Taiwans Plan to Develop Industry Clusters - Assignment Example

Taiwan’s plan to develop industry clusters Introduction In this report, the researcher will attempt to analyze and explain the diamond model; how Taiwan has been top the global competitive index through its industry clusters in reference to the diamond model, contribution of industry clusters to global business and how international managers can take advantage of them, discussions of corporate social responsibility in relation to international business,definition and examples of corporate social irresponsibility and the costs of corporate social irresponsibility to the offending organization and its stakeholders. Question one 1.1 Diamond model The diamond model was created by Michael Porter for the competitive advantages of countries hence enabling student’s, researcher’s, various experts and scholars an opportunity to understand a country’s competitive position in the global competition. This model is used to analyze the strategies countries are using to increase their competitive positions in the global market (Athman and Austin, 2009). Traditionally, the economic theory mentioned that factors such as land, location, natural resources, labor and local population size determined the comparative advantage for countries. Since theses factor endowments have no chance of being influenced, the theory fits in a passive view towards the national economic activity. Porter argues that these factors cannot be used in any way to buildsustained industrial growth. According to Porter, the abundance of these factors outlined in the economy theory undermines competitive advantage in real sense. He therefore introduced a certain concepts of clusters or teams of interconnected suppliers, firms, institutions and related industries that arise in specific locations. Porter outlined four advanced factors that are interlinked to create competitive advantage for a nation or region (Alice, 2002). These factors are; firm strategy, rivalry and structure (dynamic conditions dominate the world and direct competition is what impels companies to work on improving productivity and innovation), demand conditions(firms in the economy are facing pressure from increasing demands in the market hence need to improve their competitiveness through innovative and high quality goods and services), related supporting industries (spatial proximity of downstream and upstream industries enhances exchange of information thus promoting continuous exchange of innovations and ideas) and factor conditions (Porter argues that specialized factors of production are created not inherited and they include skilled labor, infrastructure and capital. He emphasizes that factors such as heavy investment cannot be easily duplicated hence leading to development of a competitive advantage). The government role in the diamond model is to act as a challenger or catalyst by encouraging or pushing companies to improve their aspirations and competitive performance. 1.2 Ways in which Taiwan has been able to able to top the global competitiveness index for the development of industry clusters according to the diamond model 1.2.1 Concentration of related companies in one location According to the model, one way that can be used by a country to develop a competitive advantage is to group related companies in one location (Barkley, Ramsey and David, 2002). Taiwan has been successful in concentrating industries that are related in one location. Companies are located in a certain place due to the easy availability of all the natural resources it requires. In most cases, other resources such as man-made and labour are also easily acquired from the society the companies operate in. from research conducted, all companies that are dealing with all sorts of electronics are located to the North of the country while all those firms that are producing precision tools and machinery are located in the central part of Taiwan. Companies that are concerned with producing mechatronics, steel and petrochemicals are concentrated in the southern part of Taiwan. 1.2.2 Infrastructural development Porter argues that specialized factors of production are made and not inherited. He states that infrastructural development is one of the factors that cannot be duplicated by competing nation and can therefore be used to create a competitive advantage (Baines, 2008). The government of Taiwan has been very active in developing the transportation and communication networks in all parts of the country. The good transportation channels developed has facilitated fast transportation of raw materials to all companies within the country regardless of their location. This has promoted smooth flow of all companies’ activities and minimized any chances of delay within such countries hence leading to good performance of Taiwan’s companies in terms of productivity performance.The performance of these companies has been instrumental in making the country more and more competitive globally thus commanding the top position. 1.2.3 Outstanding support from the government In the diamond model the role of the government is to act as a challenger or catalyst by encouraging or pushing companies to improve their aspirations and competitive performance. The government of Taiwan stimulates early demand of advanced products hence forcing companies within the country to improve their productivity levels in order to meet the increasing demand in the market.It is also continuously stimulating local rivalries between companies by awarding top performing companies each year. This has highly motivated companies to produce quality goods that satisfy global consumers fully in order to increase markets for the country’s products in the global market. The government is actively increasing funding in their local companies to improve their performances in terms of productivity and quality of products in order to make them as competitive as possible in the global market (Bernice, 2008). The support that the government offers companies within the country has been very instrumental in increasing its competitiveness in the global market and hence enabling it to top the global competitiveness index. 2.0 Evaluation of the contributions of industry clusters in the global business and how international managers can use them to their advantage 2.1 Contributions of industry clusters in global business Improved quality of goods and services- Concentration of related companies in one location increases the level of competition between firms (Beryl, 2009). Due to high level of competition, each and every firm has to come up with new and effective ways to compete highly in the industry. One of the methods that a firm can use is producing the highest quality of products and services needed to satisfy consumers fully in order to establish a large customer base. As each and every firm aims to produce quality outputs, the goods and services available in the global market are of great quality hence satisfying the needs of global consumers fully. Development of new products and services- For similar firms located in one location to meet their goals and objectives, they need to have plans and strategies that increase their possibility of achieving their desires. This has forced firms to encourage creativity and innovation within their organizations in order to develop a competitive advantage over their rivals (Betty, 2009). A firm for example may decide to organize training opportunities for its leaders and employees so that they can increase their creativity and innovative skills. Another firm may decide to increase investment on its research and design function with a major aim of increasing the possibility of discovering opportunities in the global market that can be explored to increase the competitive advantage of the firm both domestically and globally.The increased creativity and innovation in firms leads to development of new products and services to meet some of the unlimited needs of global consumers. Therefore, industry clusters have contributed exceptionally to the global business by availing new products and services to meet needs of global consumers through creativity and innovation of domestic and global firms. Fair pricing of products and services- Industry clusters have significantly increased competition between firms. The number of firms has been significantly increased in each and every industry hence one of the reason why competition is increasing rising (Carol, 2002). Both global and domestic consumers go for goods and services that are fairly priced and of great quality in each market. The rising competition has forced firms to develop pricing strategies that is fair to consumers in that consumers are not exploited in any way by the prices charged on products and services. This has facilitated fair and reasonable pricing of goods and services in the global market. Sharing of resources hence minimizing chances of a monopoly market structure- Industry clusters has enabled related firms in one location to share the available resources. This fact has highly reduced the chances on monopoly market structures. In monopoly markets only one seller exists and therefore is free to operate the way he wants (Candy, Ramsey and David, 2000). In most cases, the lone seller exploits consumers by charging high prices since the firm has no competition and consumers have to purchase its goods and services to satisfy their needs.Industry clusters has facilitated sharing of available resources hence minimizing any chance of existence of monopoly market structure in the global market. Increased foreign direct investment- Industry clusters have significantly increased investment opportunities in different countries. Due to existence of too many companies in one place, security in that particular area is high (David, 2008). The availability of tight security gives investors’ confidence to invest in such a place since they believe that their property will be safe from any form of theft or damage.Developing countries that have industry clusters are attracting global investors who open new companies in such countries hence improving the economic development of the country. Due to the foreign expertise acquired in the country, local firm increase their competitiveness by improving their productivity and quality of goods and services to meet global standards in order to be highly competitive in the global market. Advanced technology- Industry clusters have improved the level of competition between firms in the technology industry. This has forced the firms in the technology industry to improve their competitiveness by improving the quality of the machinery, electronics and tools they are producing to satisfy needs of their customers fully (Danson, 2008). They are also coming up with new machinery, tools and electronics to satisfy the unlimitedwants of consumers in the technology market. This has enabled global companies to enjoy the services of improved and modern technology that facilitate effectiveness and efficiency of their production processes. The improved and new technology once adopted in a global business organization, the quality of outputs produced by the company improves and hence it gets an opportunity to increase its customer base since global consumers go for high quality products and services. 2.2 How international managers can use industry clusters to their advantage Adoption of the latest technology- Due to the existence of industry clusters, the level of competition between firms producing technological products is high. Due to this level of competition, the firms are coming up with ways to maintain or increase their market share (Delian, 20090. One of the ways they are using is the improvement on the quality of the outputs and development of new technological products that might be of great help to consumers in the technology market. International managers get an opportunity to choose from a wide range of technological products that can be of great use in their respective business organizations.Depending on the type of machineries, tools and electronics being used to carry the day to day activities of their business organizations, theses manager can choose to purchase the most advanced ones for their respective organizations. The adoption of the latest technology improves the effectiveness and efficiency of their organization’s productive activities. This improves the quality of their goods and services that will be very instrumental in satisfying their clients fully hence enabling such organization to maintain or increase their customer bases. Utilizing creativity and innovative opportunities- Industry clusters basically leads to existence of related companies in one location. This enables industries to freely share resources and information. Information is shared through seminars and conferences that are organized by the related companies in order to try and discover ways to improve their production strategies to facilitate production of quality goods and services (Eric, 2009).In the process of sharing information, ideas come and these ideas can be used to promote creativity and innovation in organizations. Since the seminars and conferences organized can be attended by various managers globally, international managers get opportunities to acquire ideas and information that they can use to promote creativity and innovation in their respective organizations. This will enable such manager to come with different ways of improving their business operations and discover new products and services they can produce to increase their business operations and markets. Implementation of the modern human resource management practice- Mostly where related firms are concentrated together, competent employees in each and every firm have to be treated well in order for the firm to retain its employees since incase they are dissatisfied with how they are being treated, they can decide to shift to other companies that will treat them better (Kelly, 2002). This has led to use of modern management and leadership styles in firms. The mostly adopted management style is the modern human resource management. This management practice is focused in managing employees in the best mannerpossible. In a firm where modern human resource management is implemented, employees are equally treated and protected from any form of discrimination within or outside the organization when on official duty. The human resource manager organizes seminar and conferences for organization’s employees for them to improve their skills and knowledge further and in the process employees are empowered. Unlike in traditional human resource management, the modern practice ensures that all organization’s employees are remunerated fairly and the remuneration system is adjusted from time to time to compensate employees in a way that they can meet their needs fully as the standards of living keep on changing. The human resource manager uses effective motivational strategies such as the reward system to motivate organization’s employees to commit themselves to the organization and produce exceptional outputs. From this, the international human resource managers can implement the modern human resource management practice in their respective organization and in the process develop competent and highly motivated employees that will significantly improve productivity levels of their respective organizations. Adoption of good leadership styles- In most global business operationsespecially those in developing countries, the leadership styles used are traditional. The modern leadership style that is mostly used in related firms that are located in one place is the democratic leadership style (Lehman, Ramsey and David, 2000). This style of leadership gives employees opportunities to participate in the decision making process and projects of the organization. This enables the top management of a firm to make good decisions that can be of great help to the firm’s overall performance. Democratic leadership promotes creativity and information and this is why it’s implemented by most related firms to assist them discover new ways to create a competitive advantage.The international managers learn can various the leadership styles that they can implement in their respective organizations to improve their performances from firms that are concentrated in one place. Question four 4.1 Discussions on corporate social responsibility in relation to international business Recently, there has been wide talk about the social responsibilities of businesses, when their contribution in the free-enterprise system is being explored. These talks of the social responsibility of businesses is aimed at defending the core of free enterprise, using the claim that businesses are not only there for making profit, but also for the purposes of promoting desirable social roles and commitments. The emphasis is that firms posses some social conscience, where the ethical concerns revolve around the areas of employment provision, the elimination of discrimination, participating in community affairs and eliminating pollution among – areas of ethical concerns. Both domestic and international business organizations have a corporate social responsibility that they need to execute exceptionally well. A corporate social responsibility is simply a duty to give back to the society a business organization operates in. There are various ways in which organizations can execute this duty. In a business organization, the top management is responsible for devising ways in which the organization will perform its social corporate duty (Bernice, 2009). Most countries worldwide have legislation in place that makes it a must for business organizations to execute such duty. In their annual reports, global business organizations have to explain to organizations’ shareholders how they are performing in terms of financial and operational growth.In the annual reports, a section has to be set aside to explain to shareholders and all external users of information contained in the annual reports how the organizations are executing their corporate social duties. Some of the ways that business organizations are using to execute their corporate social responsibility are; helping needy people in the social access educational and health and social care services, contribute financially or non-financially towards conservation and protection of the environment from any form of pollution, participating actively in charities and other social activities in the society they operate in, work hand in hand with institutions that have joined forces to fight diseases such as AIDS, cancer, Ebola and malaria within the society (Beryl, 2009). International business organizations have a huge task to perform when it comes to fulfilling their corporate social responsibility. This is due to the fact that they operate in various countries worldwide and therefore need to execute their social corporate responsibility in various countries. Fulfilling the corporate social responsibility enables a business organization to develop a good reputation in the industry it operates. Consumers in each and every market associate with business organizations that have a good reputation. This is so since they believe that all their activities are ethical and therefore chances of them producing poor quality goods and services are minimal. This is what makes a business organization with a good reputation to establish a great customer base since it attracts a large number of customers who come to purchase their goods and services and stay loyal to such an organization. The corporate social responsibility can be used as an advertisement strategy by business organizations (Betty, 2009). When an organization participates in the charities and various social events, the public gets to learn more of the organization. In the process the information of what the organization offers in the market spreads globally. As global consumers get aware of the organization’s products and services, they may access such services and goods to satisfy themselves when in need and in the process the business organization gains more customers who increase their sales leading to increased generation of revenues. 4.2 Costs of corporate social irresponsibility to both offending organization and its stakeholders 4.2.1 Definition and examples of corporate social irresponsibility Corporate social irresponsibility is simply the opposite of corporate social responsibility whereby a business fails to give back to the society it operates in. organizations that practice corporate social irresponsibility mostly are focused with making financial gains and are not in any way concerned with improving the social wellbeing of the people living in the society they operate in or conserving and protecting the surrounding environment (McLaughlin, 20080. Polluting the environment through an organization’s production methods is one way of displaying corporate social irresponsibility. Each and every organization has a duty to conduct or use production methods that does not emit dangerous and harmful wastes to the environment.When an organization emits dangerous fumes to the open air where people are concentrated, people’s health is in danger since the dangerous fumes can cause diseases that can result to lose of lives. In another case, when a business organization dispatches its waste product into water bodies, surrounding people will drink contaminated water that cause diseases such cholera and typhoid that can result to loss of lives. These two practicesshow that the business organization is being socially irresponsible. An organization can also be regarded to be corporate socially irresponsible when the well fare of all its employees is not well looked at (Nelson, 2008). This is whereby organization’s employees are prone to harm or injury when conducting assigned duties due to existence of a poor working environment in the organization.The human resource manager of such an organization may treat organization’s employees unfairly by discriminating them on the basis of age, gender, religious and cultural beliefs, race or social class. A business organization need to work with other organizations to improve lives of people who live in the society it operates. The organization should maybe try to make educational and health and social care services easily accessed by needy people or participate incharities organized in the society it operates in.if in any case the organization fails to actively participate in improving lives of people living in their surroundings, it’s said to be corporate social irresponsible. 4.2.2 Costs of corporate social irresponsibility Poor organization’s performance- Corporate social irresponsibility can be displayed in many ways by a business organization. One of the ways in which a business organization can display this practice as discussed above is poor treatment of organization’s employees (Newton, 2009). According to the definition of a stakeholder, employees are part of organization’s stakeholders. The same employees contribute significantly to the success of the organization in terms of realization of goals and objectives. They are the ones who are actively involved in performing all organization’s activities and their productivity levels determine that of the overall organization. Once their productivity levels are low, that of the organization is definitely low and vice versa.The existence of corporate social irresponsibility causes organization’s employees to be treated badly by the organization’s management (Kelly, 2002). In such an organization, employees welfare is not well looked at and they find themselves working in a poor environment that makes them prone to injuries and harm when performing assigned duties. Employee performance is high when they are well motivated and managed with respect and care in their respective organizations. The morale of employees in the offending organization is always low due to poor management and this causes them to perform poorly when executing assigned duties. Their productivity levels are low same as that of the overall organization. Due to poor employee performance, it becomes very difficult for organization to succeed in achieving its organization’s goals and objectives (Eric, 2009). The main aim of shareholders is to generate revenues from their organization. When their organization is performing poorly, it becomes difficult for shareholders to get dividends since no profits are realized by the organization.Corporate social irresponsibility whereby employees are mistreated causes huge harm to the offending organization since its performance is poor since its employees are demoralized and itsshareholders gain nothing from their investments. Poor reputation created- A business organization builds a good reputation by executing it corporate social responsibility exceptionally well. Once an organization is helping in improving the lives of people living in the society it operates in or is working with other institutions to conserve and protect the environment of the society it operates, it gets an opportunity to create a good reputation (Delian, 2009). However, a business organization due to practicing corporate social irresponsibility, establishes a poor reputation. The poor reputation established causes the organization to perform poorly in its respective market since most consumers associate with organizations that have good reputations. The stakeholders of the business organization suffer a lot especially the shareholders. Due to the poor reputation established, the organization’s chances of performing poorly and making losses are very high. This denies shareholders opportunities to enjoy dividends, employees lack resources to satisfy their personal needs and wants and suppliers’ debts are not cleared on time. Inability to exist longer in the industry- In most cases, business organizations that take good care of all their employees, participate in improving lives of people living in the societies they operate in and work with other institutions to conserve and protect the environment have high chances of existing longer in the industries they operate in (Eric, 2009). such organization exist longer in their respective industry because their good reputations enable them to attract great customer bases. The great customer bases developed enable the organization to make high sales hence generating great profits.Due to corporate social irresponsibility practice, an offending organization has very low chances of existing in it respective market. Due to the struggles that the offendingorganization faces in its respective market to make profits that will enable it continue existing in the market, the chances of it closing its operations are very high.This is a huge cost to its stakeholders especially suppliers, employees and shareholders.In case the offending organization closes down, the shareholder incurs losses and their investments turns sour, employees of the organization loses their jobs and therefore becomes very difficult for them to pay their bills as before unless they secure other employment opportunities in other business organizations. Lack of business opportunities- Practicing corporate social responsibility enables an organization to identify market gaps in its respective market and take opportunity of them to increase its business operations and market (Bernice, 2008).Corporate social responsibility enables the top management of an organization to interact with organization’s employees, suppliers and customers. Employees of an organization may be very helpful in suggesting ideas that can be implemented to enhance development of new goods and services by the organization hence improving its operations leading to business expansion. By interacting with customers of an organization, the organization has high chances of identifying market gaps that it can take advantage of to increase its business operations and market. Suppliers ay share vital information to the organization’s management that may be instrumental in improving the quality of the organization’s goods and services and even developing new products and services. Due to corporate social irresponsibility, an offending organization establishes poor relationships with its stakeholders (Betty, 2009). It becomes difficult for such an organization to identify business opportunities that it cansexplore to increase its business operations and markets.The shareholders of the organization enjoy fewer dividends since the business organization relies only on one market. The employees of the organization experience boredom since they perform one and the same task day in day out. This is due to the fact that the offending organization operates in only one market and produces the same productsand servicesevery year.The customers of the organization lack opportunities to satisfy their varying needs since the offending organization focuses on producing only one line of products and services that satisfy only few needs. Conclusion Concentration of related firms in one location increases competition of such firms. The high level of competition forces firms to produce quality goods and services. Taiwan has been able to top the global competitiveness index since all its companies are producing quality goods and services that attract great demand leading to generation of high revenues that assist significantly in the development of the country’s economy. The government assists the companies in their operations by improving the infrastructure of the country and giving them funds to expand their operations. Industry clusters have contributed significantly to the global business in many ways. Due to these clusters, global companies are producing high quality products and services to meet the needs their clients in order to avoid losing customers to rivals. Innovation and creativity in the global industry has improved significantly and global business organizations are continuously coming up with new products and services to meet unlimited needs of the global consumers. International managers can learn the management and leadership strategies that are used by the related firms concentrated in one location to create competitive advantage and can implement such strategies in their respective business organizations to increase their performances. Corporate social responsibility has huge costs to the offending organization and shareholders. Some of the costs are poor organization’s performance, short existence and lack of business opportunities. References Athman and Austin.K., 2009.Effectiveness of the diamond model in business organizations, UK. Sage: London Alice. P., 2002. Industry clusters: Developing a sustainable strategy. The business Journal.75, pp. 117-135 Barkley. F., Ramsey.B. and David.S., 2000.Performance of Taiwan’s economy.3rdedn. London: Longman. Baines.E., 2008.Corporate social responsibility. Sage: London Bernice. 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F., Ramsey.B. and David.S., 2000.Performance of Taiwan companies.3rdedn. London: Longman. McLaughlin. E., 2008.Contributions of industry clusters in the global economy. Sage: London Nelson.T., 2008.The handbook of development of a competitive advantage.2nd edition.Cullompton: Willan publishing Newton. K., 2009.Analysis of the performance of Taiwan companies, UK. Sage: London Read More