Unit 2 Macro: Can China Stay Competitive
This new five minute video report from the Financial Times is excellent on the competitive pressures facing many manufacturing businesses located in southern China. Wages are rising quickly and some manufacturing businesses have already moved either to lower-cost locations within the Chinese economy or to other countries such as Bangladesh and Indonesia.
But there are alternative approaches and this video emphasises the decision that some manufacturers have made to stay put but instead to move up the value chain and produce higher-end, higher-priced products for advanced western markets. Businesses are reluctant to move factories and sacrifice the human capital that has been accumulated over in some cases over thirty years.
read more...»Unit 3 Micro: 3D Printing and a Manufacturing Revolution
Additive manufacturing or 3D printing is an emerging technology that takes product design data which provides a geometric representation of a product such as a pen and that data is then sent over to a machine that allows products to be manufactured ‘on the spot’ typically using additive materials in liquid or powder format.
This TED talk from Lisa Harouni (co-founder of Digital Forming) looks at examples of intricately designed products made using this new and increasingly affordable manufacturing technology. 3D machines can build structures, build replacement parts and parts within parts - the detailed resolution possible is incredible.
read more...»Unit 4 Macro: Does Manufacturing Matter?
Vicky Pryce FRSA has a new article on the economic significance of manufacturing industry for UK economic renewal. It is available here from the January 2012 edition of the RSA Journal. In a related article Sir Christopher Frayling FRSA discusses the rise of the Maker Movement.
Back in November 2011 Channel 4 news ran a special on the future for UK manufacturing here is a link to a related video
2012 - Carnage on the High Street
There are many retail industry experts forecasting that the early months of 2012 might be tough for some struggling retailers. We will keep this blog post updated on a regular basis as news of some high profile retail failures comes through. And we will link to media coverage of some of the attempts to restructure retailers under the threat of closure.
read more...»Unit 3 Micro: Hope Bikes - A Commitment to Excellence
Are you into your cycling? The huge expansion of interest in cycling in the UK from road racing through to BMX and mountain-biking has gone hand in hand with the fantastic success of British cyclists on the international stage. 2012 promises to be another strong year for the industry despite difficult economic conditions.
read more...»Unit 4 Macro: Does UK Manufacturing have a Future?
Here are links to two superb short reports on prospects for UK manufacturing as the British economy struggles to escape from recession and sluggish growth forecasts in 2011 and 2012. Both are from Channel 4 News that produced a special on the health of the manufacturing sector - excellent for evaluation and for some applied examples to build into essays. The links appear below
read more...»Unit 3 Micro: Unilever hit by rising costs
Here is a good example of a global giant in consumer products whose profitability has been affected by external headwinds over which it has little control.
The Anglo-Dutch business Unilever - the world’s second-biggest consumer-goods company – has announced that profitability might fall in 2011 even after it increased prices to offset soaring costs for the commodities used to make its products.
read more...»Unit 3 Micro: Impulses to Change Management Models
It is natural for large parts of our media to be obsessed with tracking the machinations of Greek politics and the frantic attempts by European politicians to shore up the fragile Euro Zone with palliative bailouts and stability funds. But the really interesting and significant discussions in economics and finance are taking place at a microeconomic level. As I reach twenty-five years teaching this fantastic and utterly fascinating subject, each day I am drawn more to the complex wiring of microeconomic decision-making and further from sterile debates about the direction of macro policy and the irrelevance of most of what passes along those dreadful ticker streams on Sky News, CNBC and Bloomberg.
That is why taking time out to listen to programmes such as Global Business, Analysis, The Bottom Line, Hard Talk and many other wonderful outputs from BBC radio provides fresh ideas for the classroom and one’s understanding of new directions in economic thinking.
A few weeks back Peter Day from the BBC met Professor Gary Hamel one of those highly-sought management thinkers who are at least prepared to challenge the conventional wisdom of university lecture halls and business schools. Are we now looking at radical shift in the nature of corporate organisation and behaviour? Will the business landscape look very different in the next few years as new models and strategies emerge post-recession and consumers are compelled to revise their choices? Hamel thinks that there is some important straws in the wind and Peter Day teased some of them out in a lively thirty-minute discussion.
read more...»Oxbridge: The Future for the Company
This looks ideal for intending economics and management students .. will it be business as usual or is there a future for the company as we know it? - here is a link to a FT video discussion - featuring Stefan Stern
Unit 3 Micro: New Business Models in a Digital Age
Here is a link is to an article from the Wall Street Journal Blog - written by Don Tapscott, author of Wikinomics. He provides five examples of industries facing structural challenges in the digital age and how a revamped business model based around collaboaration might pay dividends - he is an interesting guy to follow for potential E&M and Economics students
Global Economy: Increased risk of future shocks
A new OECD report on the risks of external shocks to the global economy looks like being really useful for teachers preparing fresh materials for their courses. “The interconnectedness of the global economy makes it more vulnerable to major shocks…...these shocks include cyber attacks, pandemics, geomagnetic storms, social unrest and financial crises.” The report can be downloaded here.
Six Global Trends Shaping Business Strategy
This is a cross posting from the Business Studies blog because it strikes me as being SO useful for A2 students in particular as they look to include synoptic arguments and ideas into the evaluation this June. This new report by consultants Ernst & Young is a pinch of gold dust for such students, as it examines in a reasonably accessible way six broad, long-term developments which shape business around the globe.
read more...»A2 Micro: Outsourcing
Over a third of UK companies now do some of their production work abroad, whilst 10% have over half of their manufacturing offshore in lower cost locations. Dyson is a high profile example of a company that has relocated production abroad to Malaysia, whilst keeping their research and design operations in the UK. Most recently we are witnessing a trend for service sector businesses to follow suit. In recent times we have seen Norwich Union, Abbey National, Tesco, British Airways and National Rail Enquiries all transfer parts of their operation overseas.
read more...»A2 Micro: Innovation and Economic Policies
Supply-side strategies are usually linked directly with attempts to promote more innovative behaviour. Indeed the focus of government policy is firmly focused on improvements in the microeconomics of markets. Which policies might encourage more innovation?
read more...»A2 Micro: Moving Away from Profit Max
The standard theory of the firm assumes that businesses have enough information, market power and motivation to set prices that maximise profits. But this assumption is now criticised by economists who have studied the organisation and objectives of modern-day corporations. Not only do most businesses frequently move away from pure profit seeking behaviour, many are nor organised and set up in a way where profit is not the only objective.
There will always be a range of business objectives:
1. Profit maximisation
2. Revenue maximisation
3. Increasing and protecting market share
4. Surviving an economic downturn
5. Pursuing ethical business objectives
6. Providing a public service
Unit 3 Micro: Diseconomies of Scale
Diseconomies are the result of decreasing returns to scale and lead to a rise in average cost
read more...»Regulation, legislation and competitiveness - The Bribery Act
From the first of July, businesses will have another piece of legislation to deal with when the Bribery Act comes into law. This was proposed and passed in 2010 just before the election last May, and in the last year the government have been determining the precise way in which it should be put into practice. There are good reasons for it, to establish the country’s position as a global leader in the fight against business corruption – the UK currently holds a strong position in the World Bank’s rankings of economies for their ease of doing business.
read more...»Never Mind Plan B - Plan V needed for the UK Economy!
George Osborne is convinced that the Coalition does not need a plan B. But for growth to be nurtured and sustained in the years ahead we need a Viagra-style boost to our competitiveness and capacity - Plan V. This was one of the main themes from a talk given by Professor John Van Reenen at a packed Hong Kong lecture theatre at the LSE (London) last night.
read more...»Shareholder activism at Thomas Cook
Relatively few of the top listed businesses on the UK stock market have seen shareholder revolts on the thorny issue of executive pay and bonuses. Here is one example of shareholder activism from Thomas Cook reported in the Guardian. “Thomas Cook’s shareholders have staged the biggest revolt of the year, with nearly half withholding their support for controversial bonus awards made by the travel group to its top 100 executives.” The vote is merely advisory and unlikely to bring about a change of decision on renumeration.
Shared Value and the Limitations of CSR
A narrow view about how to create profit has created a disconnect between businesses and society and this needs to change according to Harvard Business School Professor Michael Porter. In a revealing interview with Peter Day as part of the In Business series on Radio 4 last month. It is a superb programme and one that might be useful for teachers and students looking at the limitations of corporate social responsibility as an approach to the conduct of business activity.
“A growing number of companies known for their hard-nosed approach to business—such as GE, Google, IBM, Intel, Johnson & Johnson, Nestlé, Unilever, and Wal-Mart—have already embarked on important efforts to create shared value by reconceiving the intersection between society and corporate performance.”
read more...»Heinz Means Strikes
A seasonal hat tip to Phil Wheeler for spotting this Guardian article on a tasty industrial relations dispute at the huge Heinz factory close to Wigan in Lancashire.
read more...»Growth and Strategy at Domino’s Pizza
Despite or perhaps because of difficult economic times, the pizza delivery company Dominos UK & Ireland has enjoyed rapid growth over the last couple of years. The company, which owns the Master Franchise to the Domino’s brand in the UK and Ireland, now operates through over 130 franchisees with an average of 4.5 stores each. And their long-term strategy contains the target of rolling out at least one new Dominos store per week in each of the next ten years, growing the business into a billion pound brand in the UK – almost double the current size.
read more...»Cows with IP addresses and social networks as modes of production
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.
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Departing from pure profit maximisation
James Mansell, offers this discussion on some of the reasons why businesses frequently move away from a strategy of pure profit maximisation
read more...»Let’s hear it for the girls!
My better half and I recently popped along to the cinema to see ‘Made in Dagenham’.
The film is set in the late 1960s and depicts the true story of the 200 female machinists and their fight for fair pay at the Ford plant in Dagenham, Essex in the late 1960s. The film is an archetypal feel-good piece of social history, and packed with interesting Economics. Teaching to the syllabus alas does not always afford us the luxury of discussing relatively recent Economic history – this is a real shame. An appreciation of these events I feel can really help to bring several topics alive. Encourage your students to go and see the film – it’s all there:
1/ Monopsony – In the late 1960s Ford employed 55,000 people in Dagenham – 54,800 of them were men
2/ Trade Unions and the Supply Side – wage negotiation and industrial action
3/ Legislation – The dispute was a catalyst for what became the 1970 Equal Pay Act: something that still provokes controversy; today – 40 years later – pay disparity still remains an issue (always extra fun to discuss this in an all boys’ school!)
Cinemas are also of course excellent places in and of themselves as regards turning the restless mind to Economics issues. This particular establishment provides sofas for customers to lounge upon, and one is able to order items from the menu via a handy waiter/waitress service. This of course has several ramifications re the business model the firm operates. I marvelled at the application of cross price elasticity as I took in the outrageous prices on the menu! My thoughts turned to price discrimination as I pondered the ticket price! I glanced round approvingly at the civilised audience, gathered together in part via the power of the price mechanism!
I can’t finish without mentioning the fact that the soundtrack during an advert for a well known brand of Corn Flakes was provided by one of my favourite bands … Primal Scream, a Scottish alternative rock group. I almost choked on my Sauvignon Blanc as I vacillated between thoughts of ‘sell out!’ and the use of multiple revenue streams to maximise the value of a well-known product. I have to tell you – the irrationality of the fan won the day …. Oh Bobby, how could you?
CEO admits biggest mistake in corporate history!
A cross posting from the Business Studies blog. In 2001, internet service provider AOL completed a $164bn (£104bn) takeover of US media giant Time Warner. There were lots of crazy takeovers going on during the dot.com boom (and bust) during that period, but the AOL/Time-Warner deal is often cited as a spectacularly bad one. And now there is an admission that the strategic decision taken by AOL was perhaps the worst in business history.
read more...»Economics of Gambling
Earlier this month, the Economist did an in-depth special report on gambling with lots of good ideas for discussion:
- is gambling chance or luck?
- game theory and poker - can it be solved?
- The effect of the recession on casinos: When the chips are down
- growth of Asia’s gambling
- Government policy and the Internet - the effects on the gambling industry.
Fosters Demerger - Beer and Wine rarely mix!
If you are looking for a terrific example of a demerger for the unit 3 economics exam paper (i.e. to help evaluate the risks from aggressive acquisition strategies etc) Here’s an excellent, topical example to use. Fosters Group is to de-merge its two main operating divisions. One, the second largest wine producer in the world, is to be given its own stock market listing.
This BBC video explains the background to the decision.
This article in the Telegraph provides more background information on why Fosters believe that allowing its wine operations to trade as a separate quote business is the right strategy for shareholders.
Gary Hamel interviewed by Peter Day
In a recent edition of Global Business on the BBC, Peter Day interviewed Gary Hamel, Visiting Professor of Management at the London Business School. The one-to-one discussion takes a few minutes to warm up but ten minutes in there is a remarkable discussion about the values, competencies and qualities displayed by Apple corp.
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Profit seeking paradoxes in an oblique world
John Kay gave a stimulating talk at the London School of Economics last week, one of a series of appearances to showcase his long-awaited new book Obliquity. A large audience were treated to a deeply thoughtful and perceptive discussion of the nature of obliquity and how it affects our personal lives and the decisions and strategies taken by businesses and other organisations in a complex and uncertain world.
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