Archive for the ‘Business’ Category
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• The new economy is a molecular economy. The old corporation is being disaggregated, replaced by dynamic molecules and clusters of individuals and entities that form the basis of economic activity. The organization does not necessarily disappear, but it is transformed “Mass” becomes “molecular” in all aspects of economic and social life.
The principal economic unit of the industrial economy was the corporation. The roots of the command-and control hierarchy were in the uth and military bureaucracies of the agricultural age but were extend- to become the firm. The objective of every CEO and board was to increase the corporation’s size, revenue, and profit. The traditional hierarchy has been in deep trouble for years now because it was poorly equipped to respond to the new business realities. Conventional wisdom of the past decade has called for more responsive, flatter, team-based structures. The most significant movement to create such horizontal, process-oriented structures is business process reengineering (BPR). However, as Riel Miller, an economist working with the Alliance for Converging Technologies, put it: “The necessity of adding knowledge at eveiy step in the value chain is beginning to call into question the familiar notion of the firm as an organizational unit. The Net may be, at one and the same time, the source of both the demise and salvation of the firm as we have known it.”7
More than fifty years ago 1991 Nobel Prize winning economist Ronald Coase asked why firms exist. Why are there groups of people working together under one organizational framework? He wondered why there is no market within the firm, Why is it unprofitable to have each worker, each step in the production process, become an independent buyer and seller? Why don’t the draftspeople auction their services to the engineer? Why is it that the engineer does not sell designs to the highest bidder?
One of the main answers to these questions has to do with the cost of information. Producing a loaf of bread, assembling a car, or running a hospital emergency ward involves a number of steps in which cooperation and common purpose are essential to making a useful product. An emergency room, where each doctor bids for nursing services in an attempt to get the lowest price, while at the same time determining if the nurse is actually capable of assisting with the operation, might provide fully functioning market but not a particularly useful product for a dead patient. Similarly, holding an auction before the axle assembler would pass along product to the chassis assembler might slow down the line. It would be even less efficient if the information on engineering viabili
and compatibility needed to be purchased on the shopfloor marketpl at eve!)’ step.
What makes a pure market impractical is the time and cost of acq ing the information needed to undertake complex production proces What is being sold? What is the quality of the labor? What is the qualit the raw material or intermediate input? What is the price for the
product? How will it be sold? By whom? With what kind of information marketing? Who will finance the production process, and how much financing cost? The ensemble of functions within a firm consist not only a series of discrete products but also the infrastructure of collaboration, A clear framework and strict regimentation worked on many battlefields and in many marketplaces of the past. The role of the overarching infrastructure of the firm or army was clear and indivisible. But today, as Miller puts it: “The Net does not change the rules, but it changes what is possible. It opens up new horizons for what is economically and practically feasible. The costs of information and coordination are dropping. More than ever we are in a position to create wealth by adding knowledge to each product at each step.”
• As information shifts from analog to digital, physical things can become virtual—changing the metabolism of the economy, the types of institutions and relationships possible, and the nature of economic activity itself
In the new economy, there are (to name a few) the following:
• Virtual alien. People working and participating in one country’s economy who are physically located somewhere else—for example, ‘Mi.tual data entry workers” who live in India. Virtual aliens are often, technically, illegal aliens.
• Virtual ballot box. Any information appliance (TV, telephone, computer, kiosk, etc.) from which citizens can vote.
• Virtual bulletin board. Message Maestro, hyperlinked to other boards. Push pins not required.
• Virtual business park. “House” business resources on the Net to help companies rapidly create virtual corporations. As in Bell South’s Media Park, which provides resources for the creative community.
Virtual congress (aka virtual hearings). Legislative hearings held ft multiple locations a synchronously (in multiple time dimensions).
• Virtual corporation (virtual enterprise, extended enterprise, interenterprise). The conjunctional grouping, based on the Net, of companie individuals, and organizations to create a business.
• Virtual coupon. On the Net, encouraging you to buy, for example, peanut butter.
• Virtual government agency. Many different government agencies have a similar purpose are linked by networks to deliver services a single window to the public, as in “entitlements” virtual agency. • Virtual job. Individual contract work conducted on the Net. Not to be confused with unemployment.
• Virtual mall. An environment on the Net in which like things can be found, as in “virtual shopping mall” or “virtual shoe sale.”
• Virtual market. Any place in cyberspace where people shop.
• Virtual office. Anywhere The location of work for the nomadic office worker.
• Virtual reality. The overriding 050/moron for virtuajization
• Virtual sex. Interactive multimedia sexual experience with digitized partner(s), in the future involving kinesthetic feedback.
• Virtual stockyard. Electronic auction of stock using interactive workstations. Stock do not need to be moved to a physical yard to be sold. Now replacing many physical stocl’ards, as at Calgary Stockyard Ltd., which conducts two-thirds of cattle transactions electronically.
• Virtual store. The store on the Net that isn’t there, routing consumers to suppliers (aka virtual retail, virtual wholesale, virtual distribution).
• Virtual village. The grouping of individuals, independent of location, who share a broad set of common objective and subjective interests. Extends to village life, main street, village square, village clown.
• Virtual water cooler Places on the Net where people can engage in informal, even playfiul communications such as those that occur around the (physical) water cooler. Sometimes called a MUD (Multi-User Dungeon).
Most marketers comply with laws and regulations. However, noncompliance can scar a firm’s reputation and hurt profits. Most companies fight regulations they consider unjust. The regional Bell operating companies filed lawsuits to protect their turf against competition from long- distance carriers and cable companies, while GTE claimed the deregulation of local phone service was unconstitutional. increases. Inflation would restrict purchases less severely if income were to keep pace with rising prices; but often it does not. Inflation increases marketers’ costs, such as expenditures for wages and raw materials, and the resultant higher prices may, therefore, negatively affect sales.
Inflation makes consumers conscious of prices, especially during periods of high inflation. This influence can lead to three possible outcomes, all important to marketers: (1) consumers can elect to buy now, in the belief that prices will be higher later (an argument that automobile dealers often cite in their commercial messages); (2) they can decide to alter their purchasing patterns; or (3) they can postpone certain purchases.
Over the past 20 years, the United States’ rate of inflation has slid from 13.6 percent in 1980 to below 3 percent in 2002. Many economists predict that similarly low levels will continue throughout this decade. At these low levels, inflation may not affect the economy as strongly in the future as it has in the past.
Marketing activities also feel the effects of activities by public and private consumer interest groups and self-regulatory organizations. Consumer interest groups have mushroomed in the past 25 years. Today, hundreds of these organizations operate at the national, state, and local levels. Groups such as the National Coalition Against Misuse of Pesticides seek to protect the environment. People for Ethical Treatment of Animals (PETA) is an activist group opposing use of animals for product testing. Other groups attempt to advance the rights of minorities, elderly Americans, and other special-interest causes. The power of these groups has also grown. Pressure from antialcohol groups has resulted in proposed legislation requiring health warnings on all alcohol ads and stricter regulations of alcoholic beverage advertising.
Self-regulatory groups represent industries’ attempts to set guidelines for responsible business conduct. The Council of Better Business Bureaus is a national organization devoted to consumer service and business self-regulation. The Council’s National Advertising Division (NAD) is designed to promote truth and accuracy in advertising. It reviews and advocates voluntary resolution of advertising-related complaints between consumers and businesses. If NAD fails to resolve a complaint, an appeal can be made to the National Advertising Review Board, which is composed of advertisers, ad agency representatives, and public members. In addition, many individual trade associations set business guidelines and codes of conduct and encourage members’ voluntary compliance.
In an effort to protect consumer privacy, the Direct Marketing Association (DMA) recently approved new rules requiring customers to be notified if information about them—including their name and address—was being shared with other marketers. Companies must also tell consumers that they have the option to not have their information shared. The new rules are intended to prevent unwanted mail or phone solicitations from reaching consumers and to protect consumers’ privacy. These new rules apply to nearly 4,500 DMA member firms and include 2,600 Internet companies, catalogs, banks, financial institutions, publishers, not-for-profits, and book and music clubs.16
As mentioned earlier, regulating the online world poses a challenge. Favoring self-regulation as the best starting point, the FTC sponsored a Privacy Initiative for consumers, advertisers, online companies, and others as a way to develop voluntary industry privacy guidelines. The Interactive Services Association is also working on its own privacy standards.