CBS E Journal

CBS E-Journal, Biz n Bytes, Issue 4,June., 2010 Biz Section 1 http://www.cgc.edu.in/ ISSN 0976 – 0458 CBS E-Journal, Biz n Bytes, Issue 4,June., 2010 1.Strategies for Hotel Industry to Gain Competitive Advantage - Dr. Aarti Mahendru 2.Developing The Knowledge Strategy For Service Sector Industries - Ms. Alaka Samantaray 3.Harmonization Of International Accounting Standards In Emerging And Global Economies - Dr. Asha Sharma 4.Pharmacoeconomics in Health Care Services - Abhishek Dadhich, S.D Gupta, Anil Sharma 5.Management Education: Trends and Perspectives - Dr. Kalyan Kumar Sahoo 6.Human Behaviour at Work: A Globalization Perspective - Dr. Pradip Kumar Mallik and Dr. Pradyumna Kumar Tripathy 7.doption of Internet Banking By Indian Consumer: An Extension of the Technology Acceptance Model - Mr. Manoranjan Dash 8.Measuring Operational Efficiency In Private Banks : A Comparative Study Of Deposit Mobilization - Dr P.S. Vohra 9.Troubled Waters of IPL: A Case Study on Cricket-ainment – Mr. P.P.Singh 10.A Study on the changes brought by the FDI in the auto component sector Satyendra Kumar Sharma, Dr. Vinod Joshi and Raghav Gupta 11.Impact of Global Financial Crisis on Indian Banking System - Dr. Devendra Singh, Dr. Gaurav Aggarwal and Dr. Amit Kumar Srivastava 12.A Panel Data Analysis on Indian Banks’ Intellectual Capital Efficiency - V. Murale 13.Marketing evaluation of travel and tourism websites: Lessons from the small and medium enterprises in Andaman Islands - Dr. S.Victor Anandkumar 2 http://www.cgc.edu.in/ ISSN 0976 – 0458 CBS E-Journal, Biz n Bytes, Issue 4,June., 2010 Strategies for Hotel Industry to Gain Competitive Advantage Dr. Aarti Mahendru Assistant Professor Chandigarh Business School, Landran Abstract: This paper analyses recent developments in the hotel industry that aid in the gaining of competitive advantage and creating value to investors and customers. One of the methods used to promote their business undertaking is through e-business through the use of the internet. The hotel industry has gained advantage through the development of internet website and this helps boost its market size. The business environment today has experienced continuous change, this change has been characterized by more complexity in the transactions and relationships, and the increased complexity has been as a result of increase information access and the increasing access to information due to the growing technology and the internet. A business is usually empowered by information and the resources they usually seek out to meet their wants and needs. Due to the increased complexity there is a need to acquire competitive strategies and skills to gain competitive advantage over business rivals. In the past the only skills that were required in the hotel industry was excellent guest services but now all this has changed and more competitive strategies have emerged over time. Introduction: Competitive advantage is the advantage of a firm over its rivals. This advantage allows the firm to generate higher sales and also retain more customers than its rivals. It may include any advantage due to the cost, products, distribution network and customer support provided. When a firm posses competitive advantage it is in a position to generate great value for its stake holders and that the more sustainable the competitive advantage the more it becomes difficult for rivals to neutralize these advantages. There has also been an emergence of new and unique needs of the consumers in the hotel industry. The needs of the consumers over time have moved from the brand to the price and finally the value. Consumers now are interested to try out new things for the purpose of fulfilling their distinct preferences and tastes. This has led to competitive firms to adapt to the changing business dynamics to gain competitive advantage. Labour is one of the important resources in any business. Hiring of highly talented workers will ensure conducive environment in the workplace and therefore, there is need for firms to nurture and also to retain these talents as a way of gaining competitive advantage. There must also be a 3 http://www.cgc.edu.in/ ISSN 0976 – 0458 edu. many hotels also offer services such as advance car hiring. Biz n Bytes. This helps the business to analyze the root cause and the possible solutions to any problem being faced by the business. These skilled employees are to perform such actions as budgeting. Issue 4.while providing personal attention to the client . As a result the internet has become a very powerful and convenient medium for business communication. time is money. be flexible and positive towards change and not resist change because such resistance may result in obstructions in moving towards a successful future. Distribution and presentation of your sales material quickly and professionally . The ability of a hotel to be in a position to offer online purchase and delivery of products and services has also provided them with competitive advantage. Small firms in the hotel industry are now able to compete with other larger firms by simply having better presentation on the internet through their websites.June. Change management is also a key to the success in the hotel business. The hotel business must. Skills required include sales skills and marketing skills and ability to formulate competitive business strategies by implementing the best strategies that succeed in the business undertaking. enhancing team work and increasing productivity and the profitability of the business undertaking. The internet allows the firm to offer competitive prices. 4 http://www. Further. financial analysis and forecasting. Charisma is also an important skill required by the hotel and it is an effective strategy that is required in order to differentiate the hotel services and facilities because this emphasizes benefits and features of the hotel in a way that creates value for the customers. marketing and new opportunities. air ticket and travel packages which are very attractive and convenient to consumers. Hotels now offer more rooms at different prices that are very competitive. The hotel industry has also initiated flexibility whereby they are currently able to offer more brands and also negotiable price cuts schedules.. The business must adapt to change in the market. Through the aid of the internet the consumer is able to compare prices and also the product and services offered and as a result the hotels gain competitive advantage.in/ ISSN 0976 – 0458 . Employment of skilled labour is also an important factor to consider. This strategy focuses on building a talented workforce and a self motivated and committed labour force. This communication provided by the internet between the service and product provider and customer enhances businesses opportunities by making transaction much easier and cheaper where consumers can buy the products and services over the internet.can make the difference between the sale and lost business. Through the internet the hotels offer competitive prices to consumers and also offer promotions to consumers. This involves the introduction of new processes. advertise its products and also services all over the world.CBS E-Journal.cgc. Application of Internet in business is a recent major trend adopted by many industries. E-business: Hotel sales and catering sales industry need to start thinking outside the box when it comes to web sites and search engines through virtual presentation of services. therefore. In today's competitive sales environment. 2010 focus on deriving value through this talent management strategy. .and more effectively . as well as making the necessary changes in compensation practices. Issue 4. Hotel owners need to share as much information as possible with management. International hotel companies such as the Ritz Carlton Company. to discuss objectives.in/ ISSN 0976 – 0458 . both in terms of building a productive and positive work culture. It has also reduced the transaction costs involved in the process and therefore the competitive hotels are using the internet to promote their services which are at very competitive prices due to low transaction costs. the hiring and the recruitment activity is a major factor in the success of any business. Managers will need to pay more attention to employee motivation and team-building efforts and see that these “ideas” are more regularly . Disintermediation involves giving directly to the consumers the required products and services. employee 5 http://www. The pressure of retaining people in today’s competitive environment. must now be taken very seriously by Indian hotel companies. over a period. Age old policies and super structures. The hiring of highly talented workers will ensure conducive environment in the workplace and therefore there is need for the firms to nurture and also to retain these talents as a way of gaining competitive advantage. significantly change both the management structure and working environment in hotels in India. Biz n Bytes. like HRIS. OD intervention and Career Pathing. Managers and team leaders. provide feedback. The other disadvantage of the internet booking process is the speed of delivery of goods and services and also the reliability of these services. need to spend time with their team members. Four Seasons Hotels and Resorts and Marriott – leaders in this industry in guest satisfaction and business profitability – are companies that have made a dedicated effort to encourage teamwork. have to pave way to newer and faster career progression. The occurrence of disintermediation in the hotel industry has also aided in gaining competitive advantage. HR concepts once alien to the Indian hospitality. People productivity: Labour is one of the important resource in any business. Booking and other processes require some time to process and also may be unreliable to consumers and therefore this might turn to be inconvenient to the customer and the business. where employees are actively encouraged to perform to their best capabilities. The solution lies in the industry taking some important steps. This means that consumers are directly connected to the producer. we believe. on their part.CBS E-Journal.put into practice. The internet has resulted in a reduction in information asymmetry and this means that currently consumers can collect information easily regarding hotel products and services. This reduces the customers’ cost of searching for information.June. and as a result there has been a reduction in costs through the elimination of intermediaries and because the price is the determining factor in decision making this promotes hotel services providers who provide competitive prices. ask team members about their difficulties as well as to talk about what’s happening in the hotel.cgc. 2010 The main challenge to the e-business practiced by the hotels is that some customers are afraid of giving away their personal information such as credit card information which is a security concern. will. and the adjustments that this necessitates will.edu. Provide guestroom recycle baskets and bins for newspaper. Due to more concern about the threats to our environment. Issue 4. all this adds up to the development knowledge and better understanding of stake holders wants and needs Eco-practices: In hotel business. There are many ways that hotels can make their business eco-friendly include: Implement a towel and linens reuse program and recycle stained tablecloth into napkins and aprons. Install devices that power down heating and cooling systems when guests leave the room. Competitive advantaged hotels have focused on deriving value through this talent management strategy. the organization has to define and create a clear path of movement for its employees. Provide recycling bins in public areas. One business area that is beginning to recognize the need to be more 'green' is the hotel industry. glass products.. Team work has also been encouraged and this has been achieved through offering support and also dealing with the workers in a persuasive manner and in a polite manner. more people are embracing a 'Green' lifestyle. 2010 empowerment. initiatives that are environment sustainable are becoming widespread.cgc. Change management: Success is also dependent on the adaptation of business to change in customer's needs. Adopt other cleaning practices such as cleaning the windows with vinegar instead of chemicals.in/ ISSN 0976 – 0458 . This strategy involves keeping the employees engaged in earning. owners. cardboard. This strategy focuses on building a talented workforce and a self motivated and committed labour force. Use fluorescent lights instead of incandescent bulbs. the introduction of new processes. Therefore. Quality of working life with international cross-functional exposure should become a key focus. Environment friendly initiatives help hotels to save money and resources without compromising on quality. and a sense of responsibility towards the organization’s well-being. Environmentally friendly initiatives range from saving water and energy to hiring of hotel executives that will actively participate in implementing green programs.edu.CBS E-Journal. Adaptation of new technology is also an important factor in the determination of success. The hotels would have to invest in environmentally friendly practices and look at long-term gains. the hotel business must be flexible and positive toward change and not resist change because such resistance may result to distractions toward a successful future. Many hotels are responding to consumer demands for a healthier and greener lifestyle by making their businesses more environmentally friendly. white paper. Biz n Bytes. Adopt the use of nontoxic cleaners by housekeepers. Moreover. enhancing team work and increasing productivity and the profitability of the business undertaking. in order to increase business opportunities the businesses must harness all the creative energies from all stakeholders who include investors. staff and customers. and plastics. Dispense 6 http://www. These businesses offer monetary and compensational package that have offered extrinsic motivation to yield a result focused workforce. Businesses are now realizing that they also need to make changes in order to adopt a more environment friendly operation.June. investors and also the market. You can also make cloth laundry bags from old sheets. aluminum cans. Adopt a nonsmoking policy for the entire hotel. Therefore. Use a mulcher to chop up the garden clippings to make your own mulch. Due to the increased complexity there is a need to acquire competitive strategies and skills to gain competitive advantage over business rivals. By doing their part to conserve. May 21. HVS international. (2009). May 22. The value captured is important as that value they create and if hotels cannot capture the value today in the activities they undertake then they will still have difficulties in generating that value in the future activities they undertake. Conclusion: The hotels with sustainable competitive advantage have the opportunity to capture value that will benefit the customers through meeting their wants and needs and also stake holders. Compost food waste and use it as fertilizer. Keys to success: Hospitality conversations. Building Better Businesses with Strategic Employee Reviews. 7 http://www. Business Line. Biz n Bytes. etc.(2008). Issue 4. In the past the only skill that were required in the hotel industry was excellent guest services but now all this has changed and more competitive strategies have emerged over time. Offer guests walking maps and information on public transportation. Businesses are usually empowered by information and the resources they seek out to meet the wants and needs of stake holders. Use 'gray' water from the showers and sinks for ponds and landscaping. recycle. Environment Friendly solutions for hospitality. J. and reduce. Provide bicycles to guests for sight seeing excursions.. T. References: Singh. water.Hospitality Industry facing Manpower crunch. May 18. 2010 shampoo and soap from large containers instead of disposable plastic bottles. Use only organic products on the lawn and garden. (2010). Hotels use a tremendous amount of energy and water as well as collect a huge amount of waste. Hogan. Use electric or battery operated lawnmowers.CBS E-Journal. B. e-hotilier.Tuesday Roth. Hotel Industry Embraces Green Revolution. Jan 22. (2010).June.in/ ISSN 0976 – 0458 . Cheria.edu. Ban the use of pesticides and chemical fertilizer. J. (2010). Feb 10. and waste. they are protecting the planet as well as providing a great place for eco-friendly guests to stay. Being green means 'Green' hotels are adopting environment friendly practices and programmes that will reduce energy.com Hourah. Entrepreneur. HVS international. A.cgc. cgc. innovation and drive of its people to achieve and maintain competitive advantage.Ghatikia Bhubaneswar – 751003 Orissa alka. knowledge will be a company's most important asset and competitive advantage. 8 http://www. In the 21st century.. Alaka Samantaray Lecturer Institute Of Business and computer studies Siksha ‘O’ Anusandhan University Kalinga Nagar. Key words: The Knowledge-Intensive Organisations. this Knowledge Era or the technology era has emerged as a challenge for all the sectors including the Service Sector in Particular the Financial sector.in/ ISSN 0976 – 0458 . and can relatively quickly provide meaningful solutions for a public or private entity in the marketplace. 2010 DEVELOPING THE KNOWLEDGE STRATEGY FOR SERVICE SECTOR INDUSTRIES Ms. This paper gives focus on an alternative route in strategy formulation for knowledge-intensive organizations. Issue 4.The emergence of the Knowledge Age heralds the rise of new corporate structures.CBS E-Journal.edu.June. Biz n Bytes. In most developed [email protected] ABSTRACT Today we are all living in the Knowledge Era. The purpose of this study is to suggest an alternative route in strategy formulation for knowledge-intensive service sector industries. adaptability. The financial services sector relies on the intelligence. In this new environment. some two-thirds of the GNP is made up of services. strategy formulation . the individuals that thrive in the knowledge era workplace are the ones that can make informed decisions based on available information. Because the knowledge organisation cannot force its customers to adapt to it. experience. The business logic depends on how the managers of the Knowledge Organisations regard their assets. the key to profitability lies in efficient. The Knowledge Organisation belongs to a subgroup within the service sector.the knowledge organisations -. routines. or formulation vs.cgc. The service provider is an expert and the customer wants the problem solved by the expertise of the expert. The knowledge is in the hands of the organization. control. Fewer attempts have been made to classify empirically firms according to their strategic processes. Raisinghani.CBS E-Journal. There is no standardized service package. Literature review Filley and Aldag (1978).. 2010 INTRODUCTION The "service" emerges as an ongoing process of problem solving between the customers and teams of experts. The service sector is not a discrete phenomenon but rather a spectrum of company types. Their close relationship is sometimes even revealed in their language. The latter have more in common with manufacturing companies. The service sector is not a discrete phenomenon but rather a spectrum of company types ranging from those organisations totally adapted to their customers -. how they attract them and how they match their capacity for problem solving with the needs of the customers. The relationship between market orientation. Issue 4. While Mintzberg. One key to success for leadership in a knowledge-intensive organization is to be able to balance the management of both the professionals and the organization strategy of the knowledge company. strategy implementation. They therefore have to treat their customers as individuals. incremental.in/ ISSN 0976 – 0458 . their key people and their customers. Strategy-making is usually portrayed in dichotomous terms: rational vs. Galbraith and Schendel (1983). It may. however. be more valid to think of organizations as entities capable of developing resources and skills in multiple strategy-making process modes. service has become industry. The "service" emerges as an ongoing problem-solving process between the customer and the producer. implementation. and Theoret's (1976). Strategy implementation and performance in organizations are influenced by its market orientation.'s (1986) and 9 http://www. Biz n Bytes. however.June. it must perforce adapt to them. The "production" of the Knowledge organisations is solving problems that are hard to solve in a standardised manner. The knowledge industry therefore has to treat its customers as individuals. ranging from those organizations totally adapted to their customers to organizations that have refined and packaged their output In the companies on the far right. In fact. Image. Extensive empirical work has been conducted on the Miles and Snow (1978) typology (see Zahra and Pearce. highly educated and/or with long experience in a profession often involved with information processing. The customer often does not know what he or she is asking for. and Miller and Friesen (1986) have all developed empirical taxonomies of firms based upon the content of the organization's strategy. too much initiative might disrupt the fine-tuned system and make it less effective. Hickson et al.edu. The staff (key people) tend to be very competent.to organisations that have refined and packaged their output. 1990). and performance is robust across environmental contexts. most of this work has focused on testing specific hypotheses with respect to the typology rather than the empirical validation of the classification system. manuals.. The standardized service factory has a high structural capital. industrialized preprogrammed production aimed at a mass market The success comes from standardization and the economy of scale resulting from it. CBS E-Journal, Biz n Bytes, Issue 4,June., 2010 Shrivastava and Grant's (1985) work is also significant, each adopted the strategic decision as the unit of analysis. Development of an empirical taxonomy using the organization as the unit of analysis has been more limited. For example, Miller and Friesen (1977, 1978, 1984) used Q-type factor analysis to identify ten 'archetypes' of strategy-making. Eighty-one case studies were coded and clustered into the 10 types using measures of environment, structure, and strategy process. This work clearly broke new ground methodologically and offered a fresh approach to organizational classification. However, the resulting taxonomy was quite coarse-grained since it did not identify specific strategy process types distinct from structure or environment (Hambrick, 1984). Shrivastava and Nachman (1989) used a similar approach in their empirical classification of 27 business cases. However, the constructs used in the classification system in this study were limited to those relating to executive leadership and design processes. Organizations have long sought how to achieve a competitive advantage in dynamic environments. Some suggest that advantages are achieved by placing a renewed emphasis on delivering superior products and services to customers. Others feel that organizations should take a more pragmatic approach by implementing 'best practices' (Miles and Snow, 1978; Bourgeois, 1980; Snow and Hrebiniak, 1980; McKee, Varadarajan, and Pride, 1989; Venkatraman and Prescott, 1990). Finally, some have suggested a more cerebral or cultural approach which requires organizations to engender a market orientation (Kohli and Jaworski, 1990; Narver and Slater, 1990; Jaworski and Kohli, 1993; Day, 1994, 1998). The Knowledge-Intensive Organisations The knowledge-intensive organization is an organization where the majority of the employees are highly educated, where the "production" does not consist of goods or services but complex non-standardized problem-solving. The problem-solving process involves a lot of information processing (not necessarily computerized) and the end result is normally a report or process delivered orally or as hard copy. The customers are treated individually and often called clients or patients. The companies are in the knowledge industries like management consulting, computer software, technical research, advertising, law, medicine, architecture, and so on. The sector is sometimes called professional services or business services but they have counterparts in the public sector, such as many of the highly specialized governmental bodies or specialized hospitals or research organizations. They also exist within big organizations as departments for R&D or laboratories. The successful application of the factory strategy gives a high volume in money terms and is very tempting for an entrepreneur, who can get very rich. But the strategy also almost certainly leads to a loss in professional knowledge, a reduced value added per employee, smaller job content, and opens up for price competition in the end. Some of the most challenging problems that are facing the managers of today are closely linked to the choice of strategy. And they are people problems: disenchanted employees and intensified competition for the best recruits, who are becoming ever more demanding and requiring "free" professions anywhere except on the manufacturing industry shop floor. The successful companies in the knowledge-intensive industries have had to tackle the problems of managing "difficult", highly skilled employees wanting to do their own thing as well as demanding customers wanting tailor-made solutions every day. In fact, it is an integral part of the lives of their managers. The knowledge-intensive organization is an organization where the majority of the employees are highly educated, where the "production" does not consist of goods or services but complex non-standardized problem-solving. The problem-solving process involves a lot of 10 http://www.cgc.edu.in/ ISSN 0976 – 0458 CBS E-Journal, Biz n Bytes, Issue 4,June., 2010 information processing (not necessarily computerized) and the end result is normally a report or process delivered orally or as hard copy. The customers are treated individually. The companies are in the knowledge industries like management consulting, computer software, technical research, advertising, law, medicine, architecture, and so on. The sector is sometimes called professional services or business services but they have counterparts in the public sector, such as many of the highly specialized governmental bodies or specialized hospitals or research organizations. They also exist within big organizations as departments for R&D or laboratories. STRATEGY OF THE KNOWLEDGE COMPANY The knowledge company: • • • • • • • • • Solves complex non-standard problems demanding creativity Has a small flat organization Has a high number of professional employees ... Grows organically and through alliances rather than by acquisition Forms private partnerships rather than goes public Treats its clients individually Builds company strength through skilled individuals Develops the organization through developing the know-how of the employees Has managers who are formal as well as informal leaders Factors for making Knowledge company strategy Following are the factors which make the strategy successful: (International Review of Strategic Management. D. E. Hussey ed. John Wiley & Sons Ltd) 1. Niche Orientation It is much easier to manage a narrowly focused knowledge company than a conglomerate. This is because (a) a leader from another profession will not have the automatic following from the professionals in the other; (b) it is more or less impossible for the conglomerates to achieve better quality than the focused companies. 2. Organic Growth Acquisition of a knowledge company nothing more than recruiting a large bulk of new people - unseen. This normally creates disenchantment among the Professionals in both camps and quality, motivation and consequently productivity are affected negatively. 3. Quality Control All professionals want to produce high quality. Clients want it too. The key is the followup of quality through rigid systematic client reviews. 11 http://www.cgc.edu.in/ ISSN 0976 – 0458 CBS E-Journal, Biz n Bytes, Issue 4,June., 2010 4. Developing the Core Know-how The know-how is the most important asset and is regarded as a balance sheet item to preserve' improve, develop, acquire and guard. The Professionals are given ample resources for research into the core areas. 5. Keeping the Key People-Preserving the Know-how Various creative measures are found in order to keep the key people who possess the critical know-how. The actions vary between beer on Friday afternoon and strict employment agreements and owner/partnership. 6. Small is Beautiful There seems to be no economy of scale in production; on the contrary, creative people like small organizations better than big ones. Efficiency measured as value added per employee is the same or even slightly better in small companies as compared to larger organizations . 7. Economy of Scope There are some scale economies in PR and marketing. Big know-how Companies get more attention and larger accounts from big clients. Accounting firms also maintain that they need a certain volume in order to be able to keep specialist knowledge which their clients ask for, Such as international tax. 8. Strong Culture - Little Need for Formal Control The successful know-how companies see culture as a management tool and carefully maintain and develop it. This is because the stronger the culture, the lighter the formal control. If bright and knowledgeable people are well aware of what is allowed, how they are expected to behave and what ethics the company stands for, very little traditional top down management is needed. 9. Leaders Come from the Profession If the leader is a professional or ex-professional of the same industry as the company, he/she will find it easier to (a) get the professionals’ following, (b) truly understand the business. Very often this is impossible, so the leadership is divided between two or even more people. The traditional managing director, as we find him in the manufacturing company, takes on a different position in a knowledge-intensive organization. 10. An overall Knowledge Focus It is not only the Competence of the professionals, which is worth harnessing, also the other two intangible assets, the External Structure and the Internal Structure. An understanding of the whole, the knowledge flows and how to leverage them off each other is the tenth success factor. The manager of a knowledge company isno different from his/her industrial colleague. The knowledge company manager also manages the assets and tries to optimize their profitability. Only - the assets are the people. 12 http://www.cgc.edu.in/ ISSN 0976 – 0458 which involves an element of uncertainty. People are seen to be constantly extending themselves into their world by both tangible means. such as customer relationships. Tangible assets are owned by the company and usually the only assets that the accountants are allowed to bring into the Balance sheet.June. Biz n Bytes. reputation and new experiences for the customers. The informal power play. People can use their competence to create value in two directions: by transferring and converting knowledge externally or internally to the organisation they belong to. The value of intangible assets can not be displayed in normal market transactions. The Individual Competence The External structure can be seen as a family of intangible relationships with customers and suppliers. When they direct their attention outwards. brand awareness. That there is a value everyone agrees. The family of Internal Structure can be seen to hold patents. The value of such intangible resources is primarily influenced by how well the company solves its customers’ problems. and can change over time. It is useful to include also the 13 http://www. the organisation can legally own only a small part of the Internal Structure.. Some computers perhaps.in/ ISSN 0976 – 0458 . A knowledge-based strategy formulation should thus start with the primary intangible resource: the competence of people.CBS E-Journal. gardens and cars and intangible corporate associations. they will in addition to delivery of goods and money also create intangible structures. The real assets of a Knowledge Organisation are mostly intangible. computer systems and other administrative more or less explicit processes. A Knowledge Organisation normally has rather few tangible assets. such as better processes and new designs for products. and depend ultimately on people for their continued existence. like physical goods. templates. Reputations and relationships can be good or bad. they create tangible goods and intangible structures. People are seen as the only true agents in business. Issue 4. and relationships. When the managers of a manufacturer direct the efforts of their employees internally. such as craft. the internal networks. 2010 A Knowledge-Based Theory for Strategy Formulation The word Strategy is usually associated with activities and decisions concerning the long-term interaction of an organisation with its environment. the culture or the spirit can also be regarded as belonging to the internal structure. all tangible physical products and assets as well as the intangible relations are results of human action. When people direct their actions internally they create an Internal Structure. models. houses. which form the basis for the reputation (image) of the firm. However. concepts. These are created by the employees and are generally owned by the organisation. ideas. Three Families of Intangible Resources in knowledge company are: • • • The External structure Internal Structure. They are partly independent of individuals. Some of these relationships can be converted into legal property such as trademarks and brand names. but even the office space is often on lease.edu.cgc. The other direction is pointing towards the "Knowledge Company". Biz n Bytes. Even if the most valuable individuals leave a company that depends heavily on them. Internal structure is thus partly dependent.. the factory workers. IT. Journal of Intellectual Capital : Internet version ) Managing the Strategic Dilemma The knowledge organisation often finds itself pulled in two directions. such as a consultancy firm. since it is not possible to separate the internal structure from it’s creators. Issue 4. partly independent of individuals. 14 http://www. One direction is pointing towards the paradigm of the industrialised Service Company.cgc. HR and management in the Internal Structure family. sales and marketing. 2010 competence of individuals in the Internal structure family. accounting. at least part of both the internal and the external structures (the brand name)?will probably remain intact and can serve as a platform for a new start. The Individual Competence family consists of the competence of the professional/technical staff. The Firm from a Knowledge-based Perspective (Source: By:Karl-Erik Sveiby.June.CBS E-Journal. the experts. (Sveiby & Lloyd.in/ ISSN 0976 – 0458 .edu. such as support staff. 1987). the R&D people. all tangible physical products and assets as well as the intangible relations are results of human action.the knowledge organisations -. and depend ultimately on people for their continued existence. They wish to guard the survival of the organisation.CBS E-Journal. Look for larger profits. ideas. 15 http://www. 2010 The forces that pull towards the industrialized Service Company tend to come from the managers in charge of the organization. People are seen as the only true agents in business.in/ ISSN 0976 – 0458 . They there fore: Prefer to work in small units.edu. The Knowledge Organisation belongs to a subgroup within the service sector. In the 21st century. Biz n Bytes. Look for growth in volume rather than competence. Wish support from sufficient financial resources for own R&D Summary The emergence of the Knowledge Age heralds the rise of new corporate structures. gardens and cars and intangible corporate associations. A knowledge-based strategy formulation should thus start with the primary intangible resource: the competence of people. People are seen to be constantly extending themselves into their world by both tangible means. houses. Some suggest that advantages are achieved by placing a renewed emphasis on delivering superior products and services to customers. Others feel that organizations should take a more pragmatic approach by implementing 'best practices'. People are seen as the only true agents in business. and depend ultimately on people for their continued existence. The problem-solving process involves a lot of information processing (not necessarily computerized) and the end result is normally a report or process delivered orally or as hard copy.to organisations that have refined and packaged their output. The knowledge-intensive organization is an organization where the majority of the employees are highly educated. and relationships.. Want non standardized challenging problems. where the "production" does not consist of goods or services but complex non-standardized problem-solving.cgc. reduce uncertainty and work efficiently. A knowledge-based strategy formulation should thus start with the primary intangible resource: the competence of people. Organizations have long sought how to achieve a competitive advantage in dynamic environments. The forces that pull in the other direction usually come from the professionals. Issue 4. Want to work together with colleagues of high competence.June. Standardise service into packages that can be handled by less experienced and less costly personnel. The service sector is not a discrete phenomenon but rather a spectrum of company types ranging from those organisations totally adapted to their customers -. all tangible physical products and assets as well as the intangible relations are results of human action. such as craft. Prefer close relationships with demanding customers. They therefore: Replace staff with computer systems. knowledge will be a company's most important asset and competitive advantage. July-August 1993 Glasersfeld E.in/ ISSN 0976 – 0458 . E. 1993.June. ‘The Changing Technology of Technological Change: General and Abstract Knowledge and The Division of Innovative Labour’.CBS E-Journal.K (1990): The Core Competence of the Organisation. Sage USA. 1990. Hamel G. Biz n Bytes. K. Strategic Management Journal.E. (Knowledge Management) Ledarskap Stockholm Sveiby. J. (1990): Kunskapsledning. Strategic Management Journal 14. Normann. T. (1983) Service Management. & Gioia D. Hall (1992): The strategic analysis of intangible resources. K. vol 13 pp135-144. R. HBR MayJune1990. D. Fortune. ‘Strategic Assets and Organizational Rents’. R. Arora. Malmo Sveiby. (1995): Knowledge. Baba. Issue 4. Liber. South Africa Fambare A. Schoemaker. (1989) The Invisible Balance Sheet. Harvard Business Review. Ledarskap. von (1988): The Constructon of Knowledge. 523–532. Knowledge work and organisations: an overview and interpretation. Y. Sveiby. 643– Blackler F. K. (1994): Towards a Knowledge Persective on Organization. 1998. (eds. and A. Salinas California.G. Intersystems Publications. A. Garvin (1993): Building a Leaming Organisation. 1997. & Prahalad C. ********************************* 16 http://www. J. ‘Beyond Boundary Spanning: Managing External Dependence in Product Development Teams’. (2001): Presentation in Sekunda. Managing The Flow of Technology. and P. Nobeoka. and Lloyd. Stockholm. and K. Ancona.F. Caldwell. ‘Toward Knowledge-Based Product Development: The 3-D CAD Model of KnowledgeCreation’. H. 1995): Creative Action in Organizations ? Ivory Tower Visions and Real World Voices. 119–135. Cambridge Mass: MIT Press. (1989): The Trust Gap. Contributions to Conceptual Semantics. Research Policy 26. 33–46. December 4 Ford C. Sveiby. E.edu. (1987) Managing Know-how. and D. London.E.cgc. Journal of High Technology Management Research 1. 2010 References Allen. Research Policy 23. (ed. K. Amit. T..). 1994. Organisation Studies vol 16 (6) 1021-46 Buckman R. Gambardella. Bloomsbury. CBS E-Journal, Biz n Bytes, Issue 4,June., 2010 Harmonization of International Accounting Standards in emerging and global economies Dr. Asha Sharma Assistant Professor Aravali Institute of Management Jodhpur Introduction Accounting is the art of recording transactions in the best manner possible, so as to enable the reader to arrive at judgments/come to conclusions, and in this regard it is utmost necessary that there are set guidelines. These guidelines are generally called accounting policies. The intricacies of accounting policies permitted Companies to alter their accounting principles for their benefit. This made it impossible to make comparisons. In order to avoid the above and to have a harmonised accounting principle, Standards needed to be set by recognised accounting bodies. This paved the way for Accounting Standards to come into existence. Accounting Standards Accounting standards are regarded as a major component in the accounting framework and reporting practices. Accounting standards improve the creditability and reliability of financial statements. Accounting Standards are written policy documents issued by experts accounting body or by govt. or by any other body covering the aspects of recognition, measurement, presentation & disclosure of accounting transaction in financial statement. Aim of Accounting Standards at improving the quality of financial reporting by promoting comparability, consistency & transparency. Accounting Standards are the policy documents issued by the recognized expert accounting body relating to various aspects of measurement, treatments and disclosure of accounting transaction and events. Accounting Standards contain the principles governing accounting practices and determine the appropriate treatment of financial transactions. International Accounting Standards With the activities and interests of investors, lenders and companies becoming increasingly global, the Commission is increasing its involvement in a number of forums to develop a globally accepted, high quality financial reporting framework. Our efforts, at both a domestic and international level, consistently have been based on the view that the only way to achieve fair, liquid and efficient capital markets worldwide is by providing investors with information that is comparable, transparent and reliable. That is why we have pursued a dual objective of upholding the quality of financial reporting domestically, while encouraging convergence 17 http://www.cgc.edu.in/ ISSN 0976 – 0458 CBS E-Journal, Biz n Bytes, Issue 4,June., 2010 towards a high quality global financial reporting framework internationally. In this release, we are seeking comment on the necessary elements of such a framework, as well as on ways to achieve this objective. One aspect of this is seeking input to determine under what conditions we should accept financial statements of foreign private issuers that are prepared using the standards promulgated by the International Accounting Standards Committee. Accounting Standards is to standarize the diverse accounting policies and practices with a view to eliminate to the extent possible the non-comparability of financial statements and the reliability to the financial statements. International accounting standards are a necessary part of the rapidly globalization economy. However it is important to outline the steps necessary to establish these standards. This paper explores the issues surrounding harmonization of accounting standards between nations. The Requirement of Harmonization of Accounting Standards Globalization and growth of multinational companies The requirement of global economy is that accounting policy should be standardized among nations. This "harmonization" of accounting standards will help the world economy in the following ways: by facilitating international transactions and minimizing exchange costs by providing increasingly "perfect" information; by standardizing information to world-wide economic policy-makers; by improving financial markets information; and by improving government accountability. International investment decisions and financial-based management decisions are then made with less risk. Growth of International Market A harmonization of accounting policy would provide an important role globally. Regulators and auditors will be receiving the same information, facilitating the evaluation process. In the absence of free trade, international accounting standards will allow nations' tariffs, quotas and other trade restraint mechanisms to be more accurate and less risky for those engaged in trade. Investors and managers will be able to make more valuable decisions. World resources will be better managed and allocated. It is possible, due to their necessity, to have international accounting standards (IAS) harmonization. The following outlines the issues surrounding the development of these standards. Beneficial for national and international market Harmonization must begin with a standardization of the reporting requirements by national securities regulators. Participants in the globalized financial markets are demanding international accounting standards. The International Organization of Securities Commissions (IOSCO), of which the U.S. Securities Exchange Commission is a member, is taking the lead in the development of accounting policy for securities regulator's reporting requirements. IOSCO has a "built-in desire to reduce the number of acceptable alternatives" corporations can choose from when reporting the results of operations and net worth. 18 http://www.cgc.edu.in/ ISSN 0976 – 0458 CBS E-Journal, Biz n Bytes, Issue 4,June., 2010 Business process outsourcing In lesser-developed countries standardization has been promoted through the establishment of regional accounting associations and accountant education programs. The International Monetary Fund has aided in this effort by assisting governments with their financial management procedures. The industrialized nations' foreign assistance programs include training local accountants and professional development. Control over politicalization Efforts should be continued through IOSC to establish international corporate reporting requirements. A fundamental first step is to gain international agreement as to the definition of financial statement items. The catalyst should come through political pressure placed on securities regulators by international industry. Once international standards are set, the politicalization of domestic policies will cease. In the short term, an approach to internationalism is to find standards acceptable to each local regulator. Next, the amount of variance allowed from a single standard should be reduced until additional standards placed on industry locally by regulators is removed. The curriculum of business school accounting programs, in addition to practicing accountants, must quickly adopt these international standards. Assist with international economic and exchange rate Government financial reporting standards also need to be harmonized to assist with international economic and exchange rate coordination efforts, such as those of the Group of Seven nations, the Asian and African Development Banks, the Organization for Economic Coordination and Development (OECD), and the International Monetary Fund. Harmonization would assist in realizing the "level playing field" that the above efforts are attempting to achieve. Additionally, accounting standardization would allow better policies to be formulated and for more accurate comparative analysis by domestic economic planners. The International Federation of Accountants (IFAC), whose membership is the same as the private sector IASC, is responsible for standards concerning accounting for educational and public sector entities, and audits and ethics issues. Uniformity in reporting to interested groups Adoption of IAS by accounting bodies in developing countries would reduce the expense of creating domestic accounting standards. Countries with relatively high inflation might be able to reduce "indexing" and other poor polices such as periodic, government-mandated revaluation of long-term assets with the adoption of international accounting standards. 19 http://www.cgc.edu.in/ ISSN 0976 – 0458 in/ ISSN 0976 – 0458 . and the world's economy.. Accounting policy processes are different in each country. Hatches in foreign trade When encouraging harmonization. The difficulty in establishing international economic cooperation has been proved with the recent breakdown of the General Agreement on Tariffs and Trade. Difficulty in adoption An argument against international accounting standard harmonization is that the costs of creation and adoption of IAS standards would not be worth the benefits. economic hegemony an issue. A nation balances legal sovereignty with international cooperation. egoism and pride Superiority complex by developed countries 20 http://www. The creation of accounting standards is a political process. the process of setting accounting standards might be more the result of political than economic variables.cgc. FASB standards are the result of complicated political processes and negotiation. Biz n Bytes. 2010 The factor which are barriers in harmonization of Accounting Standards Political Interference The major issues surrounding international accounting policy harmonization is political interference. It is not recognized in all nations and national industrial sectors that free trade is good for a nation's.edu.S. the accounting profession sets a standard for self-regulation. Issue 4. social and political environment Diverse Accounting Practices Nationalism. The argument follows that full harmonization is probably not practical nor valuable. The trend has been toward bilateral and trade-block agreements.S. The difficulty in enforcing international law due to extraterritoriality requires that national governments promote and enforce accounting harmonization. Just as international and textile agreements have caused negotiation deadlocks. in actuality. the International Organization of Securities Commissions (IOSCO) and the International Accounting Standards Committee (IASC) must not make U. While it could be argued that in the U. Those with political power have a vested interest in domestic standards. making it difficult to reach a consensus on standards. Capital markets have already adjusted to the existence of a global market (without standardization) and investors and issuers have been able to make investment decisions. Contracts between nations are more enforceable than those between citizens of different nations. Other obstacles (a) (b) (c) (d) (e) (f) Different tax laws in different countries Regulating Authorities are different Differences in economic.CBS E-Journal.June. . International Economic Development The role of developing nations in global economic development cannot be ignored. East Germany. Issue 4. Harmonisation does not mean the replacement of existing GAAP with GFS. Rather. it is necessary to harmonize international accounting standards to measure the value of these assets in the world market.CBS E-Journal. Telecommunication and computer technology is making instant financial information a possibility. 2010 Value Addition of Harmonization of Accounting Standards in Global Economy Accounting standardization will aid in the economic conversion of the Central European countries." Capital Market Internationalization Technology is increasingly providing the tools necessary to make accounting standardization a reality in the short-term.in/ ISSN 0976 – 0458 . Accounting standards improve the creditability and reliability of financial statements. As sources of comparative advantage in labor and raw material. presentation and disclosure requirements. Government accounting needs to be standardized to assist in the efforts of inter-governmental economic development cooperation. It has served as a means of communication to various stake holder. Biz n Bytes.cgc. Infant stock markets and banking institutions need sound accounting systems. measurement. In view of the globalization of the economy and internationalization accounting standards has become an imperative necessity. 21 http://www. Accounting standards are regarded as a major component in the accounting framework and reporting practices.edu.June. Additionally. For this purpose harmonisation of accounting standards is the most current issue throughout the world. the principle is “convergence to a high quality standard” with consideration being given to definition. tax law standardization is necessary to minimize tax avoidance and to help create the "level playing field. International accounting standard harmonization is necessary to provide this accurate information Conclusion Accounting is the language of business. recognition. China and the Commonwealth of Independent States (CIS). International standards can be adopted to efficiently evaluate businesses to be sold by governments to the private sector. 2004. Issue 4.edu. Arpan J. L: Convergence. Holman.: International Accounting and Multinational Enterprises..: The Evolution of Accounting in Developing countries . Achievement of the objectives of harmonisation will take time. Dec. S. Biz n Bytes. References Tulsian P. R.S. International Journal of Accounting (1978). 1981.J.C.: Accountancy Gupta S. pg-47 22 http://www. Hurdles Remains Accounting World.H.CBS E-Journal. The most positive achievement over the past few years is that the important of harmonisation of accounting standards is felt by all the countries and they have started taking the issue seriously. Warren Gorham and Lamount. Chand & company Ltd. Harmonization of Accounting Standards does not seem to be easily achieved as there are many obstacles in the way. commitment and willingness for standards setters to work together to remove differences.cgc. 2010 Most of the developed and developing countries have their Accounting standards and international Accounting standards are used as a basis for developing their own standards aim at reducing diversity in accounting and reporting practices in different countries.in/ ISSN 0976 – 0458 . David. Radebaugh L.June.: Advanced Accounts. Briston.C. CBS E-Journal. Anil Sharma2 Indian Institute of Health Management & Research (IIHMR). Suresh Gyan Vihar University. and academia. This serve as a bridge in bringing together Indian researchers. Before prescribing any new drug therapy by the doctors. healthcare practitioners. INTRODUCTION Pharmacoeconomics is defined as ‘a branch of health economics which particularly focuses upon the costs and benefits of drug therapy’1. Biz n Bytes. Jaipur. The present practice of pharmacoeconomics focuses more on the pharmaceutical drugs in compare to general health care services. The economic evaluation of the health care system provides standard guidelines which can be helpful in providing “Quality of heath care system at optimum price”. the Society of Pharmacoeconomics and Outcomes Research India (SPORINDIA) was organized to provide an environment for knowledge sharing among researchers. statistics and psychometrics contributing ideas and methods for the analysis in health care system. healthcare practitioners and decision-makers interested in pharmacoeconomics and outcomes research. S. The bases of clinical epidemiology. Rajasthan *E-mail: abhishek@iihmr. health-related organizations. but also by primary care providers in health care system. and (ii) does the new drug have any economic advantage over the existing drugs 1. economics.D Gupta1. It also acts as a resource at a local level for individuals including students interested in pharmacoeconomics and outcomes research 2. PHARMACOECONOMICS CONCEPT The Science of pharmacoeconomics analyses provide a basis for resource allocation and utilization. Rajasthan 2 Gyan Vihar School of Pharmacy. It is important that this concept be understood not only by policy-makers.. The application of pharmacoeconomic principles serve as a major tool that aims to decrease health expenditures and optimize healthcare results. to resolve these problems (SPOR-INDIA) conducting meetings and 23 http://www. Jaipur. For promoting the science of pharmacoeconomics in health care system as well as in research sectors in India.June.in/ ISSN 0976 – 0458 . health administrators and health managers. and are increasingly becoming important for health policy decision-making.cgc. Issue 4.org 1 ABSTRACT The principal of pharmacoeconomics science serve as a major tool in health economics that aims to evaluate and optimize the health economy with new evaluation techniques. Thus. 2010 Pharmacoeconomics in Health Care Services Abhishek Dadhich*1. and decision-makers interested in pharmacoeconomics and members of pharmaceutical industry. This concept focuses on both pharmaceutical sectors as well as general health care services.edu. two questions must be answered (i) whether the new drug is equally or more efficacious in the said disease as compared to the standard treatment. In the present scenario of India the field of pharmaceutical industries and primary health care providers grown in large number with various new formulations of drugs and health care services which make difficult for the physician as well as medical professionals to judiciously decide which drugs to be use or not to be use. and also determines the type of analysis. These pharmacoeconomic evaluations based on the availability of published data from randomized controlled trials concerning efficacy. drug acquisition costs. or a segment of population or the total national population. Cost–effectiveness analysis 3.. The SPOR-INDIA involved in making regulatory framework regarding pharmacoeconomic evaluation in Indian health care system. Cost-minimization analysis 2. The basic idea behind economic evaluation of health programmes is relatively simple as it seeks to identify measure and value their costs and outcomes simultaneously. When no substantial or relevant information is available. managerial staff. professions allied to health.g.edu. costs of other consumables such as needles and syringes) 24 http://www. auxiliary staff.g. drug acquisition costs. Issue 4.in/ ISSN 0976 – 0458 .CBS E-Journal. Cost–utility analysis 4. METHODOLOGY OF ECONOMIC EVALUATION IN HEALTH CARE In the context of health care the inputs the production process includes labour (clinical staff. EVALUATION TECHNIQUES For the evaluation cost advantages and disadvantages the balance sheet is drawing up between them. while the unit of measurement of benefits (advantages) varies with the type of analysis. respectively. These can also be measure in term of inputs and outputs. The ultimate objective of economic evaluation is to provide a menu of choice for decision making regarding allocation of resources between different programmes 3. The cost is described as cost per unit outcome. and consumables such as drugs. a pharmacoeconomic evaluation can be performed within a hospital or health system using the pharmacoeconomic and efficacy literature 5. 2010 seminars at national and international level to provide the knowledge about the pharmacoeconomics concept among the health care providers. buildings. These factors are combined and organized to provide certain levels of care which will lead to an improvement in the health status of the population for whom the programme has been designed which could be a single patient. There are 4 main approaches/techniques for economic evaluation in health care services which are as follows: 1. days in hospital). The ‘costs’ are always assigned a monetary unit. Healthcare costs are usually subdivided as follows: Variable costs: Costs which vary immediately according to the number of patients treated (e. equipment.cgc.June. These are of various types like: Healthcare costs: Financial costs which fall on the health services (e. and so on). Biz n Bytes. Cost–benefit analysis VARIOUS COST ANALYSIS In the cost analysis the various types of cost are identified. and computing all the relevant costs for the alternatives (from their perspective) to obtain a cost–effectiveness ratio. etc. prescription charges or other treatment expenses incurred by the patient.7.CBS E-Journal. cost of administering the medication. CEA is the most commonly applied form of economic analysis in the literature. usually only to the health service. outcomes are measured in ‘utility units’. COST-EFFECTIVENESS ANALYSIS (CEA) The term cost effectiveness is often used loosely to refer to the whole of economic evaluation. the cost/QALY value of various procedures can be calculated and compared. capital costs of building or equipment. It therefore compares therapies with qualitatively similar outcomes in a particular therapeutic area. By using CUA. 2010 Fixed costs: Costs which do not vary with the number of patients treated. i. but should properly refer to a particular type of evaluation.June. costs of providing social services. coronary artery bypass graft and the use of erythropoietin in renal failure are totally different procedures. and especially in drug therapy. i. Direct and Indirect cost: Direct cost is the obvious cost.8. at least in the short term. Thus QALY tells us about both the quantity and quality of life gained. An example would be prescribing a generic preparation instead of the brand leader (lower cost but same health outcomes)11. Quality-adjusted life-years (QALY) is the commonly used outcome measure (QALY = QOL × number of years gained). QOL measure is incorporated into the outcomes.g. Cost–utility is expressed as cost/QALY gained. time given up by voluntary carers). . in which the health benefit can be defined and measured in natural units (eg years of life saved. Biz n Bytes.g. cost of patient’s or carer’s travel to and from hospital. Indirect cost is the one borne by the patient and family like transportation/traveling cost etc. this can be done using CUA. CUA is not disease-specific.edu. and is applicable only where the outcomes are identical and need not be considered separately. costs of treating an adverse drug reaction. in severe reflux oesophagitis. Other financial costs: Financial costs which fall outside the health services (e.cgc. loss of productivity) Intangible costs: Costs which are difficult to value financially (e. 25 http://www. COST-UTILITY ANALYSIS (CUA) CUA is a type of evaluation in which drugs/interventions with different outcomes can be compared. pain.6. the cost of the health service.g. Issue 4.in/ ISSN 0976 – 0458 . staff salaries). if limited resources need to be allotted to them. It does not allow comparisons to be made between two totally different areas of medicine with different outcomes 4. It includes physicians’ fees. For instance.e. ulcers healed) and the costs are measured in money.. In CUA. anxiety and loss of energy. COST-MINIMIZATION ANALYSIS (CMA) This involves measuring only costs. usually one year (e. For example.e. we could consider the costs per patient relieved of symptoms using a proton pump inhibitor compared to those using H2 blockers. country to country variations). cost benefits of expanding university education (benefits of improved education and hence productivity) compared to establishing a back pain service (enhancing productivity by returning patients to work).e. CBA may also seem to discriminate against those in whom a return to productive employment is unlikely. The various health professionals. and not just medical. It is also an important and helpful concept in economics evaluation in drug therapy.June. Biz n Bytes. time-frame settings and utility measures. 2010 Arranging the cost/QALY values of various interventions in ascending or descending order is called the QALY league table. Thus. CONCLUSION The branch of Pharmacoeconomics is a new bud in health care sciences which is continuously expanding with new methodologies and applications. these tables can be potentially misleading. i. although many economists like it on theoretical grounds and because it removes some of the “sacred cow” protection which surrounds health care. It helps in comparing the utility of different items at a glance.CBS E-Journal. CBA may ignore many intangible but very important benefits not measurable in money terms. Homogeneity of the studies included in the league table is essential. These are especially useful for resource allocation by policy-makers.in/ ISSN 0976 – 0458 . QALY instruments used.cgc. the studies should have similar data collection techniques.edu. and hence both costs and benefits are expressed in money.e. Users of these tables should always compare their settings with those of the source studies included in the table. relief of anxiety. Ideally. or the unemployed. They argue that health should be another commodity. This approach is not widely used in health economics. However the virtue of this analysis is that it may allow comparisons to be made between very different areas.g. Issue 4. and not necessarily valued more than other possible uses of the resources 10. COST-BENEFIT ANALYSIS (CBA) In this type of analysis the benefit is measured as the associated economic benefit of an intervention (eg monetary value of returning a worker to employment earlier). cost analysis and geographic settings (i. eg the elderly.. clinicians and pharmacist should actively participate in establishing standard guidelines for the proper implementation of Pharmacoeconomics in developing countries. 26 http://www. e. the health science focuses on ‘value for money’. if league tables are to be meaningfully used. In the era of rising medical costs.g. However. e. their proper construction and correct interpretation is a must 9. Siegel JE. 5. Gold MR. Weinstein MC.ispor. Issue 4. Recommendations for reporting cost effectiveness analyses. JAMA 1996.cgc. Weinstein MC.306:570–2. Gold MR. Economics and cost effectiveness in evaluating the value of cardiovascular therapies: A survey of standards and guidelines for costeffectiveness analysis in health care. Epilepsia 1999. 27 http://www. Berger ML. Drummond M.adisonline.edu. 8.307:726–8. Some guidelines on the use of cost–effectiveness league tables. Recommendations of the Panel on Cost-effectiveness in Health and Medicine. Alexander M.iuphar. Costs and cost-minimization analysis. Thomas SV. Panel on Cost–effectiveness in Health and Medicine. Schmier JK. BMJ 1993. 10. Robinson R.June. Luce BR.123:61–70. 2010 REFERENCES 1. Kamlet MS. JAMA 1996. Walley T.org/pdf/hum_67..in/ ISSN 0976 – 0458 .276:1253–8. Luce BR.pdf 9. Am Heart J 1999. Russel LB. 11. Haycox A. Br J Clin Pharmacol 1997.org accessed on 20/02/2009 6. 2. Hillman AL. Utilization of services for epilepsy and its economic burden in India: A multicenter study.43:343–8. Russell LB. 3.276:1339–41. Siegel JE. Pharmacoeconomics: Basic concepts and terminology. Mason J. A report of principles. Biz n Bytes. 7. www. Stewart A. http://pharmacoeconomics. 4.137:S53–S61. http://www. Ann Intern Med 1995. Abraham PA.com accessed on 14/02/09. Torrance G.40 (Suppl 2):198. BMJ 1993.CBS E-Journal. Economic analysis of health care technology. Biz n Bytes.CBS E-Journal. The model incorporates a series of steps: Mission of the Institute. Accreditation. There has also been gradual transference from the traditional morality based concept of management education to the development based utilitarian theory of management education. The increasing demand and the quality consciousness of the stakeholders had changed the working style of various BSchools in the recent past. Examination. Curriculum and Contents. Siksha O Anusandhan University. mass media information superhighway and the whole setup aspiration associated with these phenomenon changes.kalyan. Globalization in India was generally taken to mean ‘integrating’ the economy of the country with world economy. Bhubaneshwar Abstract The academic scenario has over the years undergone a tremendous change assuming reincarnation of vast modern perception of global realities as its components. This in term implies opening up economy to foreign direct investment by providing facilities to foreign companies to invest different field of economy activities and allowing Indian companies enter in to foreign collaboration and encouraging them to set up joint venture abroad. B-School Ranking. Faculty programmes and Teacher’s Training.com Faculty member. Teaching Methods and etc. FMS.. The increasing demand and the quality consciousness of the stakeholders had changed the working style of various B-Schools in the recent past. With the advent of communication revolution. the morality has undergone a reincarnation in management education. Issue 4. mass media information superhighway and the whole setup aspiration associated with these phenomenon changes. This in term implies opening up economy to foreign direct investment by providing facilities to foreign companies to invest different field of economy activities and allowing Indian companies enter in to foreign collaboration and encouraging them to set up joint venture abroad. With the advent of communication revolution. There has also been gradual transference from the traditional morality based concept of management education to the development based utilitarian theory of management education.sahoo@gmail. the morality has undergone a reincarnation in management education. 2010 Management Education: Trends and Perspectives Dr.in/ ISSN 0976 – 0458 . Globalization in India was generally taken to mean ‘integrating’ the economy of the country with world economy. Introduction The academic scenario has over the years undergone a tremendous change assuming reincarnation of vast modern perception of global realities as its components.cgc. There has been radical shift from the traditional university set up to a modern private B-School. There has been radical shift from the traditional university set up to a modern private B-School. The model incorporates a series of steps: 28 http://www.edu.June. Kalyan Kumar Sahoo Email:dr. AMBA. Biz n Bytes. just as bell and whistle control the flow of work on the factory floor. teaching techniques and the programmes offered. 2010 Mission of the Institute: The prime objective of learning needs and objectives of the Institute or mission of the Institute can be: • Change the thinking horizons of management trainees in to international standard. SAQS Curriculum and Contents : The curriculum consists of two important characteristics. This is a recent trend that boosts the business institutes brand image.in/ ISSN 0976 – 0458 .cgc.. • Developing the entrepreneurial and entrepreneurial abilities. Some of the Accreditations that are being sought by the B-Schools are: AASCB. collaborates with various agencies and institutes to share their knowledge and resources. It involves in the networking with the industry people. its curriculum. Branding of B-Schools: Various initiatives are taken by the Business Institutes to be brand as Best B-School. In India we have government bodies like the National Board of Accreditation (NBA) constituted by all AICTE and NAAC that is established by UGC. • Grooming of attitudes. The Financial Times. B-School Ranking: Various management institutes participate in the B-school ranking survey done by the various leading magazines and agencies to get their institutes enlisted in the ‘BEST B-Schools’ or to gain the top rankings. Some of its branding initiatives like the student development centre specially designed executive education programme and adopting the new teaching styles have made NUS enter an exciting phase of change and expansion brought about by competition and globalization. Knowledge and sound philosophy of life. EQUIS.cultural diversities.edu. Issue 4. Business Today.June.CBS E-Journal. in making the students knowledgeable and help in their final decision in the college (both domestic and international) to be joined on comparing the various parameters. it undertakes various “Memorandum of Understanding” with various colleges domestic and abroad ensures to take steps to meet quality specifications of various quality boards to meet global quality standards and accreditation. research wings. A management educated student was seen as the successful product of the B-school. ACBSP. Accreditation: Accreditation is considered as an essential factor for a student when he decides to join a college and influences the industries to judge the quality of the B-School. Learning is contextual: According to David Thornburg.National University of Singapore’s BSchool is the first in the ASIAN Region and among the first Asia Pacific to be accredited by AACSB for meeting the highest standards of education and research among Business Schools worldwide. • Develop the interpersonal potential by better management of cross. 29 http://www. EFMD. Business Week (Asian Edition). Ex-National University of Singapore (NUS) had undertaken several measures to brand their business schools that adopt the best of the curriculum of world renowned Wharton School of the University of Pennsylvania to the needs and wants of Singapore. Ex. These surveys are done and published by various leading publications every year like the Business World. Students were taught and then assessed to see what they had retained. AIMA and etc. bell and scope and sequence mandates controlled the flow of information at school. to be graduated at the end of the educational assembly line. skill. IACBE. Making a career today no longer means progressing upward within an established hierarchy. A teacher has to prepare his students for learning 24 hours. In many situations. A lifelong learner: Most of the students graduating from traditional colleges. and the exponential rate at which new information develops. are left to meet their future learning needs on their own. 2010 The curriculum of commerce and management education needs to be revised in the changed socio-cultural-economic scenario. today’s knowledgevalue teachers must learn a variety of skills in order to shift seamlessly from one career to another throughout Working years. Issue 4. This is a mismatch. Unlike the guild-based model of management education. Biz n Bytes.edu.” David Thornburg (2002). for a number of months / a year. this represents a return to a craft mentality where Progress is not measured by position.CBS E-Journal. lifelong process. in which. it now involves progressing upward through a series of assignments that provide continual opportunities to learn. that are open only several hours a day. Consideration for region. each apprentice must learn the limited skills necessary for a particular career. and it’s no wonder that those who are uncomfortable with ambiguity tend to be highly stressed.cgc. Students could be taught to treat all of life as a process of learning. but by growing mastery. Comfort with ambiguity follows naturally from the changing nature of the work contract. today. dividing then up either by Subject or by age. A B-School faculty has to prepare his her students for 24hours learning even when the student is not ready.” Our curriculum must relate to realities and focus on the context. Rather. Schooling models based on building. we would be extending the classroom beyond the few hours. The uncertainty with the rapidity of knowledge-base change virtually in all professions. Much like their industrial counterparts. Teachers only worked on one aspect of a student’s learning at a time. Students could be taught to teach him.June.in/ ISSN 0976 – 0458 . sectoral requirements and specialization are totally ignored in our curriculum. Two driving forces make lifelong learning as an essential character of successful people: the short self life of much existing information. Learning as a process not a place: “Learning is a continuous. Faculty must extend the class room beyond the 9 to 5. The objective of any management 30 http://www.. even when he is not nearly. Students could be taught to keep his senses alive. Then. 2.. Regular and updated on-job training will only be method suitable in case of world of mass knowledge and technological 31 http://www. strategic management and business environment. In addition to analytical skills. analytical skills and practical approach towards a problem which will make big divergence in his career. faculty development. forums and workshops. presentation skill. Education imparting process should be strengthened by providing the best competitive offers which helps in developing the differences in offer and competitor’s offer.Com. The outlook which one develop in those two years course at B-School will determine one’s thinking capacity. The leaders of tomorrow cannot depend on some old theoretical beliefs. It is more firm and planned. and infrastructure development. 4. it is suggested: Use innovative ways of industrial linkage Inputs of business programme must be as: 1. communicative. PhD. course has to strengthen with problem solving skill. rather they should spread their wings and cross every boundary. 3. national and international basis and those who are taking the product of business schools like industries. In order to meet the demand of technologically skilled. but emphasis should be to produce entrepreneurs to assist entrepreneurs and to solve the problem of entrepreneurs. Now the crucial point is. with management being taught with less scope for artistic quality and creative thoughts. Dimensions of I-I-I: The relevance of institute-industry interface has been discussed umpteen times in numerous seminars. lifelong learner teacher. student development. In the light of expectations of industry and requirements. skills in planning and operations. Course on foreign language must be introduced. Issue 4. we will be requiring a new way of teachers’ training. Tata Nano has been an illustration for many automobile companies who want to design their cars on the similar lines. The designing of curriculum should be done by the academicians on local.CBS E-Journal. conferences.in/ ISSN 0976 – 0458 . stress management skills. Biz n Bytes. HRD and entrepreneurship must be made compulsory. the rapid changing business environment is the need of the hour. networking ability. knowledge.cgc. The four dimensions of industry-interface are: knowledge development. This subject has caught the attention of innumerable writers too. agencies etc. Faculty programmes and Teacher’s Training: The management educators and training instructors can play a critical role in executing the task developing the right perspective and needed skills among the management students by redesigning business education programmes and modify the necessary.edu. The national educational system as compared to the system abroad is totally reverse. A continuous change based faculty development programme must design. Focus must be given on integrative courses such as corporate strategy. Need of hour: For a more efficient and supple education system. M. learning nothing at B-School will matter more than what you learn about the B-School. Rather than spooning the students with same techniques they should be trained and prepared for new challenging environment and should be encouraged to bring out their originality with their thoughts and innovative methods. 2010 education should not be to produce students having MBA.June. how to face interview.edu. Value added programs: Value added programs include sessions on soft skill development. Rather. group discussions and personality enhancement classes in order to give exposure and imbibe confidence among students.cgc. experimentation. Audio/ Video teaching aids need to be in place. then it becomes easy to face the challenges in real life. B-School faculties need to start a chapter with a case and some real life example and then proceed and end with another case to judge the understanding level of the students at the end of the chapter. Biz n Bytes.June.. Examination: Apart from semester and final examinations. In this case students. logical approach. to test the learning ability of the students. Once the student understands the subject well and conceptualizes it. Collaborative/participative learning must be encouraged in the class. Life skills. 2010 advancement. Teacher need to start a chapter with a case and some real life example and then proceed and end with another case to judge the understanding level of the students at the end of the chapter. internal test. These classes help students enhance their competencies. There need not be any direct question from the book rather all the questions need to be application-oriented to test the understanding and conceptualization of the subjects. Issue 4. However. Many management thinkers feel like doing away with examination system. system thinking. the pattern of examination and types of question may differ from institution to institution. Along with it some mini project should be assigned during this program. practical concept application exercises. group mentoring to find out whether student have really understood the topic or not are a few methods that can lead to effective learning. surprise test and open book examination needs to be planned and executed. faculty and industry champions collaborate to impart practical business education to students thereby create a growing body of knowledge within the school. internet based questions. Teaching Methods: Now it is widely accepted and proven that case method of teaching is very productive and hence many video case/movies have also come into place. I strongly feel. Student at PG level can always study what is there in the book. abstraction and collaboration will be get importance in the future teacher’s training than subject knowledge and educational theories. linkage knowledge. Business Simulation Lab: The realism of businesses. with simulation technologies and the web. 32 http://www. the teacher should bring fresh knowledge in the class. examination really makes student work hard systematically and understand the subject in a very structured way. Project Work: Four-six weeks of project in the area of specialization at final semester will help the students implement their classroom learning in the industry and get the facts of the industry requirements. so there is no need to emphasize on that.in/ ISSN 0976 – 0458 .CBS E-Journal. Finance. seminars and the like organized by students. It helps one to think out of the box. It also helps them improve their communication skills and develop better understanding of a topic. Student Development: As part of their development. Apart from these the institutions should maintain strong academic –industry interface and strong network among themselves. brand identification as well as subject and general questions. Ultimately it helps to bring practical knowledge and business trends in the classroom. presentation should be assigned to them. like Marketing. By these process institution will able to produce good students with higher academic achievement and overall personality development Management teachers need to think on how to develop areas like self esteem. Companies could engage students in in-house exercises.edu. Issue 4. Biz n Bytes. HRM.. This helps them become more confident and shed their stage fright. leadership qualities. 33 http://www. Class Presentation: In order to encourage students improve their communication skills and make them participate in the class. Consultancy Services: Faculties need to participate in providing consultancy services to the industry. Cultural club etc. so as to make the students aware of the practical aspects of the business/corporate environment.. will definitely benefit the students. team work etc. encouraging students to visit their factories or offices so that they get first-hand information on the production/office process. The topic of presentation may be academic as well as non academic. Let the students must handle the real exposure of corporate interface. 2010 Incubator/ED Cells: Management institutions should have incubator/Executive Development (ED cells so that students can take up some real-time project and come up with some innovation. Management Games: This is another very effective method of teaching. It includes different aspects like logo identification. funding of research or case studies involving students. Role Play: Role play helps students provide their prospective on a topic.cgc. This will help the faculties to be in touch with the industry and current business practices. Various management games on perception.in/ ISSN 0976 – 0458 . The burning issue is to introduce the corporate culture through various functions of management. sponsoring management fests and other events. summer projects and internship programmes besides their classroom learning of theories and principles. This facility will help students to build an entrepreneurial mindset. character among the students and come out with some strategies. Communication. Quiz Session: Quiz sessions should be held at the discretion of the respective faculty members in order to enrich the students with subject and general knowledge. students should have adequate exposure to management practices and process through frequent industry visits. According to individual profiling of each student Teaching pedagogy will undergo continuous change.CBS E-Journal.June. It provides a platform for students to compete with each other and in the process improve their existing knowledge. It also helps in enhancing the knowledge base and develops their all-round personality. . and adapt themselves with the new technologies and techniques. Extra/ special classes are to be conducted for weak students. Conclusion The coming world will be full of challenges and risks. interactive and serious towards studies. students. 2010 Mentoring and Counseling Session on a Regular Basis: Regular counseling and mentoring needs to be done for all students so as to make them more attentive. but we can be certain that they will all involve knowing where to hit the wheel. and the problem was solved. so to adjust with the global effect of the new era. “Five fifty for hitting a wheel with a hammer!” “No sir. Special attention should be given to weak and problematic students to ensure that they develop and improve before they go out of the college.CBS E-Journal. The five dollars were for knowing where to hit it. “For hitting the wheel. economy. We should also redesign our modern trends of management education system. so he took a hammer and as the wheel rotated to the right position.” 34 http://www. Issue 4.edu.” We may not know what type of management institutes. To end with the story about a great engineer and scientist Nikola Tesla. The purpose of management educationist is to prepare students for facing these challenges and taking risks. the charge is fifty cents. “Five dollars and fifty cents” Tesla replied. One has to come out from the traditional way of learning. The whole society has to come up in this great task of preparation of the future citizens.cgc. “How much do I owe you?” the plant manger asked. It also helps to bridge the gap between faculty members and students. technology is there in the coming years.June. The generator quickly came to full speed.in/ ISSN 0976 – 0458 . The role of administrators will be to train the future management teachers for the coming years.” said Test. Managing Education could become a diagnostic tool for all problems of the globalize world. He saw that the flywheel was out of alignment. who developed the alternating current generator? One day. Biz n Bytes. tapped it slightly to spring it back into place. Test was called to a power generating plant where the generator was running at very-low speed. Emerging Trends in Management education.Kalyan Kumar Sahoo. Alexandra. 6. University News. M.39. and Baroda. University News. 2.Joshi. May19-25.8. 4. 2010 References 1.41(20). USA. 2008. David Thornburg. MBA Review. Reincarnation of learning by Dharni Sinha.P. Globalization: A need for change in Educational Management System 5. M..icfaipress.b-school. The New Basics: Education and The Future of Work in the Telematic Age.Khaja Peer. Issue 4. The Teachers Education in 21st Century in India –Challenges Ahead.CBS E-Journal. J. University News. 2001. Vol.May19-25. The ICFAI University Press.University of Baroda. www.cgc. India. 2002.com 7. Biz n Bytes. Virginia. No. Santosh Gupta.2003.June. www.Mallick. The Hindu Business online 8.S.org 9.in/ ISSN 0976 – 0458 .edu. April. D. 2003. Dr. 3. 41(20). Economic Times 35 http://www. Modern Trends in Management Education. environment.CBS E-Journal. Maximum advantages can be obtained from other resources only through sustained human effort. Pradip Kumar Mallik Reader Department of Business Administration Centre for Management Studies Burdwan University Golapbag Burdwan – 713104 Mobile: 09831958233 Email: mallik_p59@yahoo. technology. 36 http://www. No other force can deter the onslaught of globalization. Globalization has induced sweeping changes in the business environment. society. its halo transcends across nations. etc.June.cgc. Its impact is so pervasive to spearhead radical changes in all spheres – individual. across the globe. etc. The impact of globalization is so enormous that it pervades the social infrastructure.in/ ISSN 0976 – 0458 . human resources. catapulting metamorphic changes in knowledge. Human Behaviour at Work: A Globalization Perspective Globalization is an ever-changing phenomenon.com & Dr. 2010 Human Behaviour at Work: A Globalization Perspective Dr. Furthermore. Human beings are the prime mover of an organization’s functions and operations. capital. Issue 4. be it external or internal. The present article makes an endeavour to delineate the impacts of globalization on business organizations. Globalization is an irreversible phenomenon. culture. It is irresistible. Indeed. Human behaviour is an integral part of an organization.edu. cultural milieu. social norms. legal framework and technological innovation to invite all round modification and transformation in business organizations. organization.. etc. whether traditional or modern. values. Biz n Bytes.) obtained from the environment into finished goods or services as outputs. the article tries to analyse the effect of globalization on human behaviour in present day organizations vis-à-vis the traditional ones.com Abstract An organization is an open system that transforms the inputs (materials. It is a reality. Pradyumna Kumar Tripathy Senior Lecturer Department of Business Administration Centre for Management Studies Burdwan University Golapbag Burdwan – 713104 Mobile: 09434177815 Email: pktripathy_in@yahoo. June. Figure 1: Key participants in business environment Government Investors Customers Organization Competitors Suppliers Employees Business environment. Similarly organization to organization interdependence and interaction is a feature of business environment. create an inner drive with varying propensities to distort the equilibrium within it.cgc.edu. legal framework. It is the basic driver of an organization at work. whether traditional or modern cannot escape from the involvement of human behaviour. Globalization has added another stumble amid constant preoccupation of an organization to play down the vagaries of internal and external environmental threats. employees. competitors. The present article embraces the upheavals of globalization and its impact on business organization. management. In fact. being interacted to generate reciprocal utilities and benefits for both. intermediaries.in/ ISSN 0976 – 0458 .. etc. Furthermore. cultural milieu. Customers. Internal forces such as organization’s workforce. etc.CBS E-Journal. act upon the organization to enforce contingent change. Globalization has been defined as a huge thrust. trade unions. 37 http://www. It is highly susceptible to change as external and internal forces of environment vary in contents and contexts over time horizons. general public. Organizations interact with multitude of segments in different ways. is dynamic. Human behaviour is an integral part of an organization. Organizations are the key players in the business environment. its impulse has triggered a compelling change in traditional business organizations. investors. whereas external forces such as economic situations. the article tries to delineate the effect of globalization on human behaviour that is supposed to be the prime mover of organizations’ functions and operations. governments. Biz n Bytes. The following figure illustrates the key participants in the business environment. legal and socio-cultural environment. Issue 4. etc. technology. in various forms and capacities interact with organizations or are. especially from the economic perspective that rattles the business landscape on such gigantic proportion that its vastness pervades the social infrastructure. An organization. by its very nature. So the cross-currents of internal and external couples render an organization highly turbulent. and technological innovations to invite all round modifications and transformations in light of its trajectories. 2010 Globalization has invoked a far reaching effect in business environment. Traditional organizations seldom lent any ground for workers’ participation. Figure 2: Traditional Organization: A Water tight Compartment Top Management Accountability Promise of performance Command Decision Control Work force Effort 38 http://www. Biz n Bytes. In traditional organizations.edu. This resulted in lack of cohesion and unity. entry of more organizations in the business arena. organizations came into existence and urged the need for human resources within it. in fact. was the propelling force of the organization because starting from decision making. employees were tailored to follow the dictums of the authority without getting an opportunity to show their ingenuity and skills. intervention of regulatory authorities.in/ ISSN 0976 – 0458 .functional interface. Issue 4. Figure-2 has made an attempt to depict the organizational climate that prevailed in traditional organizations. This prevented the information sharing. joint participation and interactive environment within the organization and thus led rise to a mechanistic work climate very akin to water tight compartment. Moreover. Traditional organizations are typified by narrow span of control. At the same time changes were on with the organizational functions. structures. Human resources.cgc. Hierarchical organization structure was the framework of traditional business units to facilitate the flow of decision taken at the top management level to the bottom through mid-level tiers. less empowerment. etc.CBS E-Journal. one-way communication.. Carrot and Stick policy was the thumb rule of the organization to manage and control the workforce. The organization’s core philosophy was profit centric and benefits for the share holders. systems. different units or divisions used to function independently having no cross. operations with the transaction of business environment characterized by accelerating demands of customers. centralized decision making. human resource became an imperative. rigid organization structure with thrust on hierarchy.June. execution of decision. soaring competition. 2010 Human Behaviour in Traditional Organizations: An Overview Since the advent of industrial revolution. etc. evaluation and controlling the work operations to reaching the end users with the organization’s products and / or services. adherence to legal norms of a nation etc. weak competition. Traditional organizations were once on the right course of business transactions till a sweeping change took place across the globe. 2010 Another feature of these type of organizations was that one department used to perform its task according to its own goal. web-based marketing on one side and establishing new subsidiary units aboard or collaborating with national firms on joint venture basis or some other strategic alliances like merger.An aftermath of Globalization: Accelerating competition among national and global business firms is a byproduct of globalization. etc. In fact. c) New Socio-cultural Environment: Post-globalization era witnesses a dramatic shift in sociocultural milieu worldwide. Robbins and Sanghi (2006) opined that employees’ perception of organizational culture is the moot point of organization-employee compatibility where an employee’s liking or disliking of organizational culture is not so 39 http://www. A journey from lenient competitive surroundings to a supra-competitive global environment has been an uphill task for the pre-globalized business firms and many such firms have nipped in the bud not withstanding new competitive scenario. to typify the organizational culture. norms. and are able to reach divergent customer groups irrespective of nationality by the grace of global advertising. acquisition etc.edu.. But other social conditions and cultural contexts like taboos. Here the local market implies domestic market or regional market or national market with no urge to cross the border for business expansion. limited innovation. abroad. Issue 4. i. Few organizations used to restrict the international business operation within the periphery of ‘export-import’. norms. suddenly confronted a situation that appeared to be quite in contradiction with their cherished corporate culture and mission. Biz n Bytes. These organizations indulged in a system-process-structure combination where interdependence and interrelationship were hardly conceived of.in/ ISSN 0976 – 0458 . paying no attention to the other departments’ goal. relationships etc. Socio-cultural transitions in organizations are reflected in organizational values. customs. The impacts are listed below: a) Transformation of local market to global market paradigm: Organizations so far were inclined to operate under local market conditions embracing domestic customer base. Old organizations.June. shared beliefs. resulting in high degree of compartmentalization.e. Luthans (1989) studied characteristics like observed behavioural regularities. values. This pushed these organizations to confront business realities of the day that forced them to withdraw the compartmentalized approach and adopt a flexible organization structure breaking down the rigor of centralized decision making and lopsided authority and control. influencing the local market players to transcend their business boundaries on the other side of the border. philosophy etc.cgc. are unique to a nation. b) The Competitive Threats . A business firm finds some commonality in sociocultural perspectives among nations. globalization was a shockwave to these organizations.. In contrast. Globalization: A Challenge to Traditional Organizations The sweeping change of economic order coupled with deregulation of economy in many a nations put forward a mounting challenge to traditional organizations. As business firms find no geographical barriers. preoccupied with stereotyped managerial functions encompassing decision making at the helm of organizational affairs and compelling subordinates to obey. global market means perceiving the entire global as a market place. Now the pertinent question is how the thunder of globalization impacted the so-called orthodox business firms on the eve of radical economic transformation.CBS E-Journal. business across borders without any barrier. dominant values. team based structure. d) Workforce diversity: A firm in a global environmental set up faces challenges to contain with workforce diversity problems. new concepts and practices like virtual organizations. Biz n Bytes. service firms have risen to the occasion to explore Indian markets immaculately. Even changes in financial sector are paramount. A handful of business firms. organizational delayering. under new globalized scenario. Aswathappa (2007) tracked down the structural. Maruti-Suzuki. The success of Videocon. 2010 important. the first food chain of India has been 40 http://www. BPL. By workforce diversity. multilingual.edu. e) Organizational behaviour at crossroads: The organizational behaviour. Mahindra and Mahindra.. at the same time. As a matter of fact. laid back style of management. organizational and cultural shifts from traditional to modern organizations where family based organization. demands time bound changes in the face of innovative changes in technology. having depth of resourcefulness and courage to combat such typhoons have posed stiff competition to the multinational firms. multi social. Dessler (2000) configured the concept of boundaryless organization that decompartmentalized the walls of functional units in the organization with the abolition of unitary work culture within a single unit and emergence of holistic organizational culture that incites dejobbing on a large extent. dispersed ownership and transparent work culture. A company. management information system etc. technology. For example. Traditional to Modern Organizations: A Journey of Continuous Change Traditional organizations in the wake of economic liberalizations. But that legacy fell apart as soon as the globalization wave stormed into their safe heavens and shook the very genesis of their business. autocratic management style and orthodox business climate have given way to flexible. we mean a company’s workforce belong to multicultural. Service sector too has been poised to take a quantum jump. Definitely it was a reality shock to national firms who so far had a cake walk on business rails to garner huge quantum of profits staying unchallenged and competitively insulated. It has a moderating effect on traditional organizations to accept the inevitable changes of the business force and take steps to turn around keeping in tune with present business imperatives. Jauhari (2003-04) reported that Nirulas. speak volume of their resilience and tacts amidst fearful competitive clout. In fact. lean management process. This meant. This is evident when a company goes for multinational or global business ventures and absorbs work force from a nation where it operates.CBS E-Journal. ought to look into developing an organizational culture that doesn’t hurt the personal and social value systems of employees contrastingly. a firm needs to think of its periphery of operations not circumscribing itself within the domestic boundary but aggrandizing its length and breadth of operations on global platforms.June.in/ ISSN 0976 – 0458 . Tata Motors. Godrej. many firms could not resist such typhoons and perished prematurely. process. In fact globalization entails radical change in structure. Tata Steel. Krishna (2005) recounted that deluge of capitals from abroad have flooded the Indian Stock markets and as investments in industrial sectors to revamp Indian economy significantly. nanotechnology. multiracial backgrounds and managing them under one roof needs some creative HRM skills and innovative HR practices. system and behavior that are strikingly different from traditional organizations. Marico Industries etc. have made redefining of organizational behaviour. Issue 4. a synonymous semantics of the term ‘globalization’ got the wake up call to rise to the occasion and started to rediscover their locus not in the orbit of national business landscape but in the backdrop of global business environment.cgc. Therefore the effect of globalization is all-pervasive. manpower etc. By behaviour dynamics we mean how employees moderate their behaviour with time depending on the situation or circumstances they confront. A shift from hierarchical to flat organization structure through delayering. Enterprise Resource Planning (ERP) etc. not to say in strategic planning.in/ ISSN 0976 – 0458 . it has stirred the organization from top to bottom to forsake all the anti-employee decisions with profit maximization drive as the sole prerogative. have made radical transformation of operations and management function of business firms. Traditional organizations were run customarily by employers’ or top level managers’ instructions and compliance of employees in humility without getting much scope in venting their voices or opinions in operations. etc. ice cream parlours etc. culture. Behaviour of an organization is the combination of behaviour of individual and behaviour of groups. distributors. legal amendments in near and distant future. are some of the notable structural turn around. Therefore. The issues are transformation of organizational missions and visions. has resuscitated its organizational structure to manage its diversified units successfully. ethos.. 2010 expanding its operations from a chain of hotels to family size restaurants. epoch making changes have been the cry of the business houses. franchisees. investors. cultural transformations. within and outside the nation.cgc. in true sense. Biz n Bytes. The organization should have the foresight to feel the pulses of future business such as radical technological change. They didn’t assume any role in operational planning of policy formulation. Another noticeable change that has shaken up the organization is behavioural dynamics. This may remain unchanged. Globalization has now turned the tables on this one sided approach. Invoking these within the so called traditional framework is like driving an earthmover with bullocks. Automations. Its gigantic force has made inroads into orthodox organization to destabilize the long cherished and hackneyed culture and values which favoured only the employers. process the information. the mission of the new age organization is more broad and all-encompassing. Therefore. Now an organization has to broaden its operations across the globe in order to meet global competition and fulfill commitments to customer. How employees behave in isolation and in group can be better understood how they receive information. vertical to virtual organization. Issue 4. particularly retrograding within turbulent business scene. resort to Business Process Outsourcing (BPO). Supply Chain Management (SCM). Therefore.. joining hands with foreign firms through collaborative mechanisms. The journey of change was not easy. But the perspective at present is different from the past. quite in line with present business contexts. In fact. Otherwise the prospect of the organization will be bleak. franchising.g. A system wide changes via various management support systems (e. Say an organization’s core philosophy is societal benefits at a profit for long term sustenance. agents etc. Changes in structures. analyze the information and act or behave on the processed information. systems. Decision Support System). In fact. The vision is a dynamic entity. process and operations. employees were always at the receiving end and employers took an upper hand to force employees to adapt in such water tight set up. behavioural dynamics was an utopia in traditional firms because of the rigidity and absence of freedom for grass root level employees to share their views and contribute their worth that are probable in a flexible business environment. Employees were just treated as order servers.edu. 41 http://www.June. the crux of the issue is that an organization in the present context should mould and redesign itself in a way that can accommodate the changes successfully. behaviour internally within the organization has been the basic premise to circumvent the uneven battle between national and global business players. Change in the basic philosophy of the organization is not the issue.CBS E-Journal. Therefore. suppliers. 2006). Information and communication Technology (ICT) has heavily impacted human behaviour at work..edu.. Organizations should behave in moral and ethical ways as constituents of the society. BPO. assessing business strategies. multi-tasking. process. system and behaviour. It is because of the realization of the fact that they can either sink or survive and prosper with the organizations as their destinies are intertwined. franchising. They are becoming more virtual and technology-driven. cultural transition. The way employers behaved and employees complied has come to a point of turnaround.). as organizations are engaged in jobcutting exercises and streamlining in the search for operational efficiencies. thus indulging in more delegation of authority and empowerment. its true that truly progressive organizations are doing much more than simply downsizing their employees. HPOs use empowerment as an effective tool to let people. hiring and firing of employees.. Biz n Bytes. the work settings and the value delivered to customers and clients.in/ ISSN 0976 – 0458 . A high performance organization is designed and operates in a way that brings out the best in people and achieve sustainable high-performance results while creating high quality-of-work-life environments (Schermerhorn et al. Even an organization assumes virtual form by lessening its gravity of operations in its core unit and spreading its wings by empowering various other business firms to share the whole work operations. As computers increasingly pervade all spheres of business. They are in fact the high-performance organizations (HPOs).June. social networking. Satyam etc. business decisions. environment protection. compensation of CEOs etc. it has become a practice for the employer to contract for work anywhere in the globe where talent exists by offering the lowest price. Having said that. 2010 Organizational behaviour has come to a turning point at present. legal norms and standards etc. They do affect human behaviour in organizations. It has become a major cause of concern among various stakeholders of the firm. 42 http://www. In the internet age. In the wake of major scandals involving the likes of Enron. that cause a drastic change in organizational structure.cgc. Behavioural changes are the order of the present day organizations. They are in fact redefining the way things get done. collaborating etc. et al. have come under the purview of corporate governance. CRM (Customer Relationship Management) etc. Issue 4. licensing. Now the essence of corporate governance transcends not only among the top level managers but also among the employees down the line. Ethical behaviour at the workplace and social-responsibility of business are closely related. and joining the global economic order. Similarly system and process changes are reflected in earnest acceptance of modern techniques like TQM (Total Quality Mgt. ICT networks employees. Transparency in financial operations. there is renewed emphasis on corporate governance. becoming tech-savvy. Indeed. not employees network among themselves. Such transformations are the reality of the new-age organizations. reporting by board of directors. BPR (Business Process Reengineering). it has far reaching implications for work flows in organizations. This has resulted in organizational transformation. are nothing but mechanism of uprooting the traditional hierarchical structure in totality and giving birth to boundary less organization that can’t be straight jacketed in structural regularities. Structurally an organization moves from taller to flatter configuration. both at individual level and group level to use their talents and expertise to make decisions that affect their work.. World Com. The forces of change being manifested in forms of technological upgradation. Behaviour in organizations has taken a turn around because of intervention of machines in modern firms.CBS E-Journal. 2006). work arrangements. Six sigma approach (Stringent quality control). and organizational systems and processes (Schermerhorn. New Delhi (2006). Synergy. and Sanghi. PHI. (1989). strategies. Himalaya Publishing House. part-time employees. Schermerhorn. Hyderabad (2007). In modern organizations. 2010 Epilogue In this globalized era. P. Organizational Behavior. Luthans. K.. J. Mumbai. References: Aswathappa.N.e.in/ ISSN 0976 – 0458 . F. New Delhi (2006). Human behaviour at work has also been reshaped and remoulded keeping in tune with the changes in the environment. Pearson. Organizational Behavior. although premium is placed on high-end technology to surge ahead beating cut-throat competition. at individual and group levels. The Importance of External Commercial Borrowings & Indian Experience. Robbins.e.. so also the business plans. Biz n Bytes. No. 125-148. we find different types of employees. i. Essentials of Business Environment. –––––––––– 43 http://www. knowledge economy. J. ingenuity and commitment of an organization’s workforce become the intellectual capital of the organization. No. Wiley India. the fact remains that human resources are indispensable for an organization... Maximum advantages can be realized from other resources of organizations only through sustained human efforts. i. Organizational Behavior..G. Krishna. Jauhari. McGraw-Hill International Editions. (2003-04).1. Human Resource Managenent. C.3. In fact. experience. The orientations and engagement level of these employees are different and so also their sense of belonging and loyalty towards the organization.cgc..V. Talent management has become the key to success of an organization. in addition to permanent full-time employees we have contractual as well temporary. Vol.e. the mind of an employee rather than his physical abilities become crucial for the organization. (2005). Outsourcing of jobs has become commonplace across the globe..S. This has resulted in domestic jobs being replaced with employees hired in countries where cost per employee is low as compared to the parent country from where jobs are being outsourced. competencies.. S.. 16-31.CBS E-Journal. As the business environment is changing at a very fast pace. human behaviour has always been in a state of flux and continuous reengineering is probably the best way to describe it. Hunt. Jr. The collective expertise.. i. New Delhi (2000).2..edu. Human behaviour is a complex issue because of its different manifestations at different levels.. New York. Under the new economic system. Toronto. It is also true that an individual’s behaviour may not be in tune with that of the group behaviour unless and until there is pressure on him / her to conform to group norms. G. etc. Again it is different depending on whether behaviour takes place in a formal or an informal group setting. Growth Opportunities in an Emerging Sector-The Case of Nirulas.. Journal of Services Research.June. Vol3. and Osborn. Issue 4.R. R. V.. This has also affected the system-structure-process set-up of the organization. Dessler. Technology has introduced new ways of delivering banking to the customer. if any. The increasing volatility in the global environment. Manoranjan Dash Lecturer. such as ATMs and Internet Banking. Now the banks are using electronic delivery channels such as internet. the diffusion may have on the economic environment. Bhubaneswar Mail: manoranjanibcs@gmail. Overall.cgc. Keywords: Internet banking. The objective of this research is to identify the factors affecting the adoption of Internet banking by customers in India in the context of the technology acceptance model (TAM). Ghatikia. telephone and mobile . Kalinga Nagar. diffusion unfolds which entails communicating or spreading of the news of the innovation to the group for which it is intended (Rogers. Faculty of Management Studies. change as well as changing consumer preferences have forced the retail bank to adopt new strategies to attract and retain customers. 1995).edu. The internet provides a channel or platform linking consumers and banks. competition.0 INTRODUCTION Rapid innovation is changing the array of financial services and payment options available to customers. technology acceptance model (TAM) 1.The findings of the study indicate that the security about Internet banking and its benefits have significant effects on the perceived usefulness (PU) and perceived ease of use (PEOU) of Internet banking acceptance. Economists are most curious about the following: who are the early adopters of technological innovations. such as ATMs and Internet Banking. I-banking products/services like ATM and electronic funds transfer were a source of differentiation for banks that utilized them. co-operation. Hence. Hence.CBS E-Journal. what factors determine the various diffusion rates across adopter groups and geographic regions.June. Institute of Business & Computer Studies. Banks began to look at I-banking as a means to replace some of their traditional branch functions. and what feedbacks. Issue 4. Biz n Bytes.. Adoption however is the commitment to and continued use of the 44 http://www. Technology diffusion is an indispensable process through which technological potential of innovative activities can be actually turned into productivity. the results of this study are vital to both researchers and practitioners and it allowed us to understand TAMs validity in technology acceptance research. Various characteristics of the economic environment in which diffusion takes place may affect the pace of diffusion. Siksha O Anusandhan University.The emergence of the internet has had a significant on the diffusion of internet banking. banks have found themselves at the forefront of technology adoption for the past three decades. Technology has introduced new ways of delivering banking to the customer. When an innovation emerges.in/ ISSN 0976 – 0458 .com ABSTRACT: The emergence of Internet is largely thought to have brought a major change in the retail and financial sectors by enabling consumers to make purchases and carry out financial transactions over the Internet. while the diffusion itself may also have feedbacks on the environment. 2010 Adoption of Internet Banking By Indian Consumer: An Extension of the Technology Acceptance Model Mr. banks have found themselves at the forefront of technology adoption for the past three decades. including financial. Rogers concludes that diffusion of innovation could be affected by psychological and behavioral as well as external and environmental factors. 2010 innovation. The TAM tends to predict user adoption of new technologies in positive perspective. which provides the direct embodiment of the service sector applications of the technology. which substitute for many of TRA’s attitude measure.June. These two factors are postulated to determine an individual's intention to use a technology-based system with intention to use playing the role of mediator of actual system use.0 THEORETICAL FOUNDATIONS This study was based in the Technology Acceptance Model (TAM) which focused on variables that influence the intention to adopt Internet banking toward bank’s customers in India. social and time risks (Jacoby and 45 http://www. 1989). and compatibility (Rogers.. Perceived risk has multi-dimensions. performance. size of the organization and socio economic status of the users of the innovation. but more important in the longer term. 2. practice or newly introduced information and communication medium is adopted or rejected over time in a given society (Rogers. the characteristic of perceived innovative attributes consisted of trailability. The technology acceptance model (TAM). It has been fully validated to be powerful as a framework to predict user acceptance of new technology. (1989). The diffusion of innovations theory provide explanations for when and how a new idea. The final factor identified affecting the realization of the potential of a technology is the adaptability of the organization installing the equipment: this includes workforce or managerial resistance to the introduction of new technology: the extent to which working procedures can be adjusted. technology and services. psychological. The first factor is opportunity. This of course affects the rate at which the technology is initially adopted within an industry. perceived ease of use. 2004). complexity. and the user friendliness of the system’s basic operating procedures.edu.. customers will reduce their usage or even refuse to use a technology if they subjectively expect that an injury or a loss likely occurs while using the technology. 1995). Diffusion of innovations theory postulate that diffusion of innovation occur as potential users become aware of the innovation. physical. 1995). The degrees of risk that consumers perceive and their risk tolerance are attitudinal factors that affect their usage (Chan et al. TAM extended the theory of reasoned action (TRA) (Fishbein and Ajzen. Usability is defined to cover both the availability and quality of software. TAM model was including perceived usefulness. 1980) by introducing two belief factors. and the rate at which the workforce can be trained in the necessary skills to use the technology. Biz n Bytes. However. These processes take place through a channel over a period of time among users within a social system. Diffusion of innovation recognizes individual as well as social factors that can influence the decision to adopt or reject a given innovation. it affects the rate at which process and product innovations can be generated once the technology has been introduced. and seek confirmation of the adoption or rejection decision (Roger. Issue 4.CBS E-Journal. Perceived ease of use is also posited to have a direct impact on perceived usefulness.. is one of the most widely used and influential models in the field of information systems. implement or reject the innovation. defined as the suitability of the activities carried out within the user sector for applications of the new technology.cgc. Correspondently. perceived usefulness and perceived ease of use. 1995). He identifies factors like perceived characteristics of the innovation and the type of individual decision involved in the adoption process. Barras (1986) identified three main factors affecting the rate of realizing the potentials of a new technology. judge its relative value and make a decision based on their judgment. and attitude toward using the Internet banking (Davis et al. The second factor Barras (1986) discussed is the usability of the technology. relative advantage. developed by Davis et al.in/ ISSN 0976 – 0458 . Daniel (1999) pointed out the perceived ease of use as one’s experience how conveniently uses a technology. individuals adjust their system-specific ease of use to reflect their interaction with the system. Bhattacherjee (2002). 1990.. Similarly. Mathwick et al. 1972. security. delivery terms. Venkatesh (2000) stated that with increasing direct experience with the target system. TAM (Davis. perceived usefulness refer to consumers’ perceptions regarding the outcome of the experience. Electronic banking features can be consumers’ attitudes of functional and utilitarian dimensions. 2002. the availability of secure. Stone and Gronhaug. In the same way. Murray and Schlacter. 2001). Perceived usefulness denoted to the prospective user’s subjective likelihood that the use of a certain application would increase his or her performance (Al-Gahtani. Davis et al. 1993). the attitudes of growth in electronic banking were the combination of convenience provided to those with easy internet access. Davis et al. 46 http://www. More specifically. Issue 4. 1993). Peck. 1989. navigation. 2001. The model consists of two attitudinal dimensions: Perceived Usefulness (PU) and Perceived Ease of Use (PEOU). 1989) posits perceived ease of use as the extent to which a person believes that using a particular system will be free of effort. and Warshaw (1992). also claim that PU is directly linked to intentions of use. 2002. 2001) suggested that customer attitude is composed of one’s attribute beliefs about the object and perceived importance (weight) of having that attribute in making the decision to adopt. high standard electronic banking functionality. visual appeal. privacy. risk involved. He added that in the case of electronic banking. found that one’s willingness to transact with an electronic firm is considered as perceived usefulness. Childers et al. security. p. Davis (1993) put forward that consumers’ attitude toward electronic banking first associated with the direct possessions of relevant electronic banking features. in his empirical study. 2001).. 2001). form of payment. 320)..in/ ISSN 0976 – 0458 . The degree to which an innovation is ease to understand or TAM suggests that attitude is based on the salient beliefs that a person has about the consequences of a given behavior and his or her evaluation of those consequences. entertainment and enjoyment (Burke. 2002). personalization. 2000. As whispered by Consult (2002). He also added that the perceived usefulness might not be derived only from prior familiarity with the firm. money. but also from calculative. Bagozzi. defined perceived usefulness as the extent to which a person deems that a particular system will boost his or her job recital. and Hewer (2002). & Carson.cgc.June. According to Howcroft. cost savings and the necessity of banking services.. (Polatoglu & Ekin. 1989. institutional and identification about the firm. savings of time. Perceived usefulness is defined as the individual’s perception that using the new technology will enhance or improve her/his performance (Davis. Childers. They found Perceived Usefulness is the former part of accessibility. 2000). like ease of use and usefulness (Menon & Kahn.CBS E-Journal. Moutinho & Smith. Suganthi and Suganthi (2001) carried out research in Malaysia when Internet banking in that country was only six months old. Rigdon. Carr. 1990. perceived usefulness is defined as consumers’ perceptions of functional and utilitarian dimensions (Menon & Kahn. Biz n Bytes. which is part of features of web site. PEOU in turn is defined by user's subjective evaluations on how much cognitive work she or he must expend when using the system. attitude of users and non-users towards electronic banking is the reflection of a number of factors such as technology. Mathwick. Havlena and DeSarbo. 2010 Kaplan. PU is defined as “the degree to which a person believes that using a particular system would enhance his or her job performance” (Davis. service offered. On the word of Davis. and Malhotra (2001). Hamilton. Perceived usefulness refers to consumers’ perceptions that using the internet as banking medium enhances the outcome of their banking experience (Venkatesh.edu. and convenience have been quoted as perceived ease of use. In the electronic banking context. consumers attitude is assorted in terms of perceptions regarding product information. The current trend reflects a decrease in the number of branch transactions and an increase in the number of electronic transactions (Mukherjee & Nath. 2001). Some banks are segmenting their markets by developing lower cost delivery systems in order to increase customer adaptation. a user’s acceptance of an information system is dependent on two factors: perceived usefulness and perceived ease of use. Adaptation of thus. 4. factors affecting the adaptation of a new information technology are likely to vary with the technology. the technological resources and infrastructure needed to engage in the adaptation (Triandis. customer adaptation describes beliefs about having necessary resources and opportunities for an individual’s intention to perform. On the contrary. This in turn affects the behavioral intentions of use. according to TAM. As whispered by Sohail and Shanmugham (2003). Together.in/ ISSN 0976 – 0458 . these factors determine the attitude toward using the technology. 2003). and customer adaptation of internet banking within the context of public and private sectors banks in India. We collected data from bank customers in India who use internet banking and collected 295 usable responses The questionnaire developed for TAM by Davis (1989) – adapting the scales for Perceived Usefulness and Perceived Ease of Use and the questionnaire developed by Salisbury et al. 47 http://www. perceived ease of use.cgc.June.edu. A seven-point likert scale ranging from (1) ’strongly disagree’ to (7)’strongly agree’ were used to assess responses. prior computer/new technology experience. To collect data. i. Biz n Bytes. prior personal banking experience and possession of a credit/debit card and a WAP/CDMA.0 RESEARCH METHODOLOGY We conducted a survey study for hypothesis testing using the framework of the original TAM as the foundation to determine the predictors of customers’ intention to use internet banking in India. This perception can damage consumers’ confidence of the online system as a whole.0 PURPOSE OF THE STUDY: The purpose of the study is simply to present and test a model that identifies the relationship between perceived usefulness. (2001) and adapting their instrument and scale to measure this construct in our questionnaire.. We tested the structural model by means of Confirmatory Factor Analysis (CFA). 2010 convenience. an attitude has been defined as a psychological tendency that is expressed by Liao and Cheung (2002). which refer to the availability of resources. We augmented TAM by adding the construct Perceived Web Security developed by Salisbury et al. However. perceived security. Lee and Allaway (2002) suggested that the adaptation of electronic banking depends on the service firm’s resource management by lowering delivery costs and by releasing service personnel to provide better and more varied service. and context (Moon & Kim. An exploratory factor analysis using SPSS was conducted on the survey data. These are facilitating conditions. (2001) – adapting the scale for Perceived Web Security. customer attitude. target users. Issue 4. which then leads to actual use.e. Some customers avoid internet banking as they perceive it as being easily susceptible to fraud. Security and reliability of transactions over the internet is a burning issue and it is an important factor that customers consider before adopting Internet banking. we designed a questionnaire by adapting the instrument and scales developed for TAM.CBS E-Journal. 2003). 1979). Cost savings have been the compelling reason for outsourcing by many banks (Bradley & Stewart. 3. 000*** 0.edu. H3: Customer’s perceived usefulness has a positive impact on his/her attitude towards using Internet banking.70 as an indicator for adequate internal consistency (Hair et al. H4: Customer’s perceived ease of use has a positive impact on his/her attitude towards using Internet banking. 2010 H1: Perceived Web Security will positively influence the perceived ease of use of Internet banking.590 0.000*** 0.669 Path coefficient (β) 0.000*** 48 http://www.in/ ISSN 0976 – 0458 . R² shows the predictive power of the model. Biz n Bytes.782 0. the R² and the path coefficients indicate how well the model is performing.316 0.CBS E-Journal. 1978).cgc. Measurement model analysis Both. Moreover.000*** 0.896 P-Value 0. H5: Customer’s attitude towards using Internet banking has a significant impact on his/her intention to use it. All reliability measures were well above the recommended level of 0. 1995.1993). Perceived Usefulness H3 H5 Security H2 Attitude Towards Use Behavioral Intention to Use Internet Banking Usage H4 H1 Perceived Ease of Use ( Modified Conceptual Framework of Technology Acceptance Model (TAM ) and Web Security ) Structural equation modeling (SEM) was used to test the model and analyse the factors that affect customers attitude towards Internet banking acceptance. and the values should be interpreted in the same way as R² in a regression analysis. Nunnally.0001 R2 0. Results for the Research Path Tests Research Path SE PEOU PEOU PU PU ATT PEOU ATT ATT AI *** p< 0..789 0. H2: Customer’s perceived ease of use has a significant impact on his/her perceived usefulness of Internet banking.598 0. this approach was chosen because of its ability to test causal relationships between constructs with multiple measurement items (Jöreskog and Sörbom.694 0.000*** 0. Issue 4.589 0.797 0.June. We suggest bankers 49 http://www.0 MANAGERIAL IMPLICATIONS: Over 80% of customers expressed concerns on Web security and real benefits when considering internet banking. Issue 4. hypothesis 5 was also supported.782 (Results of Structural Equation Model) Good of Fitness for the Hypothetical Model & Hypothesis Test Result Analysis Chi-Square 391. which in turn leads to acceptance of internet banking. although it affects the perceived usefulness of customers.85 Degrees of Freedom 147 It was found that awareness of Internet banking services and its benefits explains 63% of the variance in perceived usefulness (PU).977 RMSEA 0.789 0. however.in/ ISSN 0976 – 0458 .896.edu. with path coefficient of 0. As a result. hypotheses 3 was supported..973 RMS Error 0. 2010 Perceived Usefulness (PU) 0. Our research based on TAM suggests that perceived usefulness has the greatest influence on customer intention to adopt internet banking.June. On the marketing side. Theses factors had positive path coefficients Attitudes towards (ATT) use explain 73% of the variance in adoption intention (AI) with path coefficients of 0.918 CFI (Comparative fit Index) 0.08) NFI (Named Fit Index) 0. supporting hypotheses 3 and 4. bankers should emphasize the full functionality of their systems to cater for the different banking needs of the users efficiently.797.09 Tucker-Lewis Index 0.590 Perceived Ease of Use (PEOU) 0. Biz n Bytes.CBS E-Journal. The paths had positive effect. Perceived Web Security have significant effects on Perceived Ease of Use (PEOU) and together explain 67% of the variance .896 Security (SE) Attitude towards Use (ATT) Adoption Intention (AI) Internet Banking Usage 0.39 GFI 0. Perceived ease of use (PEOU) and perceived usefulness (PU) influenced customer attitudes towards using Internet banking.069 (< . 5. which are the highest among other factors such as difficulty in use and no internet access.797 0. Meaning. does not have a direct impact on intention to use. Perceived usefulness is more influential than perceived ease of use in explaining technology acceptance of internet banking.cgc. Perceived ease of use.These two factors had positive path coefficients that hypotheses 4 and 5 were also supported. cgc. 227-230. Davis F.R. 1. and Lu. Intention and Behavior: An introduction to Theory and Research.. J. 2001. 28. Chin. 11. Anderson. E. Tatham. Basic Concepts.W. Trust and TAM in online shopping: an integrated model.. and Programming. M. 1988. 1975.. 237-246. 1993. I. Massey. Perceived Usefulness and Perceived Web Security has a direct effect on Intention. P. 2nd Edition. 35. Gefen. A.. Multivariate Applications Series.R.. 2010 improve the security features of their systems and stress their system security and the precaution functions they have implemented. Perceived usefulness. 12. 4. and Warshaw P. and Todd.edu.. 13.June.C. Chan. W. Cohen. 982-1003.. Lawrence Erlbaum Associates. 50 http://www. Banks should also consider how to shift the perceptions of their customers by emphasizing the positive safety features in any marketing campaign. B. usefulness. T. 21-43.. Jarvenpaa. Management Science. Hendrickson. they could reassure their customers that internet banking is a safe mode to perform transactions. perceived ease of use. 19. Multivariate Data Analysis. In this regard. D. On the test-retest reliability of perceived usefulness and perceived ease of use scales. 7.. 1998. Reexamining a model for evaluating information center success using a structural equation modeling approach. 6. Hillsdale. Reading. 27. Decision Sciences. and Straub. E.P. Lawrence Erlbaum Associates.A.P.L. 2003. R.. D.. W. thereby enabling customers to feel secure and comfortable in using internet banking services. Structural Equation Modeling with AMOS. and Cronan. Belief. and Todd.P. New Jersey. 10. On the use. Massachusetts. 17. Hillsdale.. 5. 1995. MIS Quarterly. Journal of Advertising.. 319-336. P. 3. Exploring managers’ perceptions of the impact of sponsorship on brand equity. Addison-Wesley. International Journal of Electronic Commerce. The results of hypotheses testing provide satisfactory support for the extended TAM through the SEM analysis. 6. S. MIS Quarterly. 51-90. S. 309-335. Applications.in/ ISSN 0976 – 0458 . Hair. They should pass an effective message to customers that the Web security facility now available will eliminate any third-party intrusions into their internet banking account in order to turn around the negative perceptions of their customers. User acceptance of computer technology a comparison of two theoretical models.B. K.. P. 2004. W.. 12. D. New Jersey. and user acceptance of information technology.CBS E-Journal. 59-88. Cornwell. New Jersey.M. Understanding internet banking adoption and use behavior: a Hong Kong perspective. 2.A. With these functions.D.. 41-51. 2001. Bagozzi R. Byrne. and Black. M. Consumer reactions to electronic shopping on the World Wide Web. and Steinard II. D. Y. R. MIS Quarterly. References: 1. MIS Quarterly. Biz n Bytes. 30. affecting Perceived Usefulness and Attitude as intervening variables. 1997.A. Karahanna.. 1997. Prentice Hall. T. Chau. Statistical Power Analysis for the Behavioral Sciences. Fishbein. P. 1989..0 CONCLUSIONS: The results support the view that Perceived Ease of Use and Perceived Web Security are predicting variables.A. F. proper training of customers on the safe use of internet banking could help improve security and enhance their overall confidence in long-term.D. and Intention to Use internet banking as the dependent variable. 23 9. while Perceived Ease of Use has only an indirect impact.. and ease of use of structural equation modeling in MIS research: a note of caution. Roy. Journal of Global Information Management. and Ajzen. Davis. T. Issue 4. 8. 13. 1989. J. Biz n Bytes.8 73.8 85.0 Table-2 Gender of Respondents Frequenc Valid Cumulative Percent y Percent Percent 253 85.0 Valid Male Femal e Total Valid Table-3 Occupation of Respondents Frequenc Valid Cumulative Percent y Percent Percent Bank Executives 40 13.5 95.4 100. 2010 Appendix-1 Valid 24-35 36-45 46-55 56-65 Total Table-1 Age of Respondents Frequenc Valid Cumulative Percent y Percent Percent 134 45.cgc.2 100..7 22.4 84.4 45.8 7.1 Senior 22 7.6 13.June.0 100.3 Academicians 14 4.8 30.9 48.0 100.6 13.6 General 26 8.2 100.3 51 17.5 7.9 11.0 14.in/ ISSN 0976 – 0458 .0 51 http://www.6 19 6.4 Administration Businessman 7 2.CBS E-Journal.2 65.6 Management Legal 30 10.8 42 295 14.edu.0 Total 295 100.0 100.8 Unemployed 23 7.3 Medical 35 11.4 45. Issue 4.7 4.3 93.7 100.4 6.8 85.8 8.5 10.5 55.4 91 30.8 76.6 IT Professionals 67 22.8 82.2 10.7 Customer services 31 10.3 17.0 295 100.4 2.7 36. 7 100.6 33.0 Valid Percent 9. 2010 Table-4 Use of Internet Frequenc Percent y Valid Occasional ly Fortnightly Weekly Daily Total 29 25 39 202 295 9.3 80.0 Cumulative Percent 9.5 13.3 16.cgc.0 Total 295 100.0 Table-5 Use of Internet Banking Frequenc Valid Percent y Percent Valid Occasional ly Fortnightly Weekly Daily Total 26 38 105 126 295 8.2 68.0 100.6 42.CBS E-Journal.5 13.6 33. Issue 4.6 17.June.0 19.3 100.8 12.0 Valid Table-6 Use of Internet Banking Services Frequenc Valid Cumulative y Percent Percent Percent Balance Enquiry 99 33.0 82.8 12.6 Statement 56 19.0 Cumulative Percent 8.in/ ISSN 0976 – 0458 .1 Funds Transfer 48 16.0 8.edu.5 100.5 64.6 100.5 100.6 42.9 35.7 57.0 2.3 31.5 Bill Payment 34 11.8 8.8 18.5 100.7 100.3 Cheque Book 6 2. Biz n Bytes.8 21.4 requests Other 52 17.2 68.9 35.0 52.5 11..8 8.0 52 http://www. 1 23.1 27..2 Skill Other 10 3.8 88.in/ ISSN 0976 – 0458 .5 90. 2010 Valid Table-7 Reason of Using Internet Banking Frequenc Valid Cumulative Percent y Percent Percent Convenience 80 27.3 20.2 100.0 Total 102 34.0 Total 295 100.0 anywhere Saves Time 23 7.8 100.4 295 100.cgc.4 9.6 15.9 46.1 20.7 Internet Computer 24 8.4 From 46 15.6 66.edu.8 7.1 24/7 60 20.0 65.1 46.0 Valid Missing Total Table-8 Reason for not using Internet Banking Frequenc Valid Cumulative Percent y Percent Percent Awarenes 47 15.0 18.6 100.8 Other 33 11.1 s Need 21 7.0 System 193 65. Biz n Bytes.CBS E-Journal.1 27.0 100.3 47. Issue 4.0 53 http://www.2 11.5 Inexpensive 53 18.June.6 81. PS b.32978 .875 0.756 0.912 0.903 0.in/ ISSN 0976 – 0458 .867 0.781 0. PS.CBS E-Journal.815 0.cgc.642 0. 2010 Table-9 Composite Reliability Cronbach’s alpha Average Variance extracted Constructs Perceived Security(PS) Items PS1 PS2 PS3 PS4 PU1 PU2 PU3 PU4 PEOU1 PEOU2 PEOU3 PEOU4 ATT1 ATT2 ATT3 ATT4 INT1 INT2 INT3 Loading 0.698 Perceived Ease of use(PEOU) 0.912 0.713 0.506 a.June. Issue 4.867 0.731 0.817 0.31456 Model 1 2 Adjusted R R Square R Square . Predictors: (Constant).893 0.edu. PEOU 54 http://www. Biz n Bytes.793 Table-10 Model Summary Std.956 0.879 0.934 0.467 .316 .912 0.809 0.867 0.784 0.891 0..912 0. Predictors: (Constant).854 0.631 0.665 Perceived usefulness(PU) 0.831 0.804 0. Error of the Estimate .721 Attitude towards Use(ATT) Intention to use (INT) 0.387 .686(a) .727 (b) .671 0.892 0.956 0. Success or failure of a business in the economic sense is judged in relation to expectations. which leverage the best and most relevant technology. high value initiatives that bring additional capabilities to the organization. The end result is that resources previously needed to manage operational tasks can be redirected to new. Banks are among the main participants of the financial system in India.. In relation to operations of a business.in/ ISSN 0976 – 0458 . public investment. This attempt provides comprehensive and updated information.com ABSTRACT Operational Efficiency is . the term Operational efficiency means different things to different people. while not shunning profits would move to whatever the social benefits Social cost ratio justified it. best practices.what occurs when the right combination of people.June. If faced with a new complex challenge.CBS E-Journal. People and the relevant experience they bring are critical to this effort.edu. 2010 MEASURING OPERATIONAL EFFICIENCY IN PRIVATE BANKS . Vohra Assistant Professor Chandigarh Business School Contact 09779910672 E mail – drpsvohra@gmail. In a Private industry the extent of profit indicates its efficiency. Key Words: Operational efficiency. and technology come together to enhance the productivity and value of any business operation. Banking offers several facilities & Opportunities. private banking Introduction Companies need to find the best way to do what they do. Private investment is only held justifiable on business principles if the foreseeable future there is reasonable prospects of a fair rate of return on capital invested therein.A COMPARATIVE STUDY OF DEPOSIT MOBILIZATION Dr P. guidance and assistance for deposit performance areas of selected private banking in India. it’s important to draw upon actual experience. The right people have designed similar processes before. They have skills to lead an implementation and the ingenuity to find the most effective solution to challenges they face. Process is a key to drive down costs for any activities that are repeatable. Biz n Bytes. and industry standards to design and execute any process.S. 55 http://www.cgc. Every business is determined in their efforts to ensure the best people create the best processes. while driving down the cost of routine operations to a desired level. Public investment on the other hand. Issue 4. process. private investment. return on invested capital and objectives of the business concern. It is defined as an action to be implemented in a planned manner with a view to achieving the pre-determined objectives of the concern. to be acceptable. In management science the term operation is used in order to convey the same sense. 4. which may be in terms of higher efficiency. Balance Sheet approach.cgc. 5. The term “operation” is generally used in military or naval action mission including its planning and action. higher quality of output or lower cost of input etc. 56 http://www. 3..in/ ISSN 0976 – 0458 . But both are quite different with each other. Profit and Loss Account approach. but goes beyond it in the sense that it express an aptitude or capacity or the quality of the input. Biz n Bytes. Therefore any discussion of organization and administration created the general question of operational efficiency of the in dustiest and demands that performance and management of various operational or functional aspects of the industry should be so organized that they may achieve the desired objectives. which productivity introduces the idea of Relationship between output and input factors. efficiency is the state or the equity of being efficient or competence in performance or ability to accomplish a job with the minimum expenditure of time and energy or functioning in the best possible manner. 7. should be beneficial to the society. It has been pointed out that the word” Efficiency” does not embrace the idea of productivity. The meaning of efficiency is relating to operations which implies the performance of some functions involving practical application of principles or process. It has also been observed in this connection that efficiency should be measured by the output of goods or services to be obtained in relation to the corresponding total input or resources used in their production. Productivity Productivity is also defined as improvement. Development and Stability approach. Productivity approach. Further this improvement. refers to efficiency pertaining to operation both organization and management of a business concern. Efficiency and Productivity The concept of Efficiency is generally considered as synonymous with productivity. 6. increased effectiveness. The term “Operational efficiency” thus. Fiscal approach. In brief.CBS E-Journal. 1. The concept of important implies that it is a relation concept and not an absolute concept. Employment approach.edu. the productivity of which is under consideration.June. Cost accounting approach. as it means achieving something more than what it was earlier. 2010 Concept of Operational efficiency The term “operational efficiency” is a composite one. Measurement of Operational Efficiency The following approaches are to be used for evaluation of an operational efficiency of an enterprise. 2. Issue 4. Now level of activity is likely to persist as it also found that over 90 per cent of private banks believe that there are good growth prospects for the industry over the next three years and 89 per cent are either actively seeking acquisition targets or would consider acquiring if the right opportunity arose. The favorable market has allowed plenty to grow organically.in/ ISSN 0976 – 0458 . Thus. mobile banking. it can be concluded that deposits are the life blood of the banking industry and are the mainstay of bank funds. Every bank tries to produce and sell more to gain economies of scale in operations. This enables double digit returns on most asset classes which are not the case in a majority of countries. they tend to be serial dealmakers.cgc. Deposit mobilization has greater significance because of the confinement of credit policies and tough competition for deposits among banks. between banks and non-banking companies.. the explosion of corporate activity in private banking is the result of a perfect storm of contributing factors. At the same time. completing on average almost a deal every year. 2010 Private Banking Industry in India India is one of the most preferred private banking destinations as its economy is not only growing at 8 per cent annually. There has been an explosion of personal wealth. purchases of deposits is an important activity of bank marketing. continuing growth in private banking revenues and regulatory pressures benefiting economies of scale. It can also be stated about private banking industry that. The high levels of activity will only increase if the seventy percent of non-acquisitive banks join the M&A market. In other words. an emerging trend in India is a high savings rate given increased earning levels. ``robust and liquid financial markets enable exits on a timely basis to be able to realize gains. Offering a perspective on the private banking scenario in India. anywhere banking. In addition. These acquiring banks have not rested on their laurels. A bank purchases deposits in order to produce and sell the loans and advances. Biz n Bytes. debit cards. viz. Role of Deposits in Banking Industry Bank purchases deposits to produce and sell loans. particularly in India.edu. Private Banks have tended to react in two ways. deposits are the basic source for financing. Issue 4. This has resulted in a robust private banking capital raising avenue. but nearly a third of private banks reported acquisitions over the past three years.CBS E-Journal. Since the nationalization of the major Private banks. Automatic Teller Machines (ATM). Deposits play a significant role in running a banking industry. phone banking. small-scale industries. This makes India a good resource deployment avenue. 57 http://www. Private sector Banks have pioneered internet banking. agriculture. but is also going through a transformation to the next level of maturity. a greater volume of financial resources is required for a higher economic development. therefore. the lending policies have been diversified to meet the needs of the priority sector of economy and neglected sections of society.June. Survival and development of the banks are mainly influenced by their ability to attract deposits from different segments of the community rather than by the volumes of their capital resources. Indian private banking capital will soon fund deployments to a significant part of our capital needs. weaker sections. it can be said that. self-employed persons etc. Strengthening the ability of banks to mobilize deposit requires the formulation of new schemes of different nature and suitability to the different classes of investors in both rural and urban Centers. 3.edu. Yet there is a vast scope for deposit 58 http://www. society managers. increased economic activity. The Level of Deposit Banks nationalization was expected to give a greater fillip to deposit mobilization due to geographical. Problems in Deposit Mobilization Deposit the growth in deposit mobilization efforts by the banks has not been adequate made in order to meet the need of present economic environment. 2. Recurring Deposits 5. Primary Banks. Joint Accounts. 6. qualitative customers service several measures to attract and mobilize deposits particularly after 1969. Individual. flexibility. Biz n Bytes. current deposit. 2010 Types of Deposit Banks deposits can be divided on the basis of two factors: • The Time Factor . Issue 4. These schemes can be broadly divided into five categories. the incentives offered to depositors. 7.cgc. Current Deposits. functional and structural diversification. Saving Bank Deposits. Cash Credit Account. fixed deposits. 8. They are almost identical even though the schemes have been different names. Money at short call and short notices. If Banks did not engage themselves in lending and investing. 4. and other deposits. 2.June. 5. round the fundamental principles of mobility. they would have deposits equal to amount of currency left with them by depositors. recurring deposit.CBS E-Journal. Fixed Deposits. Partnership Firms. 3. loan supervisor) etc. viz. Apart banking habit as wells with steady rise in the deposit base. automatic facilities and reeducation of cash drain. Social Organization. Deposit Mobilization The strategy of mobilizing of deposits has been through the information and implementation of various deposit schemes of the banks. • Customer Factor .in/ ISSN 0976 – 0458 . In India deposits of bank have shown a great change in scale and scope of development. convenient to customers.Bank Deposits can be divided into the following categories on the basis of Customer segmentation: 1. Societies. 1. saving deposit..Bank deposits are mainly divided into five categories on the basis of time. Staff Security (For Bank staff. In the banking system the level of deposit depends primarily on the amount of credit extended by banks in the forms of loans and investments. 4. The bank staff with an urban and little knowledge about rural area is unable to deal correctly with the customer.edu. therefore come when the choice of right media and marketing strategy for the rural area has to be made. The Strategy for mobilizing deposits has been through the formulation and implementation of various deposit schemes of the banks. Structure and trend ratio of total deposits.they have been using the same publicity in rural area as well as. Deposit – credit ratio. The time has.. he does not get enough guidance and consequently his doubts in the efficiently of these schemes remain un cleared. Deposit to total resource ratio. 3. because often the by bank staff at various levels is not adequately aware of these schemes . the need of the rural depositors to be able to exploit the untapped rural saving. The bank should be educated in these schemes. Besides this in a vast country like ours. convenience and preference. neglecting the potential rural depositors. 59 http://www. Deposit mobilization should be backed by adequate publicity most of the banks have harnessed the media. 2010 mobilizing from different sections of society. The trend analysis and ratio analysis techniques are used for evaluation of the performance of the private banks under study in deposit mobilization. They are all identical even through the schemes have been given different names. The banks have to tailor the schemes to match in nature. The success of the banks depends largely on the ranges and quality of the services offered to their customers yet complaints of poor customer service are common in the banks. The banks in their recruitment policies should give preference to orientation and knowledge.cgc.CBS E-Journal. Sources wise deposits. Performance in Deposit Mobilization The volume of deposits collected by a private bank in relation to deposit potential of its area is considered to be a reliable index of the performance of the bank in this respect.June. Banks should strengthen their organizational structure and build up their efficiency in management to hasten deposit mobilization. which will be the main beneficiaries of the economic and industrial policies. all as “old wine in new bottles”. which are popular only in urban area .the result is that whenever a customer’s approaches them. 2. Most deposit mobilization schemes are now tailored to the convenience and preference of urban depositors. the requirement and preferences of various community groups in different areas underage periodic changes. Deposit mobilization also demands a proper marketing strategy. Issue 4. Biz n Bytes. The following important indicators can be used to evaluate the performance of the private banks in deposit mobilization: 1. The formulation of new schemes of a different t nature in order to make them suitable for the different classes of investors. particularly those of the rural areas. 4.in/ ISSN 0976 – 0458 . But in the end of year 2007.22 7642368.63 lacks. the amount of deposit was Rs. It was an increase of 287% in 6 year of study period from 2002 to 2007.11 lacks.edu.in/ ISSN 0976 – 0458 . It was increased by 618. 6829794 lacks. 3208511. the amount was Rs. the total amount of deposit was Rs.40 1314752. In industry deposit was registered an increase of about 5 times during the six year of study. because in among the banks under study ICICI bank was occupied about 50% amount of total deposits.63 6829794 5878560. In the end of 2007. In the case of Axis Bank. Infect in the year 2007 the deposit of HDFC Bank was 17.cgc. it reached on Rs.32 18 15.43% in 6 year.51 lacks. ICICI Bank was occupied 60% of total deposit of selected private banks. Issue 4. from 2002 to 2007. In the case of HDFC Bank. the deposit of ICICI Bank reached on Rs.. In the case of ICICI bank in the year 2002. 23051018. during to period of 2002 to 2007.38 .27 100 2006-07 23051018. It was 26.87% of Total Deposit of selected private banks. 1765381 in the end of year 2002.CBS E-Journal.96 lacks in the year 2007. 6573763. It was a great achievement for Indian private banking industry. Biz n Bytes. the amount was Rs. 38211841. 2010 Deposit Performance Table of Selected Indian Private Banks During 2001 – 02 to 2006 – 07 Table no. It was also great success for ICICI bank. which reached on Rs. It means bank enclose his deposits in term of equity but its total share in industry was reduced.11 1486372 966097.80 27 19 5. It was 49% of total deposits of selected private in 2002 year.2 times in study period and about 10% share occupied from the industry. In the end 60 http://www.53 100 (Source – Annual Reports) Table no 1 shows the deposit performance of Indian private banking industry. At that time it was 19% of total amount of deposit of selected private banks of India.11 1765381 1228721 353499 17651. It can be concluded that the bank has got 7.June.39 (Rs.85% of total deposits of selected private banks in year 2002. 1 Detail ICICI Bank HDFC Bank Axis Bank Centurion Bank of Punjab Kotak Bank Average 2001-02 3208511. In the year 2002. 1228721 lacks in the end of year 2002.89 2.7 Percentage 48. It showing its significant growth and indicates the high level of operational efficiency. in lacks) Percentage 60. In 2007 year.38 3. 4.89% in the total deposits of banks under study.in/ ISSN 0976 – 0458 . Annual Reports of ICICI Bank From 2002 – 2007 Annual Reports of UTI Bank From 2002 .2007 Annual Reports of Centurion Bank of Punjab from 2002 – 2007 Annual Reports of Kotank Bank from 2002 – 2007 61 http://www. M. Involve an appropriate strategy for attracting the deposit. New Delhi: National Publishing House. 5. This endeavor can be made in the following way: 1. Jaipur: Prateeksha Publication. 1991. It was an increase of 378.cgc.2007 Annual Reports of HDFC Bank From 2002 .P. The growth rate of deposits was more than five thousand times in absolute figure shows its commendable growth and performance. 2.53%. Introducing the new deposit accounts and banking service. The figure of deposits shows that absolute figure registered of banks has increased but in relative term its size was decreased during the period of study. 5878560. . 3. which increased to 2. Axis Bank was having 15. References: 1.CBS E-Journal.38% share. 7. Publishing for deposits.edu. Issue 4. Organizing special drive for the purpose.38% in total amount of deposits of selected private banks. Analysis of Financial statements. In case centurion bank the deposit was 5. It is the primary responsibility of the management of the banks to make an endeavor for deposit mobilization.D. Second Edition.11 lacks. 4.49%. Motivating the saving community to deposit with the bank and also the bank staff for securing deposits in large measure. Financial Markets and Institutions. Conclusion and Suggestion In this section. N.e. TMH Publication.M.June.. The absolute amount of the deposit was increased by .43% in 6 year of study period from 2002 to 2007.32% during the six years of study period but its size was reduced in the form of percentage of industry by 1. Biz n Bytes. the Operational efficiency of the management of the Private Banks under study in respect of the deposit mobilization is evaluated. 5.27% in the year 2002 of total deposit of the banks under study. Infect in year 2007. 8. On the other hand the Kotak bank was holding the minor share i. Efficiency of Public Enterprises in India. Agarwal. 2010 of year 2007. To identify the potential centers and open the branches at such centers. 6. this amount reached on Rs. 6. in the end of the study period its share was 3. any strategy for deposit mobilization involves 3. Bhole L. 1982. 2. 1987 Agarwal. Director. Common man enjoyed his time in nukkad nautankis or fairs. Every time revenues & glamour touches it climax. parties. 2010 Troubled Waters of IPL: A Case Study on Cricket-ainment P. Punjab College of Technical Education Baddowal.P. Biz n Bytes. India is a country where cricket is given the status of religion and cricketer like Sachin Tendulkar is the God of cricket. reality shows. allowing the Australian players to play on the Indian soil. Started by Lalit Modi as a rival of Indian cricket League (ICL) in 2007 & was backed by BCCI. Each & every aspect of getting publicity & to get attention is used.edu. The ads are shown on every channel irrespective of whether they belong to the TV channel group having the broadcast rights or not. selectors.. All these traditional formats of entertainment were to relieve the stress factor. the latest version T20 cricket has got tremendous interest of the people. The games like chess.com Mobile: 09914551155 Centuries ago kings used to listen to music in the evenings or go for hunting in the forests. Local feeling is added to the advertisements by training foreign players speaking in Hindi. It began with Shahrukh Khan’s comments about including Pakistani players and the outcry over the same by Shiv Sena. Then came hockey. pctepps@gmail. Controversies have proved publicity stunt for IPL.June. game shows like KBC. IPL has enthralled the spectators in every edition.cgc. As the time passed on. Who cares what is wrong or right. IPL becomes a complete business model for any organizational to generate maximum rate of returns. Beginning from the controversy involving the inclusion of Pakistan players. For example a good cricketer or selector becomes the brand ambassador of business group or a party. BCCI is the richest cricket board in the world because of popularity of cricket in India. But the way Indian Premier League (IPL) has generated the business is amazing. It is quite obvious that any format of cricket hits a large audience as a result the game gets maximum sponsorship & TRP than other game or mode of entertainment. But today IPL is synonym with a good business model. Multiplexes and Sports. Telangana supporters asking last year’s champions Deccan chargers to pull out of the tournament. Today entertainment is present in different formats like pubs. new modes of entertainment came into picture like in 19th century radio was there and then cinema enthralled the spectators in early twentieth century.CBS E-Journal. discos. soccer and test cricket in twentieth century to entertain the people. Ludhiana pps@pcte. IPL gets a lot of publicity because of this. For cricketers. Politics on IPL also contributed to it becoming most popular event in the country. It has been proving as a money minting machine for last three editions. big business houses. In sports.edu. No stone is left unturned to advertise the IPL fever. the Telangana issue ruling out Hyderabad as a spot for the tournament. the tournament was in news due to these issues.in. sponsors cricket has become a business to earn revenues. politicians.Singh Dy. videogames. Then 62 http://www. The main objective of IPL was to bring young talented cricketers to the world of cricket. to make people happy and enjoyable. Issue 4. polo and wrestling were other sources of entertainment in eighteenth and nineteenth centuries.in/ ISSN 0976 – 0458 . IPL has been selling like a hot product for last three years. and perfect model of entertaining the audience. perfect model of marketing strategies. But the BIG question is “Has IPL become a perfect model for its ULTIMATE OBJECTIVE i. Franchisors buy the players and teams at such whopping sums which makes International players to think whether they play for their own national teams in other tournaments during IPL. Biz n Bytes. bhangara beats and stage shows during and before IPL matches make the spectators out of the world. Indian Skipper M S Dhoni along with CEO of BCCI have accepted that the performance of Indian Team could have been better if the players would have not attended late night parties during IPL. 63 http://www.cgc. Further in spite of taking rest players enjoy themselves in late night parties dancing with stars & cheer leaders. Very soon different governing bodies have to decide how to tackle these troubled waters of IPL. Shilpa Shetty as the owners of IPL teams and stars like Katrina Kaif. IPL three gets its publicity not only because of cricket but because of late night parties and the controversies. The organizers of IPL should concentrate on raising the level of Indian cricket rather becoming itself as the troubling waters. music & dance programmess. Today the IPL is the second name of glamour. players which some how has made the people think about objective behind IPL. Cheer leaders. The controversy between Lalit Modi & Shashi Tharoor and later on involvement of other politicians shows how much is the influence of politics on cricket. These issues put a question mark in everybody’s mind that whether IPL is a reality or hype because in reality Indian cricket team is missing its objective to become number one cricket team in T20 cricket. No doubt IPL has given Indian cricket & India an extraordinary platform at international front in such a way that every Indian should be proud of it.CBS E-Journal. Issue 4.June. Everyday stories are in air about these parties.in/ ISSN 0976 – 0458 . If IPL is affecting the performance of Indian cricket team then the feasibility & success of IPL four becomes an issue under consideration. cheer girls. Whole country is shocked on this performance. drum performances. IPL is no more related to a sport but to mega stars. Indian Cricket Team has been thrashed out of the T20 world cup in West Indies due to its dismal performance. Today IPL has become a symbol of entertainment & excitement. late night parties. Preity Zinta.e.edu. then retreating their statement after Sharad Pawar met their chief. The marketers of IPL have brought every concept of marketing to attract mammoth audience. Mega film stars like Shah Rukh Khan. It follows the perfect business model of maximum returns. Big corporate houses like Ambanis. Is the objective of IPL is to mint money or enjoyment of players or at some extent enjoyment for spectators? Recently. Deepika Padukone as brand ambassadors of teams make this tournament most exciting. Indirectly both have have made it clear that IPL is responsible for this shameful performance of Indian Cricket Team at international front. improving the performance of Indian Cricket team & bringing new talented cricketers to the world of cricket?” Today IPL three has become the hub of controversies due bad performance of Indian cricket team & political turmoil in it. 2010 Shiv Sainiks threatened Aussie players not to come for IPL. United Breweries (Kingfisher) see huge profits in the money minting machine and as a result they involve themselves in this tournament.. No doubt controversies make IPL most happening event but the involvement of politics in cricket has made a negative impression on the mind of people. Explain different business strategies which have been used in IPL? 4. Issue 4.in/ ISSN 0976 – 0458 .edu. Is IPL responsible for dismal performance of Indian Cricket team? If yes. 64 http://www.cgc. What improvements or changes should be made in the current format of IPL? Why do you think these improvements or changes are necessary? 5.CBS E-Journal. then how? 3.June.. Biz n Bytes. Should IPL fourth edition be played next year? Give your opinions with explanation. Which stage do you think IPL has reached in its Product Life Cycle & Why? 2. 2010 Food For Thought 1. The industry has registered staggering growth rate post liberalization era.WOS Subsidary). Capacity utilisation. Rane Brake Limited. as India is quickly becoming the favored destination for auto component production. Vinod Joshi Asst.. Increased competition due to the entry of the foreign suppliers such as Delphi. Bharat Forge. of jobs is not in proportion with the increase in revenues.With the entry of foreign players and technology the industry has become globally competitive.(Mech. Rajasthan University Raghav Gupta B.CBS E-Journal. 2010 A Study on the changes brought by the FDI in the auto component sector Satyendra Kumar Sharma Lecturer. Honda etc. The growth has had a favorable impact on the quality. BITS – Pilani Abstract “India has finally arrived” is what everyone believes . With more and more companies. Post 1991 the industry has grown at a scorching rate of over 20 %.Value chain. one industry that has outperformed others is the auto component industry.in/ ISSN 0976 – 0458 . Prof. The Indian manufacturers are fast becoming the favored suppliers for the global automobile companies. TVS. The opening of the economy has thus been a blessing for the industry specially the auto component industry. Tierisation and vendor rationalization are increasingly becoming more popular. Keywords: FDI . production of the companies.Vendor rationalization (Wholly Owned 65 http://www.. have become common phenomena. Lean manufacturing etc have become very common among the Indian manufacturers now.Indian industries are performing better than ever and stories like Corus. Kaizen.June. Tierization . Biz n Bytes. Companies like TELCO. Due to the increased labor productivity. adopting Japanese methods of manufacturing the productivity and quality levels have increased immensely.ROCE . the increase in the no.E Hons. However. Land Rover. LCA (Low Cost Automation).cgc. Sundaram Fasteners etc have made a mark for themselves on a global scale by winning supplier awards from the global auto giants as GM. Management Group. Issue 4.). BITS – Pilani Dr.Kaizen.edu. and Taro etc. Visteon etc has led to an enormous increase in the domestic investments. Words like TQM. In the early 60’s and 70’s the Ambassadors and the Padmini Fiats dominated the automobile market. domestic carmakers in both countries faced intense competition for market share. But both of them were toppled by the Maruti Suzuki as it went on to capture 70% of passenger car sales by the early 1990s. within an acceptable price.000 cars. domestic investments. and to look for higher quality levels from their (first-tier) suppliers. as domestic suppliers could not meet the price and quality requirements of the carmakers. 70% within 3 years). this was seen as an unreasonable target. Achieving the 70% target required the carmakers to switch rapidly from a reliance on imported components to sourcing from local vendors. By the end of the decade. The 1990s were major breakthrough years for the Indian Automobile and Auto component industry . Some of these were joint ventures. only a handful of companies were present in India.edu. in which Suzuki-Maruti held a substantial stake.The Suzuki-Maruti plant. car production had increased by a factor of two and a half in India (from 209 thousand units in 1991 to 564 thousand in 2001). Due to the lower costs. The FDI has increased from 2 billion $ to a mammoth 19 billion $ in a span of 3 yrs. and their response was to upgrade productivity and quality levels in their own plants.This was the era of major reforms that had a positive effect on these industries. and by a factor of almost nine in China (from 81 thousand in 1991 to over 703 thousand in 2001). and this in turn gave the carmakers a strong incentive to work closely with (first-tier) suppliers. many automobile majors entered India in a hope to make huge profits. while others were independent domestic firm. In both cases. jobs. For at least some of the new entrants.quality. which 66 http://www. Meanwhile. to ensure that quality standards were met. The investments in the years 2006 were 15 billion $ up from 5.CBS E-Journal. The effect of the FDI can also be seen on the Indian economy. Over the same period. Biz n Bytes.June. developed a network of suppliers during the early 1990s.We intend to review how the coming of the foreign money has effected the productivity. The study is based on interview from the industry experts mostly from the companies in the NCR cluster..The report is mostly based on the secondary data which has been primarily sourced from the websites. and to achieve high levels of productivity and quality. located outside Delhi. Realizing the market size. 2010 Introduction Before 1990’s. the supply chain had undergone a major transformation.A lot of foreign players have made inroads into the indian auto component sector by Joint Ventures or by wholly owned subsidaries. a wave of multinational firms entered India .: The report intends to find the effects that the FDi has had on the auto component industry. From the early ’90s onwards. India produced just about 209. the multinationals have been shifting their manufacturing and most importantly. Report After the reforms in 1990’s India has attracted huge foreign investments in almost all the sectors. Issue 4.cgc. Suzuki-Maruti worked with suppliers to establish international best practice. The new generation of multinationals worked closely with local suppliers to achieve high standards of productivity and quality. Purpose and data collection. In 1991.in/ ISSN 0976 – 0458 .5 billion $ the previous year. their R&D centers to India.Most of these entrants were required to achieve a high level of domestic content within a specified period (typically. in 2006-07 alone. The auto components industry has attracted investments. over the next five years in the sector.133 2 0. The overall passenger vehicle production has increased by a whopping 17.9 3. and exports. The overall production of the four wheelers approximately doubled in a span of 4 years increasing from 669.6 5. production.7 19 Figure 1 :.cgc. The bulk of these investments have been made by Indian companies..165 0 199091 199596 200102 200203 200304 200405 200506 200607 200708 2. this has been largely possible due to the reforms that have proved to be the life savior of the industry. Issue 4. to the tune of US$ 5.5 FdI (in Billion $) 15. However.CBS E-Journal.Source ACMA The various effects of FDI are discussed below: 1.edu.1 2. India expects to attract US$ 5 billion in foreign direct investment (FDI). Increase in Production and overall investments The Indian Auto component industry has finally come of age .June. 2010 has grown.6 CAGR between 2001-2007. Indian Majors are acquiring companies abroad and the industry is growing at a double digit CAGR. The opening of the economy was the most crucial step in the growth saga of the auto and the auto component industry. which have expanded their manufacturing capacities and invested on technologies. Biz n Bytes.7 % for the period of 2002-07 and are expected to touch 20 billion $ by 2015-16. by the rate of approx 8 % during the 10th 5-year plan. FDI in the Indian Economy 20 18 16 14 12 10 8 6 4.2 4 2.000 67 http://www.4 billion. The investments have increased by a CAGR of 21. the auto component industry witnessed a boom with increased investments. Due to the growing domestic demand and the cost effectiveness.The “Made in India “brand has made a quality statement in the world.in/ ISSN 0976 – 0458 . The cars have increased by a greater margin than the MUV’s.in/ ISSN 0976 – 0458 .Source ACMA The revenue of the industry has been on a huge upswing. Issue 4.CBS E-Journal.2 CAGR over the period of 2002-07. Due to this major auto. 2000000 1800000 1600000 1400000 1200000 Production of the passenger vehicles 1773000 1545000 1309000 1210000 1323000 988000 1113000 Cars MUV's Overall 1528000 1000000 800000 600000 564000 400000 200000 0 608000 722000 669000 842000 1028000 245000 222000 182000 196000 114000 146000 105000 2001-02 2002-03 2003-04 2004-05 2005-06 2006-07 2007-08 Figure 2 :. 2010 vehicles in 2001-02 to 1. The Indian auto components industry is one of the fastest growing manufacturing sectors which is both forward and backward integrated with other engineering and manufacturing divisions in the country. The turnover has crossed the mark of 18 billion $ in 2007-08 and the turnover is expected to reach 40 billion$ by 2015. the Indian markets are around 30% cost effective to the American and the European manufacturers.. The threefold increase in the turnover in a span of 5 years indicates the scorching pace with which the industry has grown.edu.210.June. Due to the low labor costs.000 in 2004-05. The turnover of the industry has grown at a brisk pace with the turnovers increasing from 1. 68 http://www. Biz n Bytes.The turnover of the industry has grown by a huge 27. component suppliers are flocking to the sub-continent.cgc.9 billion $ in 1995-96 to a huge 18 billion $ in 2007-08. their R&D centers to India. which has grown.4 billion.CBS E-Journal. India expects to attract US$ 5 billion in foreign direct investment (FDI).9 2.1 billion $) 7.7 % for the period of 2002-07 and are expected to touch 20 billion $ by 2015-16.7 8.June. The auto components industry has attracted investments.7 12 15 18 40 After the reforms in 1990’s India has attracted huge foreign investments in almost all the sectors. The investments in the years 2006 were 15 billion $ up from 5. The FDI has increased from 2 billion $ to a mammoth 19 billion $ in a span of 3 yrs.41 5. Biz n Bytes.2 Source:.in/ ISSN 0976 – 0458 .cgc..4 4. by the rate of approx 8 % during the 10th 5-year plan. The bulk of these investments have been made by Indian companies.7 2 0 20 0203 20 0304 20 0405 20 0506 20 0607 20 0708 20 0910 3. over the next five years in the sector. 14 12 10 8 6 4 2.71 3. the multinationals have been shifting their manufacturing and most importantly.4 2.edu. which have expanded their manufacturing capacities and invested on technologies. to the tune of US$ 5. The investments have increased by a CAGR of 21.4 6. Issue 4. The effect of the FDI can also be seen on the Indian economy. 2010 Year 1995-96 1996-97 1997-98 1998-99 1999-2000 2002-03 2003-04 2004-05 2005-06 2006-07 2007-08 2015-16 Turnover ( in Billion $) 1.1 3. Due to the lower costs.8 5.ACMA 69 http://www.5 billion $ the previous year.4 Investments (in 10.51 2. in 2006-07 alone. lean manufacturing etc.This is the largest number of firms across all industries from any country other than Japan to win Deming award. Quality The quality of the Indian Manufacturers has improved immensly over the last few years. huge investment capabilities.In desperation the companies improved the quality of the products which can be easily seen from the reduction in the amount of rejections per million for the various companies .e. of which 9 have been won after 2003 i. Issue 4.937 parts per million (ppm) in 1999 went down to 864 ppm this fiscal.June. the suppliers who are doing very well are those who have been able to continually upgrade their technical capacity through joint ventures or technical tie-ups with overseas partners much before the recent arrival of multinational auto assemblers. 7-W. Most of the manufacturers are following modern shop floor practices such as 5S. Kaizen. One interesting thing to notice is that out of the total 558 members of the ACMA 551 are ISO 9000 certified. like the TVS and Rane groups have also made strategic use of government policies and are now quite well positioned in the field of global suppliers. 2010 Most of these firms that entered India were well equipped with high-end technology. for example. The in-plant rejections came down to 1. In a very short span of time. and diverse product portfolio. These suppliers. 2. of Winners 551 ISO 9000 382 TS 16949 56 QS. Quality Standard No. Biz n Bytes. in a span of 5 years . the first tier suppliers had the same characteristics.cgc.e. Due to the entrance of the Foreign suppliers in the country the firms knew that they had to improve the overall quality and their systems or get shunned out of business.07 per cent from 2. The exhibit shows a drastic reduction of the 70 http://www. In Tamil Nadu. To counter these new entrants the industry has adopted a three pronged strategy of product portfolio enhancement. of quality awards that the Indian companies have. Another thing to note is the No.edu. 11 Indian Auto component manufacturers have bagged the prestigious Deming Award. This has been possible due to an increased domestic investment. that have led to better overall quality and productivity.The other key factors that contributed to the improved quality standards are the long term contracts given by the 1st tier suppliers to the sub-suppliers and the belief in the growth story of the Auto Component industry..ACMA The Other indicator of the improved quality of the Indian manufacturers is the data for the problems per 100 vehicles which is shown below. The customer line rejection which was 15. market expansion and efficiency improvement to achieve this status.5 per cent. The Auto Component firms i.in/ ISSN 0976 – 0458 . Enhanced capacities and higher capacity utilization have contributed significantly to this growth.9000 180 ISO 14001 59 OHSAS 18001 11 Deming Award 4 TPM Award Source :.CBS E-Journal. customer level rejection rates have also come down significantly for Indian automotive component manufacturers. certain Indian companies have attained a customer rejection rate of up to 500 PPM.CBS E-Journal. In the recent past. as most of the products that are exported are of good quality. International companies maintain their customer rejection rate at an average 200 PPM. Biz n Bytes. On the other hand. What further establishes the fact of increased quality is the markets to which the auto components are exported .June. The other indicator of the improved quality of the Indian manufactures is the increase in the export of the auto components.. Source :.cgc. share of exports to Asian markets have reduced to 16 per cent in 2006-07 as compared to 26 percent in 2003-04. The problems reported per 100 vehicles in 2006(208) have been approximately reduced to 1/3rd of the problems reported in 1997( 572).edu. with a few attaining even a zero customer level rejection rates.Most of the Indian exports are to the European and American markets. Issue 4.IBEF Besides the decline in end-of-the-line rejection rates. In 2006-07. exports to US and Europe accounted for 62 per cent of total exports. 71 http://www. 2010 problems from the year 1997 to 2006.in/ ISSN 0976 – 0458 . which are high quality markets with very stringent quality measures. small and big players alike.June. The need to increase productivity and to manage as few vendors as possible has made the auto component majors help the SME’s to also adopt these modern shopfloor practices which has led to a trememdous increase in the productivty and cost cutting. There has been a significant improvement in the ROCE of both the Indian companies as well the foreign counterparts in India. Increase in productivity The Indian auto component industry has witnessed a sharp increase not only in quality but also in productivity in the past few years.923 in 200506. productivity.e. India still lags behind the productivity of a country like Japan. Indian labor productivity in the manufacturing sector is on an increase with the application of production management techniques and many companies have doubled their productivity in last five years. This sharp increase in productivity is linked to increasing use of technology along with the best in class management techniques. Lean manufacturing. Revenues have risen by a compounded annual growth rate of 25%.edu. i. 7-W. which is at 5%.terms once confined to management textbooks . according to data compiled by the Automotive Components Manufacturers Association (Acma).The above exhibit clearly suggests an increase in the ROCE for the firms.Kaizen . 2010 3. The ROCE for some companies like lumax and Sona Koyo have increased from less than 10% to over 25% in a span of 5 yrs. Now more and more emphasis is being laid on both product and process improvement to reduce the cycle time and to increase the first pass percentage.have suddenly become part of the discourse among the industry players. Issue 4. as measured by revenue per employee. Another reason for the increased productivity has been increased technical investments. Other factors that have equally contributed to the rise in productivity include the gain in skills of workers and more balanced production lines (i. The companies are laying more and more importance on waste reduction as well as its management. What the above clearly suggests is an increase in the productivity of the firms. This is attributed to the modern shop floor practices such as TQM. Kaizen.TPM etc. total factor productivity . where sales per worker is estimated at $50. Kaizen etc. Consequently. Employees are still working the same number of hours.However.The companies started automating and now almost all companies in the organised sector have some sort of automation in the plants. The increase in our productivity has not come from a huge increase in capital investment. The Indian Industry has adapted LCA (low cost automation) very well which has helped the companies to increase the production without significant investments.in/ ISSN 0976 – 0458 .000. TQM . per employee turnover in Bharat Forge has risen from Rs 17 lakh in the fiscal 2002 to Rs 42.CBS E-Journal. One of the major impacts of the FDI was the introduction of the world class manufacturing techniques in the Indian auto component industry .Today almost all of the major firms use the modern shopfloor practices like 5-S . Biz n Bytes. outstripping the growth in employment. It is that we are using our capital assets better.5 lakh in 2004-05.e. has increased from $22. nearly 70% more than that of India. more efficient use of the resources including increase in the labor productivity.. The ROCE for some companies has increased to as much as 40%.500 in 2002-03 to $30. elimination of bottlenecks and so on). Technologies were sourced either by the Joint ventures with the foreign firms or by the inorganic means of mergers and aquisitions. Due to long term orders and massive 72 http://www.cgc. One of the key reasons for the increase in productivity is that manufacturing has moved from process-orientation to product-orientation. This clearly indicates an increase in the productivity of the firm due to automation and usage of modern shopfloor practices which has led to reduced cycle time for the product.edu.But the SME’s generally prefer used machinery from the failed plants and companies.The other exhibit confirms both the views . This has been made possible by the increased use of the modern shopfloor practices and discipline at the shop floor.For companies like MICO the capacity utilised has almost quadrupled from around 25% to 100%. with only 35 per cent of exports being sourced by Tier 1 OEMs. Issue 4. it is a very different 73 http://www. In 2006. 2010 growth opportunities the companies are spending more and more on newer technologies as well as R&D. most of the Indian auto components were sold in the aftermarket.June..Companies like MICO and Setco Automobiles have not increased their capacities but even then their capacity utilisation has increased .cgc.CBS E-Journal. Climbing up the value chain The Indian automotive component industry has made a sustained shift to the global Tier 1 market for their products. In the 1990s. The companies have not just adopted best practices but have also vertically extended such practices to their sub-suppliers. Source :. It is not just the increased expenditure on the technology but also R&D that is helping the companies increase productivity. 4.IMaCS Analysis The effects of FDI can easily be seen from the above exhibit which clearly indicates an increase in the capacity utilisation.in/ ISSN 0976 – 0458 . Biz n Bytes. Another very important thing to notice is that almost all the companies in the exhibit are now utilising 80% of their capacities.One of the reasons can also be that the companies increased their capacities around 2001-02 and the increased business is now increasing their capacity utilisation. Moreover.June. the net effect has been a loss of jobs or we can say the increment in the no. which post reforms did not adapt to the changing environment of the Auto component industry. OHSAS 18001 awards for the companies. Korean and European • Appropriate automation has led to economically attractive production costs • Flexibility in small batch production • Growing IT capability for design. Today. the Indian Auto Component companies have responded by increasing their capacities.The workplaces are more safe and worker friendly as depicted by the increased no. 2010 story. Due to the increased capacities. Japanese. However. This increased supply to the OEM’s and export is also an indicator of the improved performance and working of the Indian Auto component industry. Biz n Bytes. Jobs Due to the increase in the domestic demand as well as exports. which is at 5%. increased automation in the industry has also led to firing of the workers. outstripping the growth in employment. of jobs is not in proportion with the increment in the capacity.. This is largely due to: • Proficiency in understanding technical drawings and being well conversant in all global automotive standards: American. Indian automobile component manufacturers supply 75 per cent of their exports to Tier 1 OEMs and only 25 per cent to the aftermarket.CBS E-Journal. Revenues have risen by a compounded annual growth rate of 25%. many companies. faced closure due to which many workers lost their jobs. development and simulation 5.cgc. Companies like Bharat Forge are now one of the largest in their kind and are the major suppliers to the tier 1 suppliers and OEM’s. Due to the above reasons. 74 http://www. Issue 4.edu. Indian component suppliers have displayed a growing capability to cater to the engineering and production needs of the some of the world's biggest auto companies.in/ ISSN 0976 – 0458 . Along with this has come the increased wages for the workers and better working conditions . the jobs have increased. The attrition rate is around 5 per cent overall. due to the entry of foreign suppliers and increased packages that they offer the auto component industry is facing an attrition problem. This can be seen from the increased merger and acquisitions. A tighter tiering of suppliers that has heightened the importance of a small group of designcapable and global first tier suppliers. Value added 23 Organised 77 Unorganised Though currently 558 members comprise the organised structure . The after-market is a highly competitive market as there is a high price elasticity of demand and a tolerance of lower quality standards . the auto ancillary industry witnessed huge capacity expansions and modernization initiatives in this period.edu. There have been instances of the workers of smaller companies failing to turn up at the workplace as they have been hired by bigger companies.in/ ISSN 0976 – 0458 .June..CBS E-Journal. 2010 However.Though both. which saw a lot of consolidation.but there are as large as 6000 players in the unorganised structure.while on the other hand the Unorganised players are mainly limited to the replacemant market or fprm the ¾ tier of the industry. as well as employer and employee relations.. technological collaborations.cgc. Daewoo etc. while segmented the rest into contract manufacturers and lower-tier subcontractors has radically transformed customer and supplier relations. One of the key effects of increased competition and pressure from OEM’s has been tierisation and Consolidation in the top tiers of the industry. Issue 4.But the organised players controll over 75% of the market and are the main suppliers to the OEM’s . while segmenting the rest into contract manufacturers and lower-tier subcontractors. Attrition. Attrition at the lower level of the workforce is turning out to be a major problem for maufacturers. Conclusion With the liberalization of the Indian economy in 1991 and coming of many foreign automobile manufacturers like Hyundai. A tighter tiering of suppliers that has high lightened the concept of a small group of design-capable and global first tier suppliers. a problem that was earlier confined to the mid-level of management in automotive component manufacturing industry — has now started affecting operators. 75 http://www. One of the reasons is that most OEMs find it prudent to hire people from smaller companies instead of spending time and resources on training newcomers. organized sector and unorganized sector supply to the replacement market . This also led to a tough competitive scenario. Due to which the unorganized companies are able to supply the replacement market with significantly lowerpriced though usually lower-quality parts as compared to those produced by the organized sector.the unorganized sector dominates the replacement market because the fiscal liabilities (in terms of excise duties) are not accounted for by this sector. Biz n Bytes. and equity partnerships within the industry and with leading global players abroad. There are four major manufacturing clusters in India.Ministry of Heavy Industries and Public Enterprises . One of the major advantages that these small enterprises enjoy is the ability of batch production. 8.. 76 http://www. Vol.32.in Last update 2010. Iyer A. Biz n Bytes.dnb. ICFAI Jouranl Of Supply Chain Management.June.cgc. Journal of International Trade and Economic Development. Business outlook survey 220-2003 available at ACMA website www. Draft Automotive Mission Plan 2006-2016 . Nowdays more and more plants are being set up in the state of Uttaranchal. Most of the unorganized players are the suppliers to the organized companies. However. The Indian Auto Ancillary Industry (2006) available at http://www.in/SMEs/smesinsights.autoblogs. Though the industry is fragmented.com 6. References: 1. Most of the manufacturing is confines to NCR cluster. Hyderabad. Issue 4. Nitin Gupta (2006) Logistics Management in Auto component Industry. Saranga H. Assessment of Auto Industry available at www.ibef. 3. PP 52-64 10.in/ ISSN 0976 – 0458 .com 2.com/ancillaries_indu.acmainfo..htm 9.fadaweb.CBS E-Journal.in 4. SME Insight available at http://www. Meenu Tiwari (2008) Engaging the New Global Interlocutors: Foreign Direct Investment and the Transformation of Tamilnadu’s Automotive Supply Base. Govt.autofocusasia.edu.& Seshadri S. Maharashtra cluster. Vol 5 pp152-164 7. 2010 Another thing that can be seen is the formation of clusters . Auto Focus Asia Available at www. Conference aon Global Manufacturing Competitveness at ISB. With increased exposure and opportunities. Tamil Nadu cluster and the Eastern cluster.asp 5. Uwe Achterholt (2007) Domestic Growth and Global Aspiraions. of India 11. slowly the best practices have penetrated down to some of these players. these small enterprises are slowly entering the big market. the fragmentation is fast decreasing with concepts such as tierisation & vendor rationalization coming in vogue under pressure from the OEM’s to cut costs.co. (2006) Productivity and Technical changes in the Indian Auto Component Industry.Before 1990 the concept of clustering was no so evident as we see it now. Foreign Direct Invetsment & Auto Component Sector available at IBEF www. KPMG’s India Automotive Study . Industrial growth has been faltering.3 billion. So far the global financial crisis has had three major impacts on the Indian economy: (i) Economic Downturn (ii) Exposure of banks (iii) Domestic policy. there was some premature triumphalism among Indian policymakers and media persons. because of the "strong fundamentals" of the economy and the supposedly well-regulated banking system. they pulled out $11. of which $8. Professor. the Indian economy was experiencing a downturn. net FII inflows into India amounted to $20. Accurate Institute of Management Technology. Accurate Institute of Management Technology.in/ ISSN 0976 – 0458 . Noida Dr. foreign exchange reserves are depleting and the rupee is depreciating. have become major sellers in Indian markets. Gr. Amit Kumar Srivastava Associate Professor. Gr. inflation remains at double-digit levels. This has had two effects: in the stock market and in the currency market. Biz n Bytes.cgc. The most immediate effect of that crisis on India has been an outflow of foreign institutional investment from the equity market. and when US-style financial sectors with the merging of banking and investment functions have been created. Devendra Singh. Accurate Institute of Management Technology. Gaurav Aggarwal Associate Professor. In 2007-08. Foreign institutional investors. Gr. The last two features can also be directly related to the international crisis.. 2010 Impact of Global Financial Crisis on Indian Banking System Dr. These effects have been most marked among those developing countries where the foreign ownership of banks has been already well advanced. Issue 4. The crash in the Sensex at that time was not simply an indicator of the impact of international contagion. Noida Dr. the current account deficit is widening.CBS E-Journal.edu. There have been warning signals and signs of fragility in Indian finance for some time now. It has been argued that India would be relatively immune to this crisis. 77 http://www. and these are likely to be compounded by trends in the real economy. ECONOMIC DOWNTURN:After a long spell of growth.3 billion occurred over the first six-and-a-half months of financial year 2008-09 (April 1 to October 16).1 billion during the first nine-and-a-half months of calendar year 2008. As compared with this. who need to retrench assets in order to cover losses in their home countries and were seeking havens of safety in an uncertain environment. Noida ABSTRACT The financial crisis has been erupted in a comprehensive manner on Wall Street.June. edu. This was despite the sale of dollars by the RBI. the pullout triggered a collapse in stock prices. this withdrawal by the FIIs led to a sharp depreciation of the rupee.cgc.. 2010 Given the importance of FII investment in driving Indian stock markets and the fact that cumulative investments by FIIs stood at $66. 2008.000 by October 17. Issue 4. the RBI reference rate for the rupee fell by nearly 25 per cent. 2008. from Rs 39. As a result. even relative to a weak currency like the dollar. 2008. to less than 10.8 billion in its foreign currency assets between the end of March 2008 and October 3.CBS E-Journal.20 to the dollar to Rs 48.in/ ISSN 0976 – 0458 .86 (Chart 2). Biz n Bytes. 78 http://www.873 on January 8. the Sensex fell from its closing peak of 20. 2008 (Chart 1).June.5 billion at the beginning of year 2009. Between January 1 and October 16. Falling rupee In addition. which was reflected in a decline of $25. There is an imperative need for not mere technology up gradation but also its integration with the general way of functioning of banks to give them an edge in respect of services provided to optimizing the use of funds and building up MIS for decision making and better management of assets and liabilities and risk assumed which in turns have a direct impact on the balance sheet of banks as a whole. So far the RBI has claimed that the exposure of Indian banks to assets impaired by the financial crisis was small.June. the RBI had estimated that as a result of exposure to collateralized debt obligations and credit default swaps. But given the sudden exit by the FIIs. the combined mark-to-market losses of Indian banks at the end of July 2009. According to reports. Thus. more dynamic. Another significant impact of banks today is the technology issue.in/ ISSN 0976 – 0458 . brand values. the MTM losses incurred by public sector banks were estimated at $90 million. although these rumours have been strongly denied by the bank. the RBI is clearly not keen to deplete its reserves too fast and risk a foreign exchange crisis. designing. aggressive and challenging work culture to meet the demands of customer relationships. product differentiation. self-service product delivery channel. 2010 It could be argued that the $275 billion the RBI still has in its kitty is adequate to stall and reverse any further depreciation if needed. advertising. any time and any where banking. while that for private banks was around $360 79 http://www. The changes staring in the face of bankers relates to the fundamental way of banking-which is undergoing rapid transformation in the world of today. Issue 4. While this depreciation may be good for India's exports that are adversely affected by the slowdown in global markets. in response to the forces of completion productivity and efficiency of operations.edu. technology has demonstrated potential to change methods of selling marketing. reduced operating margins better asset/liability management. risk management. Biz n Bytes. Nor does it assist the Government's effort to rein in inflation. it is not so good for those who have accumulated foreign exchange payment commitments. was around $450 million. Given the aggressive strategies adopted by the private sector banks. Unfortunately. there were no clear estimates of the extent of that exposure. THE CHANGING PARADIGM OF BANKING Change is the only constant factor in this dynamic world and banking is not an exception. All these changes call for a new. corporate governance and regulatory prescriptions. ICICI Bank was found to be the victim of a run for a short period because of rumours that sub-prime exposure had badly damaged its balance sheet.CBS E-Journal.cgc. The major challenge faced by banks today is to protect the falling margins due to the impact of competition.. Word over. The result has been the observed sharp depreciation of the rupee. pricing and distributing financial products of an electronic. EXPOSURE OF BANKS: A second route through which the global financial crisis could affect India is through the exposure of Indian banks or banks operating in India to the impaired assets resulting from the sub-prime crisis. reputation. giving room for rumour in determining market trends. have been cutting back on credit.000 crore up to June 2009. Loans to finance consumer durables purchases fell from around Rs 6. to as low as 1. the recession generated by the financial crisis in the advanced economies as a group and the US in particular. decelerated to 11 per cent growth in 2007-08 and 12 per cent over the year ending June 2008. Direct housing loans. These losses are bound to render some institutions fragile. even though it was lower than the 50 per cent recorded over the previous year. These fears were compounded by those of the minority in metropolitan areas dealing with foreign banks that have expanded their presence in India. as a result of their exposure to domestic stock and currency markets. which had increased by 25 per cent during 2006-07. the rate of growth of auto loans fell from close to 30 per cent over the year ending June 30. As yet these losses are on paper. to a little over Rs 4. in this uncertain environment. Such assurances have neither reduced fears of those exposed to these banks or to investors holding shares in these banks. more than 60 per cent of which are directed to the US. The reticence of lenders to increase their exposure in markets to which they are already overexposed and the fears of increasing payment commitments in an uncertain economic environment on the part of potential borrowers are bound to curtail debt-financed consumption and investment.2 per cent at year ending June 2009. where banks are unable to control the growth of credit that expansion was.CBS E-Journal. A third indirect fallout of the global crisis and its ripples in India is in the form of the losses sustained by non-bank financial institutions (especially mutual funds) and corporate. especially the huge volume of housing. Finally. as signaled by the decision of the RBI to allow banks to provide loans to mutual funds against certificates of deposit (CDs) or buyback their own CDs before maturity. Such losses were expected to be large.. but the RBI believes that even if they are to be provided for. quite high over the year ending June 2008. 2008. This could slow growth significantly. these banks are well capitalized and can easily take the hit. Issue 4.edu. especially its exports of software and IT-enabled services. automobile and retail credit provided to individuals.000 crore in the year to June 2007. whose global exposure to toxic assets must be substantial.cgc. and underpin the 9 per cent growth trajectory India has been experiencing. It is known that credit-financed housing investment and credit-financed consumption have been important drivers of growth in recent years. Biz n Bytes. banks and financial institutions concerned about their balance sheets. According to RBI figures.in/ ISSN 0976 – 0458 . 2010 million. with implications that would become clear only in the coming months A fourth effect is that.June. 80 http://www. will adversely affect India's exports. It is only in an area like credit-card receivables. at 43 per cent. the most important aspects of which are the injection of vast amounts of public funds into financial institutions and the provision of sovereign guarantees on bank accounts. despite the backlash against neo-liberalism worldwide. Actual costs of borrowing have gone up (even with falling central bank interest rates). that when faced with this crisis the Government is not rethinking its own liberalization strategy. DOMESTIC POLICY: While these trends are still in process. The extent of imported difficulties would have been far less if the Government had not increased the vulnerability of the country to external shocks by drastically opening up the real and financial sectors. the nationalisation of many of these banks is likely to increase the pressure to reduce outsourcing in order to keep jobs in the developed countries. this does not justify the argument that India's difficulties are all imported. it is indicating that it hopes that more of what created the problem would help solve it. unemployment has been rising in the major world economies. They have been induced by domestic policy as well. By deciding to relax conditions that apply to FII investments in the vain hope of attracting them back and by focusing on pumping liquidity into the system rather than using public expenditure and investment to stall a recession. The net result would be a smaller export stimulus and a widening trade deficit. 2010 International banks and financial institutions in the US and EU are important sources of demand for such services. CHALLENGES FACING INDIAN BANKING The main challenges facing by Indian banking are the role of financial instrumentation in different phases of the business cycle. but they were found to be important contributory factors. therefore.edu. This crisis is sought to be addressed by a variety of policy initiatives.CBS E-Journal. Biz n Bytes. 81 http://www. It is disconcerting. and the difficulties they face will result in some curtailment of their demand. Further. their effects were already being felt. The need for introduction of new technology in the banking and the importance of skill building and intellectual capital formation in the banking industry are also equal important. if not trillions of dollars in capital value have been lost in stock markets. Yet. Issue 4. Inter-bank credit has almost frozen up. Hundreds of billions.June.cgc. INDIA: CONFRONTING THE GLOBAL FINANCIAL CRISIS: Recent events in the global financial system have been nothing short of seismic.in/ ISSN 0976 – 0458 . the emerging compulsions of the new prudential norms and benchmarking the Indian financial system against international standards and best practices. They were not the only causes for the downturn the economy has been experiencing.. And the slowing of growth outside of the financial sector too will have implications for both merchandise and services exports. and home foreclosures and bankruptcies are on the rise. Not one Indian bank has had to be rescued in the aftermath of the crisis. and (iii) Foreign Institutional Investors have withdrawn from Indian stock markets leading to sharp falls in key indices. Growth during the quarter ending June 2008 was 7.CBS E-Journal. Indian policymakers have responded with measures to enhance liquidity – primarily by reducing the cash reserve ratio and the repo rate – and enhancing confidence. and (iii) Indian financial markets are still relatively insulated from global financial markets. Although India did experience a period of slow growth in the years that followed that crisis. In charting its course. are well-capitalized and well regulated. The capital adequacy ratio of every Indian bank is well above Basel norms and those stipulated by the RBI. Indian banks have strong balance sheets.9 percent.June. export growth is expected to slow. China. providing a solid foundation for the much more rapid growth that has taken place this decade. The huge injection of funds to stabilize the financial system will need to be financed. 82 http://www. So far the global financial crisis has had three major impacts on the Indian economy: (i) the quantum of liquidity available during the first half of FY 2008-09 is about a third lower than during the first half of FY 2007-08.cgc. India has a long history of working with public sector banks and in engineering bank rescues. say. INDIA: TURNING CRISIS INTO OPPORTUNITY:India's economic managers. India is grappling once again with many of the same challenges that the region faced a decade ago. creating difficult choices for economic and financial policy.. (ii) India's trade to GDP ratio is much smaller than that of. have been deemed unnecessary. low ratio of short term external debt to GDP and less than complete capital account convertibility. In common with its East Asian neighbours. the sharp shift in the availability of global risk capital for financing Indian investment. the Government is juggling multiple considerations: the state of the domestic business cycle. India's growth rate will slow in 2008-09.edu. India has a healthy external balance. (ii) with slackening external demand. The slower growth will be accompanied by reduced employment growth and slower poverty reduction. that will be a significant slowdown compared to recent experience. Issue 4. and particularly the Reserve Bank of India (RBI) take considerable pride in having protected India from Asia's financial crisis in 1997-98. the basic financial machinery of the country remained relatively robust. with high foreign exchange reserves. beyond those that already exist. Biz n Bytes. and the slowdown in growth in the world's rich economies. but it will still be robust growth. Bank guarantees. Nevertheless.in/ ISSN 0976 – 0458 . ensuring financing for the balance of payments deficit. Principal reasons for this modest drop in economic growth include (i) a large and diversified consumption base for the Indian economy. The budget deficit for 2008 in the US has trebled as compared to its forecasted value and the ratio of public plus private debt to GDP is well over 300 percent. 2010 But the ability to do so is limited. Technology product innovation. There is a slowdown in India's growth performance — but not a collapse.edu. generation of new income streams. and. investment-led growth. Building business volumes and cost efficiency will be the key to success of the banks in the new era. Adoption of risk management tools and new information technology is now no more a choice but a business compulsion.June. The growth of financial integration has been even more rapid. The interesting question is whether a similar opportunity can be created again. as in 1991. They will be helped by India's lower integration with world trade and finance. to use this crisis also to resume the momentum of reforms that have largely stalled. Policy until late August operated on a business-as-usual basis. the stimulus packages announced by the government and the RBI have had their desired effect.cgc.7). Real GDP growth and major sectors have shown strong signs of slipping. This growth slowdown was initially welcomed by the RBI. Of this there is as yet little sign. Three different channels of the GFC's impact on India can be identified: i) The financial channel. the RBI has sharply reversed course on the two key instruments at its disposal: the cash-reserve ratio (that is. it is perhaps not surprising that. Even though the financial crisis had been underway for almost a year.2 per cent to 34. i. new banking products and players and mergers and acquisitions. 2010 After three years of buoyant. The ratio of exports plus imports to GDP increased by more than 50 per cent between 1997–98 and 2007–08 (from 21. to inspired political and economic leadership at that time. reserve requirements) that banks are required to hold in their accounts with the RBI. for many Indians the present moment is compared less with 1997 than with 1990-91. The short-run outlook for the Indian economy is unclear.CBS E-Journal. Biz n Bytes. But. iii) A final avenue is the confidence channel. that payments crisis was turned into an opportunity for major structural reform from which India continues to benefit till this day. and the overnight secured lending rate at which the RBI lends to banks. CONCLUSION The Indian economy has globalized rapidly during the past few years. sophisticated risk management systems. Yet by itself this is not enough: the larger challenge will be. That was the year when India suffered a major external payments crisis and was obliged to apply to the IMF for assistance. Over the course of October 2009. The Indian banking industry is facing newer challenges in terms of narrowing spreads. which had been gradually tightening monetary policy (since 2004) in a fight against inflation. and by a variety of institutional features. In the present 83 http://www.e. Issue 4. ii) The growing trade links between India and the rest of the world indicate that exports would decline quite sharply.in/ ISSN 0976 – 0458 . India's policymakers have both the experience and the tools to ride out the present storm.. the growing integration of India's financial markets with global financial markets. however. The tightened global liquidity situation following from the failure of Lehman brothers in September 2008 increased the riskaversion of several banks and other lending institutions. Taking economic and political pressures together. the Indian economy started to slow late last year (2007). Thanks.. policy action was based on the assumption that India could remain largely unscathed. Address at CII Banking Summit 2002. New Delhi. Issue 4. Ministry of Fiancé (1991). Y. Government of India. New Delhi.. Public Sector Commercial Banks and Financial Sector Reforms: Rebuilding for a Better future. 2004 Mien M. R. but they have to change before the change. Ministry of Fiancé (1991). 2005 84 http://www. Government of India. Ltd. April 2002. Y V Reddy. at Banker Conference.Inaugural address by Dr. 2003 Bank Fiancé India. Ministry of Finance (993b). solutions. 2004. Miniappan G.. (2005) special Speech in Hindu.Economics' Reforms two years after and the task Ahead. MIT. Economics of Public Finance. Tapolova.in/ ISSN 0976 – 0458 . New Delhi. 2004.June. Banerjee. Sultan Chand & Sons. Hall of India Pvt. 2003. 04/64. Indian Banking 2010: Towards a high performing sector”.. Banking Reforms in India MIMEO. Petia. Brownlee. Governor RBI. Abhhijit. IMF Working Paper No. Petya. 1998 Rustagi. Abhijit. New Delhi. Government of India. Shawn Cole and Esther Duflo. 10 Nov. V. Rakesh Mohan. Reddy.03/150. Banerjee. 2010 environment where change is invisible. MIT.. Mumbai. Biz n Bytes. IRCA (2004): The Indian Banking Industry. 2004. Overview of the Indian Corporate Sector: 1989-2002 IMF working Paper No. They should perceive what customer want and accordingly structure their product and services REFERENCE: “Banking Sector in global perspective”. Koeva. MIMEO. and Esther Dufflo. The Performance of India Banks during Financial Liberalization.V.cgc. legal reforms".. Banking Sector Reforms in India.P: 2002.P. Investment Management – Theory & Practice. Overview. "Financial Sector Reforms in India". "The NPA Overhang Magnitude. it is not enough if bank change with the change.edu. New Delhi. Chartered Accountant Feb 2005. Mac Kinsey & Co. New Delhi.CBS E-Journal. V. Report of the Committee on the financial system (Narasimham Committee). edu.June. RR District. Biz n Bytes. (V. 2000.Thus for broadening and reinforcing the literature requires expanding the research with more diverse examples. Dontanapally Village Shankerpally Mandal. 2010 A Panel Data Analysis on Indian Banks’ Intellectual Capital Efficiency V. The impact of the human capital on firm’s performance is measured by Market Value to Book Value (MB) . broader. human capital efficiency and financial capital efficiency. Indian firms had underwent through several transformations during the last two decades and service sector is being emerged a s a major progressive contributor to Indian as well as world economy. 1995. Boxall and Steenevald. and cultural conditions outside india.. To have a sustainable performance they should continually improve their performance by reducing costs. As mentioned earlier VAIC comprises of structural capital efficiency. The human capital of the firms were measured using a new accounting tool proposed by Ante Pulic named Value Added Intellectual Coefficient (VAIC). information and skilled workers– in other words intellectual capital will determine the competitive edge of the firms . and deeper. Bae and Lawler.For the purposes of this study the concept of a firm’s human capital is incorporated as a part of intellectual capital. motivation.Jayaraj.economic. Issue 4. Inchniowaki. 501504 Ph: 09666496756 E-mail: mailmurale@gmail. In a rapidly changing environment on a globalised arena competition has become a nomenclature for most of the organization.CBS E-Journal. Murale Asst Professor IBS-Hyderabad (Icfai Business School) Survey No. The study deals with Impact of Intellectual capital on Indian Banking Sector. It wouldn’t be wrong to contend that the society has turned out to be an information society in which the main economic resource is information.AshrafAli 2010). While training and development of employee's skills.R.Murale. as most of these studies were conducted under different geographic . the focus of human capital is sharper. This focus is on ensuring and sustaining the competitiveness of the enterprise. and by the way of innovation of new products process and 85 http://www. 156/157.1999) several problems still exists. Introduction The concept of human capital” subsumes and goes beyond the conventional concept of human resources.in/ ISSN 0976 – 0458 .com Abstract The human resource research is replete with studies that have contributed to understand human resource management issues and the importance of human capital (Huselid.A. and involvement of employees in decision making.cgc. are common to both.1997. hence they present a unique opportunity for broadening the literature and expanding the understanding of strategic role that human capital plays in the success of an organization The purpose of this paper was to examine empirically how certain human capital elements affect a firm’s value creating efficiency. In this new information society and in its economy. 2002) and separate studies by American researchers(Kalleberg. and well-established retail firm. Pfeffer (1998). They particularly stress the importance of leading edge HR practices. and financial performance. According to IBM's management. General Motors.June. IBM was not only very late in entering in the PC market.CBS E-Journal. IBM turned down the opportunity to acquire it very cheaply. of Sears failed to see the impending threat of Wal-Mart. competent. serious strategic and cognitive failures occurred despite the presence of highly trained. patents and access to capital and more on innovation sped and adaptability. In the early days of Xerox. 1996) found that people-centered management practices which emphasize long term relationships with their employees. the post 90 period has been seen a burgeoning of research attempt that progressive HR practices result in higher organizational performance. and retaining critical intellectual capital within the firm The following examples serve to bring out the consequences of the missing focus of human and intellectual capital.edu. A then insignificant firm — Apple — capitalized on the Xerox's R&D. Encyclopedia Britannica came to the brink of disaster owing to its failure to appreciate the implications of printing its product on CD-ROM. Marsden and Spaeth. 2010 productivity and speed of market. Another Australian study (Stace and Dunphy. In each of these cases. and which encourage organizational membership. but also gave away the huge new wealth to be generated from the PC software market. technology. Xerox missed out the PC revolution even when they had invested so much in their pioneering Altos machine. the demand for photocopiers was in-sufficient to justify investment. 2001. Similar examples can be multiplied. and understand the implications of the latter's new business design and logic of competition.. and experienced managers and employees: • • • • • • • Ford. An Australian study.in/ ISSN 0976 – 0458 . Pfeffer argues that these latter sources of competitive advantages are largely derived out of firms’ human resources. perform better with regard to innovation. but had to withdraw after sustained losses in the face of Xerox's entrenched position. product development. Their top managements believed that they knew all the answers. Compaq missed the opportunity of Just-in-Time assembly of PCs which was exploited by Dell with outstanding success. In response to the longstanding and repeated criticisms that HR does not add value to organization. The rich. These were no 86 http://www. attracting and retaining good staff. Biz n Bytes. 2001) found that organizations performed better when they were strategically well positioned within a changing environment and pushed the pace of internal organizational change at a rate appropriate to the external environment. powerful.cgc. (Royal. Later. and Chrysler failed to see the impending threat of the Japanese competition before the Japanese auto firms had captured a large market share. IBM entered the photocopier market. High level of human resource management and development practices. 2000. There is an important link between retaining key knowledge workers. Issue 4. argues that success in today’s markets depend lesson advantages associated with economies of scale.for example. and highly qualified and competent managers were present in all these organizations. quite simply . social capital and knowledge management” (Rastogi. 1998) who believed that there was more to the definition of corporate intelligence than dry skills—that it also requires intellectual action. Edvinsson (1997) defines intellectual capital as the possession of knowledge. 2003). their attitude and their intellectual agility. views IC as a firm’s holistic capacity or meta-capacity to meet the challenges and exploit opportunities in its continual support of and search for value creation. Resource-based view gained attention of strategic thinkers only after the contribution by prominent authors such as Barney (1986).cgc.CBS E-Journal. Academicians and practicing managers alike. serve to provide the foundation on which an edifice of intellectual capital may be built. (1998) argue that employees generate intellectual capital through their competence. In short intellectual capital is defined “A dynamic nexus of a company’s human capital . they do not have any appreciating intellectual capital Well-developed human resources however. Issue 4. applied experience. for instance. Essentially capabilities refer to the firm’s capacity to deploy resources. IC. were not aware of the argument. organizational technology. 2010 ‘new voices’ ‘new conversations’. is the move from “having” knowledge and skills to “using” the knowledge and skills that are scripted.”was first introduced by Kenneth Galbraith in 1969 (Bontis. or ‘democratization’ in strategic decisions Organization-wide conversations about strategic issues and problems are vital for providing reality checks on managerial think is. That is.Edvinsson (2000) views IC as the future earning potential derived from the combination of human capital and the potential of workers within an organization. The Resource-Based View (hereinafter quoted as (RBV) links a firms internal capability (what it does best) to its external Industry environment (what market demands and what competitors offer). IC equals competence times commitment. Recent social scientist account Human capital as One component of intellectual capital. Dierick & Cool’s paper is a fundamentally important literature in the theory of Resource-based view. in literature. The active use of knowledge is the transformation of information known to the individual into a product or service that is of value to a firm and its stakeholders.June.Human capital represents the individual knowledge stock of an organization as represented by its employees. Ulrich (1996. Literature Roos etal. customer relationships and professional skills’. According to Bontis et al.edu. Others view this asset as functioning at the collective level and regard it as a meta-competence. 1992) or intermediate goods (Amit and Schoemaker. usually in combination using the skills of individuals or group as well as organizational routines and interactions to affect a desired end.Capabilities have proven more difficult to delineate and are often termed as intangible assts (Hall. (2001). because it clearly explains the kind of resources and capabilities that are of central concern. Rastogi (2002). Biz n Bytes.in/ ISSN 0976 – 0458 . 87 http://www. however. regarding the resource-based view until recently. The term “intellectual Capital (IC). often circuitously. 1993). ) argues that intellectual capital exists when skilled employees are committed to business goals. Wernerfelt (1984) and Dierick & Cool (1989). as he introduced it.. India’s liberalization have had two major implications for the corporate world. the attention has been switched from quantity to value and hence the topic need a study in detail. interconnectedness of asset stocks. “Quantity” is now substituted with “value. these resources and capabilities are viewed as bundles of tangible and intangible assets that include management skills. in his seminal study “Firm Resources and Competitive Advantage”. Time compression diseconomies. asset mass efficiencies.June. Barney coined the phrase “Resource-Based View of the firm” to describe this new model. The measured returns of the products market activities under normal circumstances will be inflated if the opportunity cost is not properly appropriated. Lahiri. they argue that providers' human capital. A number of scholars had expressed the concern that much of the strategy literature was narrowly focused on product market position as a basis for competitive advantage and above normal return. Issue 4. Barney. expanded Werner felt’s 1984 model with concepts from organizational economics and strategic management literature to demonstrate that firms can gain and maintain competitive advantage. organizational capital. wealth was equal to an increase in the quantities produced of a product. 2010 In 1991. Ben L. Biz n Bytes.” rather it is based on the perception that potential clients have. but non tradable asset stocks. it is necessary to account for the opportunity cost of those assets. He argued that firms’ sustained competitive advantage derives from resources and capabilities that are rare valuable. 88 http://www.. information. management capability. intellectual property and experience) that can be used to create wealth. (2009) in their study on business process outsourcing focus on the resources and capabilities that are utilized by the providers in fulfilling their clients' sourcing needs. asset erosion and causal ambiguity are the dimensions associated with the value of an imitable asset. Moreover in the context of the firm. Value creation” is the process by which we accumulate value. The concept of value has went a radical redefinition in a knowledge economy. Kedia. or intellectual material (knowledge. and information and Knowledge. Value based on knowledge is not based on tangible “quantity. Using resource-based view and social exchange as theoretical foundations. with the measurement of quantities captured by models based on cost/I income ratios. and partnership quality are crucial assets that are deemed valuable by the clients and are utilized by the providers in attaining higher performance.CBS E-Journal.in/ ISSN 0976 – 0458 . and not substitutable. Somnath. Dierick & Cool (1989) offered a unique perspective on the topic of limits to imitation of valuable.” Whereas in the old economy.edu. in the knowledge economy. creation of hyper-competitive environment by lowering barriers to entry and opening up of opportunities for growth through the removal of regulations. Shaikh (2004) views IC as knowledge that can be converted into value. imperfectly imitable. They suggested that the degree to which an asset is imitable depends upon the characteristics of the process used to accumulate the particular asset.cgc. This approach has created an analytical problem: if a product market position is achieved or otherwise protected by the deployment of scarce assets. organisational processes and routines. It is “value creation” and not the “production of prices” that serves principal actors in the new economy. .edu. Research frame work The primary objective of this study was to ascertain the relationship between human capital of a firm and indices of organizational performance at the organizational level. its 89 http://www. this article tries to bridge this gap with an analysis of intellectual capital in thirty firms in service sector and how they helped in improving value. Though there are many methods in measuring human capital efficiency.June. Modern companies base their operations upon information and relevant technologies. The data obtained from Prowess Data base provides detailed information on each company. so as to evaluate performances of them..In the light of the progress made by India's reforms and the growing worldwide interest in India. However most of the studies in Indian context had used a subjective approach in studying the impact of human capital on firm value . very little work in general has been done on the Human capital of Indian corporates after the liberalization process and practically a few on how they are bracing competition through human capital in adding value . new valuation techniques are continued to be sought. Storey 1995). Noon 1992. In today’s global marketplace. Kanfer (1994) acknowledges this phenomenon and suggests that the distance between practices and firm performance is too large to perform good reliable research. Therefore. In the west and other developed nations aligning and adopting strategy for competitive advantage is common and there had been many approaches and studies done on measuring and valuing the intangible capital and their impact on firm performance and value. the problematic nature of such a relationship cannot be ignored studies (Legge 1989. Hence there exists a gap in the application of these modern concept of human capital measurement in Indian service context Though we have a developing conceptual literature as well as a conventional wisdom among Professionals that a efficient utilization of intellectual capital will lead to better firm performance. Biz n Bytes. It is commonly agreed that there is a lack of appropriate method of valuation.cgc.The firms were selected from the Information Technology service sector which plays a crucial role in the economy of India. The data used for the study are for the period 2003 to 2009. 2010 However. particularly in monitoring and managing intangible assets.in/ ISSN 0976 – 0458 . However there has been a very few studies in India which had deployed VAIC method in determining the human capital efficiency of a firm. Issue 4. VAIC method of Ante Pulic (1998) is considered as a robust approach in recent studies in the field of Human capital accounting.500 data items and ratios per company. hardly anybody would dispute the decisive role of information and skilled workers in producing goods and services effectively and efficiently. This includes a normalized database of the financials covering 1. Consistently increasing progress of information has taken the knowledge-based workforce into a superior position. The human capital indices considered for this study is addressed by the Value added Intelligent coefficient(VAIC) VAHC and the outcomes are measured by Market Value to Book Value (MB ) Data and Methodology The data used for the study comprises of Sixteen banks representing Bankex in BSE.CBS E-Journal. and everything was contingent upon production. It gives a new insight to measures of value creation and monitors the value creation efficiency in companies using basic accounting figures. VAICTM numerically shows that total efficiency of physical. Issue 4. VAIC is designed to effectively monitor and evaluate the 'efficiency' in adding value (VA) to a firm's total resources and each major resource component. such as Edvinsson. Boremann 1999). However. The coefficient of VAICTM is the efficiency of all resources and exhibits the value-adding ability of a company or an economy. and valueadding procedures. To accomplish this. This method measures the performance of both physical and intellectual capital in value-adding process. 90 http://www. Borhemann 1999) which is designed to help managers leverage their company's potential. a company should and may rely on its skilled workers. financial and intellectual capital turn out to be.cgc. developed by Ante Pulic (1998) as his trade mark. Modern companies’ objective is. to produce commodities by using more information as much as possible. however. The method of Value Added Intellectual Coefficient (VAICTM) was first made public by Pulic (1998) and further developed by Manfred Boremann (1999).CBS E-Journal. only using intellectual brainpower intensely in the production process can now increase the value of commodities.. and driving factor for competition is mainly accounted for by intellectual capital. Malon Sveiby and Stewart maintain that traditional accounting is inapplicable to modern companies for it cannot appropriately measure and indicate their natural dynamics. VAICTM method is based upon physical. focusing on value addition in an organization and not on cost control (Pulic 2000. and a company’s workers are viewed as the primary asset for success. business success rests upon the ability and efficiency of companies to utilize information. VAICTM method assumes that company is a dynamic and ever-changing system.and his colleagues at the Austrian IC Research Centre (Pulic 2000. Conventional companies’ objective was to increase production. financial and intellectual capitals in value-adding process.in/ ISSN 0976 – 0458 . Biz n Bytes. financial and intellectual capital. VAICTM considers the entire company as a dynamic system. This potential of VAIC is motivated by growing evidence in the literature.edu. Bornemann (1999) found a correlation between intelligent potential and economic performance. much of the research stemming from the work of Pulic (1998). the more efficiently used physical. The value-based management approach pushes the managers so as to maximize the economic value of the assets by using them efficiently. The VAIC Method™ Researchers.June. The key contribution of VAIC is to provide a standardized and consistent measure that can be used to conduct comparative analyses across various sectors locally and internationally. Today. This empirical study applies a new accounting tool of VAIC(TM) or the Value Added Intellectual Coefficient. The larger the coefficient. value-adders. 2010 innovation in products and services. Pulic’s methodology focuses on value-adding. In essence. but rather wastes it. The value created (and also value added) indicator acknowledges that the use of any sort of capital implies the existence of costs that have to be paid. This capital is resulted from the products or systems that firm has created over time and 91 http://www. 2005). continuous strengthening of intellectual resources and capabilities must be made to create a larger pool of talents and high caliber professionals in the banking and finance industry (Zeti.CBS E-Journal. Irrespective of the origin of capital and of the form in which it is supplied.com). and intellectual Capital is one of its central contributing factors. Financial sector in particular. (2) Human capital efficiency (HCE): indicator of VA efficiency of human capital. it is also the ability source of intellectual capital. suppliers and clients In a later research from Firer and William (2003). human capital is always owned by the individuals who have it. unless it is recorded in a tangible form or is incorporated in the organization’s procedures and structures (businessdictionary. needs a new generation of professional executives who are more customer-centric. the attainment of which is regarded as an end in itself (irrespective of their income potential) because they yield fulfillment and satisfaction to the possessor.June. The structures ranges from tangible items offered by an organization such as patents. high class human capital today has become a necessity and not merely opulence. Stewart suggests that the workers in a company from bottom to top must be seen not as assets. Human Capital: As the Human Capital is not only one of the most important components of intellectual capital. The earnings that add value to a company can be recorded only after all costs have been covered. more highly qualified. flexible and agile with skill sets that are now more comprehensive than previously. motivation and skills. It is also referred to the employee competence in creating both tangible and intangible assets by contributing in the continuous generation of knowledge and ideas. it can never be used for free. Biz n Bytes.edu. as well as company stockholders. but investment. Human capital can be defined as health. trademarks and databases.in/ ISSN 0976 – 0458 . (3) Structural capital efficiency (SCE): indicator of VA efficiency of structural capital.(Gigare 2009) VA=OUT-INP Where: VA= Value Added OUT= Output INP= Input The value added indicator is measured in monetary units (units of value): Money earned by an enterprise is what provides this enterprise with value.cgc. 2010 The enterprise thus yields less output to the economic environment than the input it uses as resources. Each and every employee takes part in the process of value creation. In this case it could be stated that it does not create wealth (value).. The indicator is simple. Structural Capital: Structural capital encompasses the enabling structures that allow the organization to exploit the intellectual capital. knowledge. transparency and trust among employees (Seetharaman. Low. to complete intangible success such as culture. Unlike structural capital. and Saravanan. they define VAIC as a composite sum of three separate indicators (1) Capital employed efficiency (CEE): indicator of VA efficiency of capital employed. 2004). In the context of globalization. technologysavvy. Issue 4. Research on intellectual capital management from an empirical perspective still seems to be insufficient. exactly how these two constructs are related has seldom been investigated.in/ ISSN 0976 – 0458 . 2007). 1984). to learn and to practice them (Bontis et al.. organizations that possess strong structural capital will have a supportive culture that permits their employees to try new things. we would like to propose the following hypothesis: H1: Firms with higher intellectual capital (VAICTM) yields a higher firm value(market/Book value ) in banking sector H2: Firms With Higher component of Intellectual Capital Yields a Higher firm Value. firms gain competitive advantage and superior performance through acquiring. Many studies have conferred upon the importance and content of intellectual capital. Van Buren (1999) further discusses how to transform intellectual capital into competitive advantage but from a more conceptual aspect. Software companies rely little on physical capital investment. Based on the resource-based view. 2000). particularly for the high-technology industry. this study selected the Information Technology industry as an empirical research target.cgc. Biz n Bytes. Issue 4. VAIC(TM) = VACA+ VAHC +STVA ------------------------------------------------1 where VAIC. How to leverage intellectual capital effectively has seldom been investigated empirically and is still subject to further study. Thus. Unlike other companies. Rather. both tangible and intangible assets) that are vital to developing competitive advantage and achieving strong financial performance(Wernerfelt. VACA indicates capital employed efficiency. holding and subsequently using strategic assets (namely. Intellectual capital has replaced physical capital as the primary basis of value creation. To achieve the above research objectives. the Value Added Intelligent Coefficient. Although the importance of intellectual capital in ensuring superior competitive advantages is well accepted.(Market/Book Value) In Banking Sector 92 http://www.. an increasing number of firms have recognized that intangible assets rather than tangible ones are vital to achieving competitive advantages. indicates corporate value creation efficiency. Capital Employed: Capital employed refers to physical capital employed for attaining business goals The equation to assess each resource that helps to create or produce VA. VAHC human capital efficiency and STVA denotes structural capital efficiency While withstanding a highly competitive environment.CBS E-Journal. the intellectual capital possessed by Information technology firms is what determines their survival.June. 2010 will stay remains with the enterprise when people leave (Nik Muhammad and Aida.edu. both independent and dependent variables have been were operationalised.June. and SCEi = SCi /VAi. VA capital employed coefficient for firm i. For testing the linearity of variables initial test was through correlation analysis that is being discussed in the forth coming section of the paper.The data was normalized by converting it to natural logarithm.HCi. 93 http://www. Dependent Variables To conduct the analysis. Analytical procedures and tools for testing the model was also presented.CBS E-Journal. 2010 Independent Variables As mentioned beforehand. HCEi = VAi / HCl. Issue 4. t dependent variable of Market value to book value was used as measure for and market valuation . the VAIC method as modified by Firer and Williams (2003) was used and the measure of independent variables as follows: VAICi = CEEi HCEi SCEi where VAICi = VA intellectual coefficient for firm i. in this study.edu.None of the multivariate analysis may yield reliable results if the assumption are not satisfied. HCi = total investment salary and wages for firm i. structural capital for firm I. SCi = VAi . structural capital VA for firm i.in/ ISSN 0976 – 0458 .cgc. VAIC is applied as it indicates efficiency in creating corporate value or the extent of corporate intellectual ability. Thus the above discussion provided a plausibility of hypothetical assertions about potential interrelationships among construct as well as the measures assessing them. human capital coefficient for firm i. CEEi = VAi / CEi. The Analysis This evaluation of the hypothesized model is carried out by using correlation and linear multiple regression to analyze the data. Before proceeding with regression analysis the assumption of regression analysis have to be fulfilled . With these we will extent the study by presenting the results of analysis. VAi = Ii (sum of interest expenses) DPi (depreciation expenses) Di (dividends) Ti (corporate taxes) Ri (profits retains for the year) CEi = book value of the net assets for firm i. (Table -1).. Biz n Bytes. CBS E-Journal. 126 **.in/ ISSN 0976 – 0458 .000 126 1 . Error .013 126 1 .013 126 VAIC1 .110 .603 Standardized Coefficients Beta .5225** .763 7. Biz n Bytes.783 B 4.000 Impact of VAIC’s Components on Market value to book value 94 http://www.05 level (2-tailed). The table 1 shows that there exists a correlation between market value to book value and the VAIC at 95 percentage confidence level. Correlation is significant at the 0.363** . Issue 4.less than 0.917 RSquare . The dependent variables were tested against independent variable and the significance of linearity test was small -.234* . 126 .046 126 EPS_1 .614 Std.000 126 . 126 . (2-tailed) N VAIC_1 Pearson Correlation Sig.01 level (2-tailed) *.046 126 .363** .234* . R Square ..42 . (2-tailed) N EPS_1 Pearson Correlation Sig.05.000 . Correlation is significant at the 0.June.123 Adj. (2-tailed) N Dependent Variable: MVBV MVBV_1 1 .5225** .cgc.783 T Sig .edu. 2010 Table-1 Correlation among VAIC and MVBV MVBV_1 Pearson Correlation Sig. It indicates that the linear relationship exists and was ensured. Table – 2 Impact of VAIC on Market value to book value Unstandardized Coefficients Model 1 Constant VAIC R .456 . SCE.658 30.935 54.June.191497 LOGHCE 0.610 Model 1 2 3 Table-4 ANOVA Model Sum of squares Regression Residual Total 2 Regression Residual Total Regression Residual Total 44.860 R Square 0.050759 0.824 0.719 0.525 64.. CEE. Biz n Bytes.000 .151 99.841 99.000 a 66.314844 LOGCEE 1.in/ ISSN 0976 – 0458 .01149 0.000 . Error of the Estimate 0. Predictors: (Constant). Issue 4.726 Std.590 99.434 F Sig 1 1 83 84 2 82 84 3 81 84 68.592 0.185794 LOGCEE . CEE b. Predictors: (Constant).525 61.136657 (Constant) 3.000 .000 .320 .835 000 b 3 49.000 95 http://www.525 df R 0.458 . SCE c.198 0.448 000 c a.153 0.736 Mean Square 44.603 0. 2010 Table-3 Model summary Adjusted R Square 0.cgc.107371 (Constant) 3.248735 Sig Model 1 2 3 Unstandardized Coefficients B Std.935 .247013 0.734 0. Error (Constant) 3. Predictors: (Constant).42445 0. HCE Table-5 Coefficients Standardized Coefficients Beta 0.842 .5171 0.860 0.edu.127469 LOGCEE 0.000 .000 0.553 0.091463 LOGSCE 0.000 .685 37.513 0.CBS E-Journal.208676 .000 .824 0.093052 LOGSCE 0.375 35.688 0. CEE.46768 0.461 21.547 0.695 0.000 .734 0. Model 2 being the best two variable model and model three is a single multiple regression with three variables. 1991). Biz n Bytes. 2010 Discussion It can be inferred from the table -2 The total variation in Market value to book value can be explained (explanatory power) by the 60 percentage variation in the Value Added Intellectual Capital Coefficient. The R square ranges between 0. All the three components of VAIC shows a significant positive relationship with market value to book value and thus the second hypothesis is also proved to be valid. An empirical evidence of this research suggests that there is a significant positive relationship between Market value to book value and corporate intellectual capital. Implications of the study This investigation has shown potency of corporate intellectual capital in order to generate capital gain on shares and as a result attract investors in the market.edu.CBS E-Journal.726 According to Table-3 54 %.cgc. 69% and 72% of the variation in Market value to book value on shares can be explained (explanatory power) by the variation in the Value Added Intellectual Capital Coefficient components such as physical capital. Table-4 shows the significant result (P value < 0. 1991. Pulic. structural capital and physical capital has a positive correlation with market value to book value Table 5 shows the coefficients of the linear regression in the respect of independent variables. Hence the statement of hypothesis that firms with Higher Value added Intellectual Coefficient will have higher rate market value to book value is supported The table three represents the model generated using regression analysis.54 and 0. which suggests that at least one independent variable such as human capital. Three models were generated with model 1 being the best one variable model . Issue 4.June.05) of the Global test. 2000b). Conclusion Intellectual capital is recognized as a major corporate asset capable of generating sustainable competitive advantages and superior financial performance (Barney. The Influence of VAIC on Market value to Book Value is significant at 0. In addition..in/ ISSN 0976 – 0458 . this study indirectly proves the positive relationship between market value to book value and corporate financial performance since existing research has shown a positive relationship between VAIC and corporate financial performance (eg. structural capital efficiency and human capital efficiency respectively. Thus a firm can formulate their business strategies to increase the efficiency of its resources and achieve competitive advantages over its rivals. Barney. The VAIC has a positive impact on Market value to Book value. Similarly investors should also carry out analysis on firms Intellectual capital along with other parameters to have a sustainable return. 96 http://www.05 Level. in/ ISSN 0976 – 0458 . 1. Biz n Bytes. (2000): Accounting for the Creation of Value. The Rate and Direction of Inventive Activity: Economic and Social Factors. B. J. (1991). Metin Coskun (2007) Intellectual capital performance of quoted banks on the Istanbul stock exchange market. C. M. (1962) Economic Welfare and the Allocation of Resources for Invention.yrityksen ikkuna menestykselliseen tulevaisuuteen. 163-182. 673-702.cgc. University of Minnesota. ResearchTechnology Management 39 May/June 1996 Andersen R. K. J. (2000). (1999): Accounting methods for measuring intellectual capital. Journal of Political Economy. Bontis. Arthur.CBS E-Journal. (2000): Henkilöstötilinpäätös . K. B. (1998) 'Why do new technologies complement skills? Directed technical change and wage inequality'. D. Adams. Increasing returns and the new world of business. 99-120. Kauppakaari. Lending Strategy. Jul–Aug. Issue 4. 98. Princeton University Press. Azad. 17 No. (1991).120. Harvard business Review. Nick and S. and Poole. Publisher: Emerald Group Publishing Limited Acemoglu. Helsinki 1998 Amidon Debra (1996): Knowledge Management gains Momentum in Industry. 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July-December 2010: pp. C. Issue 4. Academy of Management Review.. 30 (June). Economic Journal. pp. E. Human Resource Measurement: A Challenge for Accountants.. Issue 4. S. 99 http://www. Thus one of the most important characteristics of Internet marketing is the opportunity and the promise it holds for Tourism enterprises (particularly the small and medium-sized) to extend their marketing capabilities and grow. Pondicherry University. according to a World Tourism Organization (WTO) report.. For these enterprises. small and medium tourism enterprises Introduction: Some of the services that people use require active contact with the organization. Internet offers a level playing field. it is not the cost of being there on the online market place that must be reckoned with.in/ ISSN 0976 – 0458 . every encounter is a real-time encounter with a self-service equipment (e. this notion is changing.in Abstract: Tourism and Internet are ideal partners. In the off-line service marketplace. Tourism is an information-intensive industry and the Internet. Because of the Internet. This paper studies the websites of select small and medium Tourism enterprises in Andaman Islands from the marketing perspective and draws generalizations about the enterprise–customer interface design. Biz n Bytes. virtual assistant). When the competition is just a click away and when the customer can leave at the click of a mouse. a notion of a spectrum of customer contact with the service organization is possible with the extremes of highcontact and low-contact service encounters. It involves an evaluation of their websites from a marketing perspective. the design and implementation of the enterprise-customer interfaces are of paramount importance. website evaluation. As small and medium Tourism enterprises come up with well-developed and innovative Internetenabled marketing strategies. 2010 Marketing evaluation of travel and tourism websites: Lessons from the small and medium enterprises in Andaman Islands Dr.Victor Anandkumar School of Management. India E-mail: victor. it certainly affects the quality of service encounters. It is understood that the Tourism industry is dominated by private sector. with its inherent wealth of information and interactivity empowers customers to locate information quickly and precisely on the web-fronts of Tourism enterprises. important consideration must be given to the design and implementation of their web-fronts where the service encounter happens. Since the website represents the enterprise–customer interface. “face-to-face” encounters common in the traditional retail environment have been widely replaced by “screen-to-face” interactions. Tourism and hospitality services fall in this category. website) and a virtual encounter with service personnel (e.June. According to a UN report. Keywords: e-Tourism. but the cost of not being there. In the online service market space. With the advent of Internet and e-commerce.cgc.g. using the 7-C framework as suggested by Rayport and Jaworski (2002).edu.edu.g. comprising largely of small to medium Tourism [email protected] E-Journal. Tourism and Internet are ideal partners (WTO. which represents 30% of the global Internet user population (Carton. A Comscore Network research finding suggests that the number of unique visitors who surfed the eTourism websites worldwide reached 93. Issue 4. 1998).edu. brochure ware) are used to influence the consumer decision making. 2001).in/ ISSN 0976 – 0458 . The 7-C framework of enterprise-customer interface in Internet marketing as propounded by Rayport and Jaworski (2002) is evaluated and its application in the case of select small and medium tourism enterprises in Andaman islands is studied.g. The information representations and descriptions (e. Hence a whole system of ITs is being rapidly diffused throughout the tourism industry and no player will escape its impacts (Poon. 1987). convenience (i..4 million Internet users in 2002. the global Internet population will reach 300 million by 2005 (Cyberatlas. enter new product markets and rationalize their businesses. Timely and accurate information. regardless of the type of tourism business. 2000). The concept of Internet marketing of tourism services is presented as the context and rationale for the paper. 1998). The paper identifies the 7-C framework to manage these moments of truth and transform them into moments of magic. As a result E-Marketing has emerged as a marketing option for Tourism enterprises. an increasing proportion of Internet users are buying online and tourism will gain a larger and larger share of the online commerce market.CBS E-Journal. Unlike durable goods. 1998). The growth of the number of Internet users has been skyrocketing. According to the WTO (2001). effective use of Information Technologies (ITs) is pivotal. The growth and popularity of Internet marketing of services is overwhelming.e. 2002). Marketing is the field where websites have been used the most. Tourism and Internet: Internet is revolutionizing Marketing. 1993).cgc. As information is the life blood of the travel and tourism industry. Internet marketing is not for every company nor for every product (Kotler. intangible tourism services cannot be physically displayed or inspected at the point of sale before purchasing. According to a Datamonitor report. anytime 24*7*365). Hence they depend exclusively upon the quality and quantity of information provided by the travel trade. Biz n Bytes. is often the key to satisfaction of tourist demand. The study of e-commerce in the Tourism industry has emerged as a ‘frontier area’ for information technology. The Internet is useful for products and services where the customer seeks greater ordering convenience or lower cost or more 100 http://www. information (that is recent. lest they become moments of misery. 1999). However. relevant to consumers’ needs. They are bought before the time of their use and away from the place of consumption (Buhalis. if not mediocrity. e-Service encounters represent the Moments of Truth (Carlzon. In the Internet marketing of tourism and hospitality services. viz. Organization for Economic Cooperation and Development (OECD. reliable and researchable) and fewer hassles (as there are no die-hard salespeople nor long lines) (Janal.June. 2000) revealed that the advent of Internet-based electronic commerce offered considerable opportunities for firms to expand their customer base. Internet and related technologies can provide the information backbone that facilitates tourism.. They can be attributed to three major benefits that customers perceive. Internet Technologies have had an enormous influence of communications and product promotion and distribution for the Tourism industry worldwide (Buhalis. 2010 The paper briefly discusses the healthy marriage between tourism and Internet. Tourism marketing is no exception.. not peep 101 http://www. consider airline tickets. Mistakes or problems that occur in the early service encounters are particularly critical because a failure at one point results in greater risk for dissatisfaction at each ensuing encounter. Observation means that the situation of interest is checked and a person or some mechanical device records the relevant facts. 2010 information about features and value differences.June. From the firm’s point of view. Issue 4. Apart from general industry information collected as secondary data. the most vivid impression of service occurs in the service encounter. 2003). when the customer interacts with the service firm.. Accurate data about the situation of interest (in this case. From the customer’s point of view. 1985).e. and each encounter contributes to the customer’s overall satisfaction and willingness to do business with the firm again. In this context. facility booking and so on. eService encounters happening at the enterprise-customer interfaces (i.in/ ISSN 0976 – 0458 . hotel reservation. the eService encounter at the website) is provided by observation. this research relies heavily on passive primary data collected through observation method.cgc. Biz n Bytes.CBS E-Journal. or behaviours. Tourism products and services match these requirements for Internet Marketing. actions. not passive Lack of control of the electronic environment Price competition Lack of consistency due to customer involvement Requires changes in consumer behaviour Security concerns Customers want to interact. Observation does not tell why it happened. car rental. Table 1. each encounter thus presents an opportunity to prove its potential as a quality service provider and to increase customer loyalty. Observational studies can provide rich data and insights into the nature of the phenomena observed (Sekaran. eService encounters – benefits and challenges Benefits Consistent delivery for standardized services Low cost (per interaction) Customer convenience Global distribution and bigger reach Customer choice and ability to customize Quick customer feedback Parallel processing Research Methodology: This is a descriptive research aimed at studying the websites of the small and medium Tourism enterprises in Andaman Islands from a marketing perspective.edu. It is in these encounters that customers receive a snapshot of the firm’s service quality. They appear at a time and space and in an environment defined as per the customer’s convenience. 2003). Background: A service encounter is a period of time during which customers interact directly with a service (Shostack. the websites) assume special importance. Challenges Customers are active. For example. Table 1 summarizes the benefits and challenges in eService encounters (Zeithaml and Bitner. emeraldislands.andamanconnections.andaman.in www.sinclairshotels.cgc.nic.diveandaman. 2010 The data obtained through observation of events as they normally occur are generally more reliable and free from respondent bias.com www. Through a random sampling from the sampling frame provided by the Destination Marketing Organization (http://tourism. These sectors represent the 4 As of tourism – Access. Issue 4.beachresortsindia.com www.hotelsentinelandamans.June 2005.in/ ISSN 0976 – 0458 .com www.nic. Accommodation.com www.in ACCOMMODATION ACCESS ATTRACTIONS ANCILLARY 102 http://www. The research study was carried out during the period December 2004 .com www. hospitality and so on.com www. This research defines them as enterprises that have 50 or fewer employees or annual sales in the range of US$ 10000– 100000 and operating in the sectors like travel services.com www.barefootindia.palmgroove. leisure.com http://andaman.andaman.edu.diveindia.com www. Biz n Bytes.scubaindia.com www.June.com www.andamanresidency. The definition of what constitutes the small and medium Tourism enterprises varies widely.andamanthrukathay.in).com www.andamanisland. The sample profile is shown in Figure 1.com www.com www.CBS E-Journal.hotelabhishekh.com http://tourism.wildorchidandaman.co.com www. 20 websites of small and medium Tourism enterprises were identified. Attraction and Ancillary services. Table 2.com www.andamandiveclub..andamansearally. Websites chosen for observation (passive primary data collection) Category of business Websites chosen www. This time period accounts for all types of seasonal variations and thus accounts for all types of business promotions and periodic site content changes. Table 2 gives the list of small and medium Tourism enterprises whose websites were chosen as the sample for research. It serves to organize favourable customers and to increase their loyalty. Sample profile From these websites. User-to-user communication can occur between two users (e. maps. primary data was collected through a structured observation method. The 7-C framework for Customer interface provided the structure for observation. Customization means the website’s ability to tailor itself to different users or to allow users to personalize the site.June. price.cgc. commerce.edu. Customer postings. 7 Cs Framework for marketing evaluation of websites: From a marketing viewpoint. context. In the case of Service marketing. Service that allows customers to design personal itineraries by themselves is a good example of customization. though not in a dynamic sense. “face-to-face” encounters common in the traditional retail environment have been widely replaced by “screento-face” interactions (Rafi. chat rooms). Seven design elements of customer interface have been suggested. customization. Table 3 explains the seven Cs (design dimensions of enterprise–customer interface) and their indicators. participants and processes are added to the marketing mix (Booms and Bitner. 1981). 2002). Websites offering multiple language support and search (on the basis of a personal query) facility may be credited for this design element. Because of the Internet. These however do not fit into the Internet Marketing paradigm. including content.in/ ISSN 0976 – 0458 . 2002). Issue 4. Furthermore it is expected that they play a critical role as opinion leaders for general customers through word-of-mouse.CBS E-Journal. Biz n Bytes. promotion and place (McCarthy. 2010 Figure 1.. Community is defined as the interaction that happens between and among the website users. guestbook comments are certain instances of community-building. et al. emails) or involving many (e. community. security/privacy/quality statement. communication and connection (Rayport and Jaworski. which is the online equivalent for word-of-mouth.g. physical surroundings. 103 http://www. traditional marketing mix elements involve product.g. pictures. price information and so on. Content is defined as all digital subject matter on the website. It may include the itineraries/tour/product information. 1981). 104 http://www. payment and cancellation features indicate a highly commerce-oriented website. Context involves the website’s layout and design.in/ ISSN 0976 – 0458 . Biz n Bytes.CBS E-Journal. 2010 Table 3. Issue 4. 7Cs and their indicators for Website observation Dimension Content Indicators Essential information Itineraries/tour/product info Maps Security/privacy statement Click-through content Quality assurance Price information Customer postings User-to-user interaction Multi-language service Personalized service Loading specifications Search function FAQs Email form Online registration Call center Offline Contact details Useful links Affiliate links Online reservation Online payment Online cancellation Cross-selling Sitemap Main menu Multimedia contents Cookies placement Search Engine optimized Resident software required Look and feel Transactional utility Alias Community Customization Communication Connection Commerce Context Commerce means the website’s capability to enable commercial transactions. visuals) and functional (simple. Cross-selling commerce is gaining popularity in an increasingly ‘connected’ world. Some websites are search engine optimized to rank high on search results and therefore stand a better chance of getting noticed and then visited by the browsing customer. easy-to-navigate) design elements to communicate the site’s main benefits. Online reservation.June.cgc. It has both aesthetic (colours.edu.. seeing is believing! For these small and medium Tourism enterprises. outlined here make the encounter between the customer and the marketer. but also other necessary information on tourism destinations such as ‘places to see’.June. viz. followed by online payments. Apart from the cognitive appeal generated by the site. The consistency of the customer interface 105 http://www.. such visuals immensely improve the emotive appeal. As in any scientific research. real-time reservation (with a real-time email or a call center) is a step to begin with.in/ ISSN 0976 – 0458 . It involves a program that supplies affiliated sites with banner advertisements to link visitors from other sites to a particular site.e. The power of community needs to be harnessed and therefore the community services must be enhanced on the websites. This communication can be of three types: site-to-user communication (e.0) browser. customization.g. Overall. Although the sites were found to be doing well in terms of context.cgc. Connection is defined as the number of formal linkages between the website and other websites. Biz n Bytes. it is not just the information which is shared. fragmented information about products. Multimedia contents mostly comprised of Flash animation which add to the site aesthetics and hi-tech looks.CBS E-Journal. context.g. communication and connection.. 2010 Communications refer to the dialogue that unfolds between the website and its users. commerce is the most important function. In particular. Online. All the observations made by the researchers were using Microsoft Explorer (ver. a mutually rewarding experience. community. On many tourism sites. user-to-site (e. this function enables the user to talk directly with the contact person while using the site. The examples from among the small and medium Tourism enterprises in Andaman islands drive home this point. In a typical eService encounter at the enterprisecustomer interface. instant messaging). Issue 4. but at the cost of slow download time.edu. ‘things to do’ and ‘guidelines for the visitors’. word-of-mouth (or word-of-mouse!) advertising and repeat purchasing. commerce. After all. they are well-constructed in terms of communication and context. Therefore. customer service request) or two-way communication (e.g. It is surprising to note that not many sites had even thumbnail picture/video gallery. Findings: Tables 4 and 5 consolidate the website (i. email notification). customization and commerce. The seven Cs. this research also has certain limitations. they have to make this function available and secure as possible. enterprise–customer interface) evaluation of the sample of 20 small and medium tourism enterprises. Tourism and travel-related websites should consider implementing one-stop services like portal sites given the fact that customers want not only simple.5. Most of the sites were found to need improved functions of community. Conclusion: Tourism is an information-intensive industry. most of them were not offering sitemaps that make site navigation easy and convenient for the customers. but also equally critical is the manner in which it is shared. content. Community is an important function in the sense that it facilitates information exchange among customers. sites which resemble portals (with extensive menus and links and diverse services) excelled in communication and context. cgc. J. lot of content on the websites was to build confidence and to dispel apprehensions. References: Booms.R.. But these limitations in no way undermine the conclusion about the importance of a good enterprise– customer interface to facilitate eService encounters.. advertise and sell your products and services on the Internet.com/big_picture/demographics/article/0. MA: Ballinger Publishing Co. Marketing Management: The millennium edition. No. care must be taken to design and implement rewarding enterprise-customer interfaces facilitating eService encounters. Moreover. D. E-Tourism Newsletter.. J.5901_150061. Vol.George.19. Issue 2 (2002) Cyberatlas. In the post-Tsunami recovery. Marketing Strategies and Organizational Structures for Service Firms. Further research may be carried out to find out how the seven Cs individually support the business model fit and how collectively and consistently they reinforce each other. at URL: http://cyberatlas. Netscape Navigator) was not studied. But the effort and the expenditure in maintaining it puts off certain small and medium enterprises.html (2000) Janal. Chicago: American Marketing Association (1981) Buhalis. New Jersey: Prentice-Hall Inc. M.edu. In an increasingly globalized world.Donnelly and W. Tsunami did wipe away a few small and medium tourism enterprises out of business and hence their online presence also got wiped off. they pull off their websites.H.00. P. Moments of Truth. (1987) Carton.. The extent to which an enterprise–customer interface is successful depends on how well all of the seven Cs work together to support the value proposition and business model..J.H.internet.June. Tourism Management.CBS E-Journal..in/ ISSN 0976 – 0458 .. Online Marketing Handbook: How to promote. 2010 across browsers (for example. New York: John Wiley (1998) Kotler. ed. Biz n Bytes. As tourism services marketing makes use of the eCommerce technology. Cambridge. B. Strategic use of Information Technologies in the Tourism industry. Issue 4. in Marketing of Services. e-Metrics. As a result. Two concepts are particularly helpful in understanding the synergy among the seven Cs: fit and reinforcement. and Bitner.5 (1998) Carlzon. technology is fast emerging as the chief homogenizing agent. L. Such contents are temporal in scope and not part of the usual website content. (1999) 106 http://www. The convenience and the low cost of setting up a website attracts many small and medium enterprises. The study covers the Tsunami and post-Tsunami periods. the website mortality rate seems to be high.1323. D.. . IL: Richard D. J. Internet Marketing: building advantage in a networked economy. Lexington. (2003) Sheldon.. 2010 McCarthy.. CAB International. Research methods for Business: A skill building approach (4e).Surprenant. Jaworski and Aileen M.in/ ISSN 0976 – 0458 . Tata McGraw-Hill (2003) 107 http://www. Italy (2000) Poon.. 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Enterprise-Customer interface: Website evaluation Dimension Content Indicators Essential information Itineraries/tour/prod uct info Maps Security/privacy statement Click-through content Quality assurance Price information Customer postings User-to-user interaction Multi-language service Personalized service Loading specifications Search function FAQs Email form Online registration Call center/Online sup Offline Contact details Useful links Affiliate links Online reservation Online payment Online cancellation Cross-selling Sitemap Main menu Multimedia contents Cookies placement Search Engine optimized Resident software required Look and feel Transactional utility Alias A Y Y N N Y N N N N N N N N N Y N N Y N N Y N N Y N Y N N N N Y N Y B Y Y Y N N N Y Y N N N Y N N Y N N Y N Y Y N Y Y Y Y Y N N Y Y N N C Y Y N N N N Y Y Y N N N N N Y N N Y N Y Y N Y Y N Y N N N N Y N N D Y Y Y N N N Y N N N N Y N N N N N Y N N N N N Y N Y N N N N Y N N E Y Y N N N N Y N N N N N N N N N N Y N N N N N Y N Y N N N N Y N N F Y Y Y N Y N Y Y Y N N Y Y Y N N N Y Y Y Y N Y N Y Y Y N Y N Y N Y G N Y N Y Y N Y N N N N Y Y N Y N N Y Y Y Y N Y Y N N Y N N Y N N Y H Y Y Y N N N N Y N N N N N N N N N Y Y N Y N Y Y N Y N N N N Y N N I Y Y N Y Y N Y Y N N N N Y N N Y N Y Y Y Y N Y Y N Y Y N Y Y Y Y N J Y Y N N N N N N N N N N N N N N N Y N N Y N Y Y N Y Y N Y Y Y N N K Y Y N N N N N N N N N N N N Y N N Y N N Y N Y N N N N N Y N N N N L Y Y Y N N Y Y N N N N N N Y Y N N Y N Y Y N Y Y N Y N N Y N Y N N M Y Y Y N N Y Y N N N Y N N Y Y Y N Y N N Y N Y Y N Y N N Y N Y N N N Y Y N N N Y Y N N N N N N N N N N Y N N N N N N N Y N N N N Y N N O Y Y N N N N N Y N N N N N N N N N Y N N Y N Y N N Y N N Y N Y N N P N Y N Y Y N Y N N N N Y Y N Y N N Y Y Y Y N Y Y N N N N N N N N Y Q Y Y N N N N Y N N N N N N N N N N Y N N N N N Y N Y N N N N Y N N R Y Y Y N N N Y N N N N N N N N N N Y Y N Y N Y N N Y Y N Y Y Y N N S N Y N Y Y N Y N N N N Y Y N Y N N Y Y Y Y N Y Y N N Y N N Y N N Y T Y Y N Y N N N N N N Y N Y N N N Y Y N Y N N N Y N Y N N Y N Y N N Community Customization Communication Connection Commerce Context (Note: A-E – Accommodation. Q-T – Ancillary businesses. Biz n Bytes. 2010 Table 4.CBS E-Journal. L-P – Attractions.. Issue 4. F-K – Access.edu.June. N – not available) 108 http://www.cgc.in/ ISSN 0976 – 0458 . Y – available. 2010 Table 5..edu.CBS E-Journal.in/ ISSN 0976 – 0458 . Enterprise-Customer interface: Website evaluation cumulative score Dimension Content Community Customization Communication Connection Commerce Context Accommodation 17 3 2 8 2 10 14 Access 21 4 5 10 7 16 23 Attractions 20 1 3 11 3 11 12 Ancillary activities 14 0 4 6 4 7 13 -------- 109 http://www. Issue 4.June. Biz n Bytes.cgc.