Timetric update the latest figures for market share in the web browser market - they are shown in the chart below. Internet Explorer continues the long slow slide as rival browsers become more popular and web users reveal their preferences!read more...»
The UK coalition government does not yet have a growth strategy worth the name but they have invested plenty of capital in the idea of a Patent Box. This involves a lower corporation tax on profits drawn from patented products) and is a supply-side policy to make UK an attractive location for innovative industries. One proposal is that royalties and other profits from patented products and technologies would be taxed at just 10 per cent.
But many economists argue that this is at best an ineffective way of lifting the amount of research and development in the British economy. They look instead to the Netherlands where an Innovation Box has had a significant impact - it reflects the view that patents are only a small part of the innovation process - you dont necessarily have to patent an idea to make small scale innovations commercially viable.
Channel 4 news tonight visited Sandwich in Kent where the Pfizer research and development facility is set to close.
“Confusion is rife and millions of people are not getting what they have been sold” - a damming indictment of the retail broadband market in the UK exposed here by Rory Cellan Jones in a BBC news article and supporting video clip detailing information failures regarding high speed broadband and the dubious ‘up to x mb/s’ adverts that typically only 3% of UK customers experience…a stronger hand from OFCOM is needed to address this information issue. A hat tip to Henry Wingfield for spotting the article.
How many students still use MySpace? This social network owned by News Corporation looks to be in terminal decline to judge by the sharp and dramatic fall off in unique users in the United States. The labour force is being cut in half and News Corp looks set to end up with huge losses from its ill-fated acquisition of MySpace - Rupert Murdoch’s News Corp bought MySpace for $580m. MySpace’s revenues have fallen sharply to less than $350m in 2010 this year, down from $470m in 2009 and way short of the $1 billion target set by Murdoch on purchasing the business.
A half term hat tip to Henry Wingfield for spotting this super article in Wired magazine. It discusses how Apple is able to keep the iPad at the $500 price point and looks at how the company is vertically integrated and the importance of its retail stores. Have a read here.
This is perfect for examples to draw on when teaching and learning about dynamic efficiency in markets - it is a subjective list but the Fast Company has produced a selection of the fifty most innovative companies in the world adding a profile for each. According to the introduction, the selected businesses are non-dogmatic and they are willing to fail. A great resource and one that I will return to. Below we have added some of recent blog posts on aspects of the economic and business drivers of innovation
The government retains a crucial role in helping to shape and sustain the eco-system needed to foster innovation and growth. This is one of the key arguments of Will Hutton in his piece in the Observer today, essentially a review of a new book by Tyler Cowen. “Invention and innovation, we are discovering, are much too important to be left to the tender mercies of markets.” More here
The concept of market share is an important one in economics. But what data can teachers use other than the (slightly) tired example of Tesco, Asda et al in the UK supermarket market? One approach is to conduct a piece of primary market research amongst the class to see what their preferred Internet browser is and then to compare the market share calculated from student preferences with the overall global browser market…read more...»
This is a must read article for every student who wants to appreciate the impact of innovation on competitiveness and growth. Writing in the Business Guardian, James Dyson argues that “For me, the UK economy shouldn’t be built entirely on the City of London or the next digital fad. We need substance – patentable exports. They bring new money into our coffers. And what will generate economic growth is not just talk of spending cuts, but creating the right environment for research and invention.” Dyson is a strong supporter of tax credits and lower corporation tax for research and development projects and also for science and maths graduate teachers to be paid more.
More here: Innovation: Britain’s other deficit
Tories look to Dyson on hi-tech economy (BBC news video)
Here is a fantastic piece from John Cassidy - author of Why Markets Fail - a simply terrific investigation of the different ways that we can measure the rate of return for different business activities. Apple employees earn a lot less than Goldmans’, despite generating a much higher return.
A hat tip to Tim Mercer from Ashcombe School for spotting this resource - an interesting article from this month’s McKinsey quarterly looking at the consumer surplus that currently exists in the world of ‘free’ on the Internet and how companies might seek to ‘monetize’.
I am a big fan of the journalistic work of Roger Harrabin at the BBC. Here is a nap hand selection of five recent video pieces on environmental issues focusing on emissions issues and policies in developed and developing countries.read more...»
The Telegraph reports here that Mozilla’s Firefox has overtaken Internet Explorer as the preferred browser for internet users in Europe. And Google’s Chrome is fast gaining a strong foothold in this intensely competitive market. The market share data suggests an oligopoly but we know that despite the dominance of a small number of web browsers, the reality is that competition is fierce and millions of web users have their own quite strong preferences!
Lots to think about here in terms of economic efficiency - not least dynamic efficiency and innovation in the market.
And also the impact of competition policy in action .... as the article says at the end
“Since early 2010, Microsoft has offered millions of European customers that use its Windows software the option of using 12 different internet browsers. This followed an agreement in December 2009, when European Union regulators accepted Microsoft’s pledge to give consumers better access to rival browsers, ending a long antit-trust dispute.”
A hat tip to Ian Goff for spotting the article. If you want to keep an eye on what is happening to market share on a daily basis this is the link to the StatCounter site
Not all instances of collusive behaviour are deemed to be illegal by the European Union Competition Authorities. Practices are not prohibited if the respective agreements “contribute to improving the production or distribution of goods or to promoting technical progress in a market.”
• Development of improved industry standards of production and safety which benefit the consumer
• Information sharing designed to give better information to consumers
• Research joint-ventures and know-how agreements which seek to promote innovative and inventive behaviour in a market. The EU has introduced a “R&D Block Exemption Regulation” for this
In December 2010 the EU Competition Commission introduced new guidelines on the types of ‘horizontal cooperation’ that is allowed under EU laws. And here is a good recent example - the development of and agreement on joint industry standards in Europe for mobile phone chargers which means that mobile and smartphone users will soon be able to use a standardised charger.
The common charger will make life easier for consumers, reduce waste (good for the environment) and benefit businesses who dont have to spend as much on developing their own charger technologies.
Apple, Emblaze Mobile, Huawei Technologies, LGE, Motorola, NEC, Nokia, Qualcomm, RIM, Samsung, Sony Ericsson, TCT Mobile (Alcatel), and Texas Instruments have all signed up to the agreement.
Reading this piece gave me flashbacks to the mid 1980s when I would trek in excited fashion to my local petrol station who did a brisk trade in renting out VCR tapes to customers wanting to watch a move over the weekend.
A generation later and the movie rental industry has gone through several transformations. Content has migrated online and high street movie rental businesses are thin on the ground for good reason! Here is a new kid on the block attempting to challenge movie streaming businesses and the likes of Love Film. A US business Flix on Stix Kiosks allow you to download movies onto a USB 3.0 stick loaded with proprietary anti-piracy software. You choose how many movies or games to download and the rental period - the files are self deleting. It is an interesting business model that cuts out the cost of returning DVDs through the mail or in person. And rented movies can presumably be played on any device you choose within the rental period. Dynamic efficiency in action? More information here How long before this business model arrives in the UK?
The nature of demerit and merit goods are such that it enters the realm of normative economics. That is, one government or society may deem something to be a demerit good whilst others do not. Cigarettes are undoubtedly a more demerit good these days than they were in 1940.
Last night’s documentary from Panorama highlighted the 21st century demerit good: Gaming.
The Addicted to games? documentary explores the dangerous side to those who play computer games for 16 hours a day.
This annual presentation from Mary Meeker is widel regarded as the definitive analysis of key internet trends - always worth a peek especially for students and teachers wanting deeper background on the explosive growth of mobile technologies. Access her presentation here.
The OECD Information Technology Outlook 2010 also launched in the last few days is full of useful background - The world’s ten biggest Internet firms’ revenues increased by 10% during the crisis year 2009. More information available here
Obviously, Facebook is not a monopoly in the pure sense - there are, of course, other websites on the internet! However, students studying A2 Economics will be well aware that the working definition of a monopoly, as used by the Competition Commission, is a firm with more than 25% market share.
Imagine my surprise, then, when I read this short article from the Boy Genius forum. According to a recent report filed by Experian’s Hitwise group regarding internet usage in the US during the week ending 13th November, one of every four page views took place on facebook.com.
This could spark an interesting discussion on whether the 25% definition is necessarily a useful benchmark in all markets. Does Facebook have any degree of control over the internet?
There is a fascinating piece here from the World Street Journal Blog on the inexorable rise of a new breed of internet monopolist - businesses with dominant positions in their industry space that millions of people cannot do without from day to day and where the effective barriers to genuine competition are pretty fierce. The article emphasises the importance of first mover advantages and also network economies of scale - a demand-side economy of size that normal economics textbooks are slow to introduce into their coverage.
“It’s hard to avoid the conclusion that we are living in an age of large information monopolies. Could it be that the free market on the Internet actually tends toward monopolies?.....Internet industries develop pretty much like any other industry that depends on a network: A single firm can dominate the market if the product becomes more valuable to each user as the number of users rises. Such networks have a natural tendency to grow, and that growth leads to dominance.”
More here “In the Grip of the New Monopolists”
In a related article Edmund Conway (now based in Washington) discusses the power of disruptive technologies and the huge take up of the Apple iPad among people many of whom have never bought a laptop before. A hat tip to my colleague Tom Allen for spotting this one.
Time Magazine has listed the iPad as one of its top fifty innovations of 2010 - more here
I have started using Google docs as a tool for collaborative work between my students. It is early days yet but my aim is to set a discussion question once a week for each group to contribute to, I will credit students for the input they have having reflected on the edit history for the document. Here is our first attempt.
The expansion of Google and the economics behind their growth strategy offers interesting avenues for study as part of your A2 micro course. This document asks a simple question “Which industry is Google in?” The answer(s) will reveal much about the nature and ambition of Google as a business and the economics of contestable markets and monopolistic markets. The full document can be downloaded below as a pdf file.read more...»
Dom Tapscott - author of MacroWikinomics - was on great form in his evening lecture at the LSE on Friday. He talk - “Rebooting Business and the World” argued that many established institutions have become atrophied because of the global financial crisis but that a new open network model built around collaborative technologies available through the web provide incredible opportunities to address key challenges in the environment, transport, government, education and health care.
Fans of Twitter may be interested in the news that Twitter is migrating to a new search engine based on an open-source information retrieval software Lucene. A good example of dynamic efficiency in action.
Rory Cellan-Jones, the BBC’s Technology Correspondent, does a pretty spectacular demolition job on an attempt by clothing retailer Next to break into the fast-growing market for tablet devices. A very funny piece to camera that manages to highlight when cheap truly means awful! A lovely clip to show when discussing the nature of inferior products in a given market space.
It is already common knowledge that Google is by far the biggest player in the internet search market (with an 83% share globally at last count). In fact, their search is one of the few products that are so ubiquitous that its name has become a verb. Think about it - would you naturally say “search for it” or “Google it”? Surely, this is the ultimate form of monopoly power.
However, many will be less aware of the web giant’s rapid growth in other markets, namely those for internet browsers and smartphone operating systems. Here are links to two articles from the blog Engadget which show how Google’s innovation and rapid product development have made them increasingly competitive in markets that until recently were dominated by other large firms. This could be good as a starter or mid lesson stimulus for a lesson on competition, barriers to entry or even growth strategies of firms.
Incidentally, I am one of the many who have bought into the Google franchise and use both the Chrome browser and an Android phone. I have found both excellent so far!
One for the economic geographers - a fascinating tour of a research park established by Stanford University in the early 1950s which has played host to some vastly successful businesses - old tech and new - and which has become a phenmenonal source of income for the university. Many universities in the UK have sought to create Science Parks and other clusters of emerging industries - but are perhaps light years away from the scale and impact of this example.
Three video resources on innovation - the last one has generated a huge response from students!read more...»
In a digital age the speed and reliability of broadband access is a major supply-side issue affecting the competitiveness of thousands of businesses in rural areas in the UK. This BBC news article captures the issue well as a race is set up between a digital download and a carrier pigeon. Broadband ‘carriers’ are expected to lose!
It is a staggering chart - taken from the Business Insider web site - and most newbie businesses would give their right arm for the sensational growth of users that Twitter has achieved! It is also testimony to the importance of network economies of scale. But can Twitter monetise the content from their ever-expanding army of users?
There are moves afoot! Today we learn that Twitter has reached an agreement with 16 partner sites including YouTube, Yahoo! and Flickr to embed content on its site, make their content stickier and make the site more appealing to potential advertisers.
I am a huge fan of Twitter - there are great opportunities for students and teachers to use it as a learning tool and I will blog about this a little later on in the term
Cross posting from the Business Studies Blog
If you ever need to point students to some real-life examples of technological innovation in action, use this new list produced by the Guardian. Some great case studies here of how technology can be used to identify new value-added services for consumers & businesses, as well as challenge the existing business models of market leaders.
The underlying theme seems to be that technology is enabling these businesses to overcome barriers to entry in a market and quickly become quite disruptive to the established operators. Not all of these businesses will survive and thrive, but some (e.g. Spotify) are already household names and others may soon achieve that status.
Smartphones and Apps - a good example of two products in joint demand - and this BBC news video from India looks at the commercial opportunities for online apps retailers as market demand surges in emerging markets. I will be using this short video when teaching complementary demand.