the technology. Training sessions in which members from both nations explore their cultures can help diffuse some of the tensions that occur. The transfer can take the form of joint ventures or acquisitions. During the transfer, continued workshops in the challenges of cultural differences can help keep reducing the impedance mismatch between the two entities.

My Consultancy–Asif J. Mir – Management Consultant–transformserorganizations where people have the freedom to be creative, a place that brings out the best in everybody–an open, fair place where people have a sense that what they do matters. For details please contact Asif J. Mir