Employment Contracts- Valid restrictions on the employees

– Disclosure of company confidential information.

– Starting a competing business

– Double employment

– Solicitation of company customers

– It is said that when Phaneesh Murthy was asked to leave Infosys, he was asked to sign a non-Solicitation bond. This was done so that he do not use his existing relations with the customers to pouch them. As a part of this bond, he was not allowed to setup his own first for one year. In that period, Infosys worked to strengthen the relationship with customers.

[This blog is captured from “Managing Commercial contracts” class notes (by Prof S. Shankar . Some information referred from Wikipedia/other listed sites.]

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Salient features of a Bond

– A Bond is a form of contract.

– A Bond is never oral, its always in writing.

– A Bond has an obligation and the condition attached to an obligation.

– Obligation and its related conditions always rest with one person.

– If an obligation is not performed then the condition attached to it is executed.

– A Bond can be considered as a One sided contract (though there is no such legal term as one sided contract).

– A Bond will always be expressed in money terms, it is never in kind.

– A debenture is also sometimes called as Bond.

Indemnity is for indefinite period e.g. Defence agreements but bonds are for definite period.

– Indemnity arises only after the event happens. Bonds are void if conditions are fulfilled.

[This blog is captured from “Managing Commercial contracts” class notes (by Prof S. Shankar . Some information referred from Wikipedia/other listed sites.]

Key questions to ask when getting into contract

– What is the risk i am getting into by getting into an agreement ?

– It is not possible to cover all the risks in the contract.

– It is considered practical to list all the risks in the table and see how best to address these in the contract.

– The key question becomes- How do i cover the listed risks ? How can the contract help me to cover the risks ?

– Break-up a contract into table containing 2 columns- Essence and Collaterals

– Essence covers the conditions based on which other party and claim the damages.

– Collateral covers the basis on which contract can be cancelled.

[This blog is captured from “Managing Commercial contracts” class notes (by Prof S. Shankar . Some information referred from Wikipedia/other listed sites.]

Non Performance Risk- Warranty vs Guaranty

– The concept of Warranty and Guarantee covers for Non Performance Risk.

– The term Guarantee is coined by people for convenience.

– It is left to the contracting parties to define what they mean by “Warranty” and “Guaranty”.

– In lending agreements, collateral is a borrower’s pledge of specific property to a lender, to secure repayment of a loan. The collateral serves as protection for a lender against a borrower’s default – that is, any borrower failing to pay the principal and interest under the terms of a loan obligation.

– Terms and Stipulations are the one and the same things.

– Essence of any contract are warranties and conditions.

– Any breach in warranties means the right to claim damages.

– Any breach in conditions leads to cancellation of the contract (+ damages)

[This blog is captured from “Managing Commercial contracts” class notes (by Prof S. Shankar . Some information referred from Wikipedia/other listed sites.]

What does COMBITERMS 2000 mean ?

– COMBITERMS helps us understand who will bear the cost of shipment considering the various stages of shipment.

– COMBITERMS defines the cost sharing terms for a shipment between a buyer and a seller.

– COMBITERMS helps define the Trade terms for the different modes of the transport.

This site defines COMBITERMS 2000 as “Combiterms 2000 is based on Incoterms, a set of regulations containing international trade terms and standardized contract terms about how responsibility and the costs of transporting goods should be divided between buyers and sellers. They are fundamental, especially to international trade transactions, and are in line with the UN Convention on Contracts for the International Sale of Goods.”

Some examples below-

– In sea transport, the Trade term- FAS means Free Alongside Ship. If this is the trade term then Loading at the seller’s premises is the Seller’s responsibility whereas paying Import charges and Unloading at buyer’s premises is Buyer’s responsibility.

– In all modes of transport, the Trade term- DDP means Delivered buyer’s premises Duty Paid, exclusive of. In this trade term, Loading at the seller’s premises is the seller’s responsibility but paying the Import charges is Seller’s responsibility whereas Unloading at buyer’s premises is the Buyer’s responsibility.

– P-56 in the printed material provided in the class defines the COMBITERMS for Sea transport only.

– P-57 in the printed material provided in the class defines the COMBITERMS for all the modes of transport.

[This blog is captured from “Managing Commercial contracts” class notes (by Prof S. Shankar . Some information referred from Wikipedia/other listed sites.]

Functional structure vs. Divisional structure

– Functional structure is considered more efficient because people are organized as per the expertise they bring in. Because of this they could deliver the output more efficiently. For the very same reasons, the Divisional structure is not considered efficient as there tend to be the redundancy of resources.

– In Functional structure, the across-function communication is less so the chances of creating Functional silos is more. Divisional structure on the other hands is more flexible and allows for movement of people. Silos are possible here too.

– Functional structure is less flexible whereas Divisional structure is more flexible.

– The Manager or the superior will be an expert in the functional area so there will be more credibility in relaying the feedback. This leads to something called as a Social Specialization. Since Social specialization is missing in Divisional organization, the feedback mechanism may not be fully trust-worthy.

 [This blog is captured from “Organization Structure and Design” class notes (by Prof Sourav Mukherji . Some information referred from Wikipedia/other listed sites.]

Different types of Organization structures

– Functional structure

– Divisional structure

– Hybrid structure (which includes both Functional and Divisional structure)

– Matrix structure

 Some points:

– Entrepreneurial Organization is the one in which everyone does everything.

– Functional structure is quite skin to Input based organization. It means that People are organized as per the Input/skills they bring in.

– Divisional structure is more like Output based grouping.

– Divisional structure is quite prevalent in the multi-product organizations. Individual functions exists within each org.

– The key question in Divisional structure is on what factor the output will be based on. It could be Product, Geography, Customers.

– Most large software companies are Output based.

– Matrix structure somewhat violates- One person0One boss notion.

– ABB was one of the first company to have imbibed Matrix structure. To make it work they prepared and circulated huge documentation on how to make it work. US Defense is another example.

[This blog is captured from “Organization Structure and Design” class notes (by Prof Sourav Mukherji . Some information referred from Wikipedia/other listed sites.]

Organization Structure: General Motors vs Ford

General Motors:

– General motors (GM) structure was decentralized.

– They brought in the concept of organization structures based on Business units.

– GM was based on many business units (some through acquisitions) like BUIC, CHEVY, OYM, CADILLAC, PONTAC).

– For each of Business units, GM appointed a General Manager who was like a CEO of that particular business unit.

– Till 2006 or so GM was the highest producer of Cars.

– GM’s organization structure was more based on output i.e. various Product divisions.

 Ford:

– Ford had pioneered the Vertical Integration model. Over a period of years, they had acquired mines and Steel plants and integrated with their production/supply chain.

– Ford’s was a functional organization structure.

– Ford’s structure was grouped with Inputs. i.e on the basis of functional inputs.

[This blog is captured from “Organization Structure and Design” class notes (by Prof Sourav Mukherji . Some information referred from Wikipedia/other listed sites.]

Organizations and the choice of Cost effectiveness or specialization

Porter mentioned that Organizations have to make their choices. You either make cost effective organizations or a specialized one.

– Some examples here as below:

1. Maruti launched the cost effective cars in India first. Everyone went for Maruti as their first car but when it came to second car, people rarely went for Maruti. Because it was branded as a low cost car, people didn’t want to be seen as driving Maruti as a their second car (as it would not be seen as luxury).

Maruti had successfully captured the cost sensitive segment but despite good quality high end cars, they could not fully capture the market.

2. Toyota earlier captured US market in the low cost segment. But when they had to get into the Luxury segment they launched the Lexus brand. Only catch with Lexus brand was that it did not have Toyota logo. That way customers could be associate it with a low cost brand. In today’s information age, though, it may not be able to achieve what Toyota did with Lexus.

[This blog is captured from “Organization Structure and Design” class notes (by Prof Sourav Mukherji . Some information referred from Wikipedia/other listed sites.]

Production (Mass Production) model vs Innovation model

– Mass manufacturing result in standardization, efficiency and cost reduction.

– McDonalds is an example of Mass manufacturing. They have a 900 page book that specifies on what each employee is meant to do. They don’t deviate from their standard process (not even the menu).

– Courier business is another example where similar type of transactions are repeated. It is a large skill and low variety business.

– Indian IT has a production model and not necessary an Innovation model.

– Unlike manufacturing, the R&D and production in case of IT is mixed (Automobiles, for example have different groups focusing on R&D and Production).

– Process Innovation has been more associated with Indian IT than the Product Innovation.

[This blog is captured from “Organization Structure and Design” class notes (by Prof Sourav Mukherji . Some information referred from Wikipedia/other listed sites.]

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