Markets are not self adjusting

Markets are most efficient means of resource allocation

Eco objectives

Reduction in unemployment

Reduction in inflation

Eco instruments

Control of aggregate demand

Control of money supply

Govt Philosophy

Discretionary intervention

Laissez faire

Socio-political stance


Individual freedom


Classical economic – based on the belief that market forces are able to achieve the optimal between supply and demand across the range of goods and services. (faissez faire approach)

Depression of 1930, break the theory

Keynes’s Challenge by 1936 “General Theory of Employment, Interest and Money” argued that market, including labour market, are not able to adjust automatically to eliminate unemployment. (Imperfections market).  Should intervene by Government, stimulating demand in time of recession, and dampening demand in times of boom.  Government should prompt a response at aggregate level that could not achieved by rational behaviour of firm alone.  Intervention thr’ fiscal policy, on infrastructure; on supply-side programmes, and on welfare.

Post-war intervention

Failure of Keynesianism

-government intervention could only achieve high employment at the price of inflation. In 1970s, stagflation (low growth, inc unemployemnt, rising inflation)

Neo-Classical Economics (economic liberalism or monetarist)

Friedman and Hayek

The control of money supply is key to inflation. Restrict the growth in money, and inflation will

In 1980s, 90s more in market-orientated policies

·          Inflation became the prime concern

·          Tolerated high level of un-employment

·          Power of trade union was reduced

·          Government involvement declined

·          Firms fostered reduced taxation

e.g. No more centrally-planned economies in Eastern Europe

Failure of new classical econ

Although inflation fell, but unemployment rose

Move to Consensus

Draws from lesson being learned from the history of post-war era:

·          Management of aggregate demand thr intervention but limited to fine tuning

·          Control of inflation by fiscal policy, however, may not maintain the primacy

·          Reduce unemployment  will be increasingly important

·          Supply side reforms (flexibility in labour supply, search for job creation)

·          Government expenditure decline, but intervention focused on supply side measured.



Long-term cycle – are the result of bursts of innovation and entrepreneurialism that occur at the low point in the economics cycle.

Schumpeter aruged inventions occur discontinuously, give rise to bunches of innovations, serve to stimulate economic growth

Freeman – result of radical changes (lies in changes in technology)


Short term cycle – cyclical fluctuations in national income are caused by changes in the level of aggregate demand (Metthews).


Macroeconomic model

Large sys of external factors to levels of economic activity

Includes typically government policy, significant commodity price such as oil, prediction are usually adjusted to take account of special factors known to forecaster upon his adjustment.



Key determinant of future levels of effective demand and price. E.g. pig cycle


Elasticity of demand

Demand for good and services will increase as income increase –

High income elasticity good, luxury end

Low income elasticity good/service, food product, non-brand clothing


Income inc, demand dec (inferior product, negative income elasticity of demand)

e.g. low quality or unfashionable foods or clothing, public transport


2 factors influence future demand

1.        distribution of income

2.         regulatory policy


Competitive strategy

Understanding of marcoecon environment is an element of cs


·          Cycles are easier to recognise in retrospect than at the time.

·          Timing is all important

·          Bounded rationality

·          Entry and exit costs

·          Groupthink




1.        loss of output

2.        loss of human capital

3.        increasing inequalities in distribution of income

4.        social cost



1.        Improve labour market efficiency

2.        Improve productive efficiency


Improve labour market efficiency

Releasing market forces (economic liberalism)

·          Union-restrict on wages; resolving grievances and reduce labout turnover

·          Minimum Wage regulation

·          Reduce by lack of information and by geo immobility

·          Structure of the benefit system

·          Social contributions levied on employers

when demand for labour match supply, achieve natural rate of unemployment (regarded as being voluntary)


Improve productive efficiency


·          Asset ownership can affect econ demand and efficiency, in commercial sector, org are subject to the pressure of market forces. 

·          Public feature difficult to implement long term investment strategy.

·          Difficult in developing alliances with other org.



Ending of monopolies that have dominated key sectors (telecom; air travel);

Eroding long standing protectionism and break up cartels


Industrial Policy

·          By creating expectations and confidence at the marcoeconomic level

·          By providing incentives and support in operational area.

Consistency of direction for long term investment by firms, and confidence in growth, tax regimes, interest rate and exchange rate (supply side management of the economy)



By raising levels of skills and knowledge, training inc competitiveness; overcome skill barrier (train, retraining) move from decline ind to growth sector. (structural unemployment – long term unemployment unaffected by movement in the economic cycle)


Implication to manager

·          Concern the nature of good/service in demand, as it is a function of level of income.

·          Policies which affects the cost of labour

·          Charges to employers, training levies, shifting in taxation

·          Government policy represent the long term expectation regarding growth, inflation etc.



Interest rate & exchange rate – they are price, reflection the balance between supply and demand.  Policy instruments, used by government to achieve marcoeconomic policy objectives.


Demand-side intervention

Government to control money supply through influencing both the demand for and supply of money.

Demand – by level of interest rate, high will depress demand.

Shortfall: (1) may not be very sensitive (2) reduce the profitability of firm (3) creating opportunities for speculative movement which increase exchange rate volatility (4) may affect int’l competitiveness.


Supply-side intervention

Issuing new bonds, increase public sector expenditure. Buy private sector bond (resulting increase monetary base). 


Interest Rate – Issues for Managers

Immediate impact on profitability

Impact on the availability of funds for short and long term borrowing

Customer & supplier, impact on demand, pricing and costs


Long term prospects, expectation on price stability and cost of money influence long term business decisions


Exchange Rates

A price at which the supply and the demand of a currency are balanced. 

Affecting firms:

A Rising of home currency:

·          Translation effect – profit of overseas branch worth less

·          Transaction effect – after quoting an overseas order, foreign currency fall

·          Economic effect – as exporter, hit profit margin or losing sales to competitor

·          Domestic effect – foreign companies likely to cut price.


Why volatility?

1.        Markets are not perfect, imperfect information, lags in response

2.        Intervention of Governments, by interest rate

3.        Above (1)&(2), create opportunities for speculation, IT support instantaneous movement of funds on a massive scale.


Implication to manager

·          Environmental scanning extend beyond domestic economy

·          Focus on sustainability, take contingency action

·          Foreign direct investment and purchasing policy, hedging.

·          Managing account should identify the impact, investment plan should include sensitivity analysis.




Firm as (p.62)

Financial units – B/S; P/L & Fund Flow

Economic units – profit maximization

Behavioral – complex social org.  determined by behaviour


Agency Theory (p.64)

Pappas & Hirschey

Principal & agent – not same objectives & motivation

                                Information asymmetry

                                Maximise or satisfice?


Yes. (1) vigorous competition, affect their rate of return; managerial compesnation; risk of replace; sanction (mechanism of marketplace)

(2)     consideration of cost & benefit before decision


NFP – much less clear; stakeholder can be considered as donors/beneficiaries


Moral Hazard

-          information asymmetry (manager act; but principal cannot monitor/evaluate; only depend on trust to act property)

-          source (not identical interest) e.g. assess bids on take-overs by directors (offering a seat in Board)

Adverse Selection

-          problem of adverse selection also arises from information 


-      Even if the principal is able to observe the agent’s actions,  

       not possible to know whether the agent has acted optimally – 

       made the correct selection.


Control (?)

Agency cost – (1) closer monitoring (reduce info asymmetry) (2) provide incentive


Constraints on Managers (only can provide a partial limit to moral hazard)

(1)     Relations with principals

Lambert & Larcker 3 conflicts P/M

-          Perquisites (M more benefit)

-          Attitudes to risk (M more risk adverse)

-          Time horizons (M short term improvement)

                Control thr’ replacement & incentive (design of remuneration)


(2)     Risk of take-over  (poor performance)

(3)     Fear of Bankruptcy (Debtor monitor, say bank)

(4)     Treat from competition (commit to future earning, employability)



Transaction Cost

Williamson p.76

Costs of carrying out a commercial or eco transaction in the course of business.  Transaction cost (not factor costs, labour materials), but rather the costs of managing and controlling the transaction, including the costs of writing the contract (avoid uncertainty and risk).


Boundaries of Org.

Org choose to reduce risk and internalise the costs by carrying transaction within the org.  The range of activities that are carried out internally will determine the boundaries of the org. To min transaction cost, structured and set.  Boundaries are determined by eco factors and efficiency of structure.


Market governance – transaction cost lower

Scale economies; Risk-pooling; Econ of scope



·          Bounded rationality - mgr act as eco agents are intendedly rational, but only limited by both the availability of information and their capacity to process it.  Cannot fully protect the company’s interests.

·          Opportunism – Williamson “self-interest with guile” imply individual are venal, motivated by greed and corrupt self-interest. It refers to the practice of managers to make decision in pursuit of objectives that are inconsistent with the aims of the org.

·          Asset specificity – the extent to which the assets needed to carry out a transaction are generally available or are specific to that transaction.  The more sophisticated the transaction, the more likely to require highly specific assets (can be fixed plant, equip, skill or experience)

·          Externality – the pursuit of private goals by an agent, like distributor. Interest conflict, inconsistency in goals between principal and agent.

·          Hierarchical decomposition – ugly term to describe the effectiveness of the internal management structure of an org. / inc complexity, more decentralised, refers to the extent to which decision-making is delegated within the org or hierarchy.


Market vs hierarchical governance?

1.        bounded rationality, contract more than 2 yrs not reliable (sub-optimal) cannot cover.

2.        Under uncertainty, hier protect & control more

3.        High level of asset specificity; lower risk in hier

4.        In area of distribution, market gov. can lead to loss of control

5.        Hier. Incurs cost “bureaucracy” – managerial opportunism

6.        Hier decomposition is inefficient, market gov more attractive

7.        Asset specificity high, limited the choice; stronger interdependent

8.        Asset specificity high, great cost in renegotiated in future contract


Application - Marriage of Porter and Williamson:

Downsizing, outplacing, contracting, make or buy decision; to reduce headcounts and to convert fixed into variable cost.  Justify in cost, but cause competitive impact, severe competitive penalty.


Hierarchical – top-heavy; fixed cost grow, incompetitive

Market adv of scale and scope vs hierarchical adv of control, flexibility and reduced risk (assess of the above terminology)


T.C. Implications to managers

a.    Broader definition of costs ( + transaction cost)

-          Production costs – raw materials, labor, facilities, finance

-          Fixed and overhead costs – management and administrative costs

i.         scale diseconomies –increase in levels of seniority – more senior, more highly paid à reduce factor costs

ii      hierarchical governance – high salary costs of management and administration, delayed decision-making & less efficient – creating another cost

iii     management opportunism – yet another source of cost

-          result à re-categorization of jobs, core à contain in-house, peripheralà within or outside the organization.

b.   Make or buy decisions

-          evaluate the market advantages of scale and scope vs hierarchical advantages of control, flexibility and reduced risk.

c.    Outsourcing and the use of contractors

-          Transfer transaction from hierarchical to market governance, surrender control over activities out-sourced.

-          Balance of these advantages and disadvantages will d o transaction. Activity non-strategic à little impact on the organization’s competitive strengths if outsourcing ( create long term risk if outsourcing)

Vertical integration

-          Grant: decline in the costs of internal administration relative to transaction cost in the market resulted in growth of the scope of firms.

-          60s Galbraith write about replacement of market economy by corporate economy. Past 20 years, reversed as major co have divested peripheral businesses and increased outsourcing. Benefits of internalization outweighed by high transaction costs, including inflexibility, of internal administrative systems. Greater reliance on the market requires that the cost of managing external contracts is reduced.

-          Greater dependence on relational contract, develop long term co-operative relationships with suppliers improving flexibility and reducing transaction cost.

-          Short-term profit-maximizing opportunities in order to maintain the long-term relationship.

-          Forward integration - competitive advantage.

d.   Not-for-profit organizations (NFP)

-          The principles of transaction cost analysis can be applied to public, voluntary as well as commercial sectors, however there are some key differences for NFP:

a.    the identity of the principal –not clear

b.   Measurement of performance difficult

c.    Run by professionals, opportunism

d.   Little incentive

e.    The option of outsourcing is unlikely

f.    Employees work to a strong code, managerial opportunism less important.

g.    not subject to the pressures of competition that apply the ultimate sanction of bankruptcy or take-over

 2 consequences will be resulted:

-          risk of heavy over-staffing, with fewer check mechanisms

-          corrective action liable to be externally imposed and traumatic


Labour Segmentation

Shifting boundaries between market, hierarchies and oth bybrid (franchises) in response to change (for the efficiency of transaction cost)

Fig. 6.2 (pp105)


Doeringer and Piore

Primary sector – job, pay and promotion being organized thr’ internal admin of large org. (specific skills)

Secondary sector – external labour market (general skills) – modern industry, cannot support stable and relatively favourable conditions.



Edward, Gordon and Reich

Greater weight to role of social agency

Worker were progressively divided as employers sought.

(for maximise labour productivity)


Rubery (tend to be time and ind specific)

A complex interplay of structural and strategic factors, including product market, technology, workers and employers strategies and state policy.




Functional flexibility (multi-skilled)

Financial flexibility (hire and fire)


Primary                   Core                        Periphery

- internal                  -full time                 -semi-skill              

Secondary               -high status             -part-time

-external                  -multi-skill              -financial flex

                                -functional flex       



Implication to Society

-job mobility inc. long term employment by both manual and professional workers can no longer be taken for granted

-decline in core, benefit for career progression, training and development and pension provision. Self study more as portable asset.  Inc state pension provision, government move toward private

-inc importanace of self-employment (secondary/peripheral, low-ed, lock into cycle of low reward)

-peripheral sector becoming underclass, growing econ burden

-eco role of women (most poorer quality jobs) growing econ power of women in production and consumption.


Implication to Managers

-not only eco, but social and political consequences.  Flexibility and competitiveness against incentive, loyalty, control and supervision cost.

-supply-side issue, improvement of range of skill (Er commitment)

-non-static ext envio, plan ahead:

                decline of size of workforce in mature Europen

                inc role of women

                inc nos. of old pople, phy fix at work.































































Game Theory

·          It is to model the way in which humans interact with each other in a whole variety of situations

·          It is to consider the best strategies of the rational model of political action

·          Can apply to negotiations with pressure groups or competitive behavior, voting behavior (apply in variety of situations)


Prisoners’ Dilemma (rational)


Both not confess                                      One confesses/One doesnot




(irrational; hard to achieve) must have mutual trust.


B= -15


A= -15


A= -5

B = -5


(Possible situation as individual leads to this outcome)

One confesses/One doesnot                      Both confess


More likely appears loss/loss situation (non-co-operative)

Due to:

1.        poor information

2.        neither side not trust

3.        payoff fatal for wrong decision

e.g. arm race between US and Soviet Union


Established co-operation :Conditions (Robert Axelrod)

1.        The no. of interactions cannot be finite and known as it is always making sense to defect on the last turn

2.        Interactions amongst players. (communication between rivals)

3.        Strategy of reciprocity (ability to react with others)

4.        Self-protection based on reciprocity can protect itself from less co-operative strategies.

5.        Can establish best situation upon time for interaction and observe stable pattern of other side.


Tit for tat

Factors to consider:

Response to first move in co-operating manner, and then ding whatever the other player did on the previous move. Defect once only.


It handles defectors well but also gain much higher scores available from cooperation

Reasons for its success:

1.        Nice – prevent itself from getting into troubles

2.        Retaliatory – discourages the other side from persisting defection

3.        Forgiving – help promotes mutual co-operation

4.        Clear – makes it intelligible to the other player - cooperation

Two useful rules to elicit co-operation

1.        Enlarge the shadow of the future – build up by frequent interactions thus promote stable co-operation

2.        Base their code of practice for interactions on reciprocity

(government, social value change, Live-and-let-live system

Improving recognition abilities, so that it is easier for participants to recognize one another in repeated iterations of the game.)


Chicken – Non co-operation

                Driver A

Turn                        Don’t Turn

A= -50

B= -50


(possible situation)

A= +50

B= - 50






A= - 50

B= +50

A= -1000

B = -1000


(Worse situation)



Don’t Turn


Rational, both drivers will turn (selection of downside with the lowest risk)

Factors to consider:

·          Communicate yr strategy in advance can radically alter the outcome of a game

·          Example of not keeping business strategies confidential

·          Different and conflicting view of the risks and opportunities



·          Short term business game

·          Faced with chicken, the irrational and emotional seem attractive


Zero sum vs non zero sum games

Winners gain purely at the expense of the losers and the pool of rewards cannot be increased by the actions of the game participants and the only issue is how it is to be divided up.

Some Non-Zero sum game examples:

1.        Two firms launching new products in a new markets

2.        Several div competing for investment resources. (but…)

3.        Introduction of new resources as it may lead to job losses. (but .)

4.        Good decisions made as a result of political inter-party struggle (but)



Tullock – “selfish” approach rational pursuit of self-interest

Median voter theory: Attempt to take the position of the median voter, In a two-party system, there is a simple operational rule – find out what the other party is doing and take a position very close to it in the popular direction. 

Interest on an issue-by-issue basis


Himmelweit – essentially driven by voter’s perceptions of party policy. The individual, with his personal set of attitude and beliefs, looks for the best match or the least mismatch. Information gathering may superficial, misleading, the act of vote like purchasing, as simply one instance of decision making.  (Weakened form of rational choice approach, includes voter’s pursuit of goals and values, variety of reason, non-rational one, habit, reason and emotion will vary.



Butler and Stokes

Voting behaviour as a result of history, carried their voting preferences with them throughout a lifetime, almost irrespective of the action or ideological position of the parties.

Heath et al – Interactionist Model

Interaction between class potential and party character.

Voting choice are not made on basis of a conscious weighing, is based on much boarder, more “synopic” evaluation of parties, something like events and personalities.

In 2-dimensional

Wealth and income distribution issue

Social liberalism


Dunleavy - Radical Model

Believe people vote in accordance with the interests of their social location. Interest as fundamentally group based, reinforced by inequality of class, status and power.


Overview – voting as a result of historical forces, rather than being a matter of consciously rational processes.


Pressure Group


Must be considered in corporate strategic planning and public action program

Establish system for appropriate flow of information into and out of corporation

Basic to any strategic approach to conflict management is an analytical sys attuned to the needs of the corporate environment and knowledge of public policy issues and the actors who are involved in those issues.



PR vehicles:

·          Media contact

·          News stories

·          Media events

·          Press office


Corporate PR

·          Communicate to stakeholder – annual report and newsletter

·          Speeches - ghostwriting

·          Community contact – corporate citizen activities


Defensive PR                                             Proactive PR


Defensive PR

Defend the org against onslaughts (pressure group..) and handle the external interface with such group.


Proactive PR

Influence external activities such as those in political arena, to their advantage by lobbying.  As Investment required  Wide range of audiences: general public; press; financial community; government.



The primary rules of working with Government

Monitor                  first

Talk                         second

Argue                      third

Apply pressure      last


-          The technique of dealing with government can be summarised as below:

a.    Who makes the decision?

b.   Who can influence the decision-makers?

c.    Who do you make your case to?

d.   How do you make your case?

e.    How do you obtain access to Government?

f.    How do you monitor Government?

g.    When is the right time to monitor, talk, argue or lobby?



Social Factor

How business link with sociology

Alan Warde (p.6)

--Sociology can help in analysing the social context of business practice. The emphasis is on how the social environment is structure.

Sociologists do?

-To report on, explain, describe and evaluate the structure of social relationship

Marketer do?

-From business point, they identifies some key social trends and tendencies


(Nelson) Marketer – challenge of the new society – the growth in trends: pleasure, complexity, networking, open citizenship, a greater self-knowledge and control, strategic opportunism and exploring new mental frontiers. (illustrate practical impacts which face management – practically and pragmatsim – changing lifestyle and beyond)


What is a trend? (p.7)

-A change in common practice that many people making similar individual decisions without consulting one another e.g. reduction in family size


What is social movement?

-People consciously act together to alter the structure of social relationship.

Trends and movements interact with one another

-They have mass mobilisation as their prime source of social sanction and power.

e.g. feminist in 70’s, environmentalists in 80’s in Western countries

(family size, individualism, egalitarianism, collectivism)





Key Industries













Social justice

Equality of opportunity

Post Modern

Post industrial


Features of :



Post Modern

Rural, Religious







Post industrialist

Post fordist







Social justice


Equal opportunity





Popular culture




1.    Area of study – social trends, social division, how the social environment is structured.

2.    We concentrated on the understanding of societies that are modern and diverse. Such societies change rapidly and are highly differentiated – i.e. people belonging to different social groupings, have distinctive experiences. Different occupational groups, religious groups, age groups and ethnic groups typically have different resources, opportunities, concerns and beliefs.

3.    We focus on the nature and consequences of extensive social differentiation.

4.    What is the culture of the modern societies? What would be the experience of modernity?

5.    The basic for social division and distinctive experience à class, gender, age, generation, status, ethnicity and geographical location à contemporary social change.

6.    Firms operate in a social environment which both constrains their behaviour and offers opportunities for innovation.

7.    Runciman : Sociologistsà

a. report what happened in a series of events, processes or situations, 

b. explain in terms of causes or reasons why these occurred,

c. try to describe how participants interpreted or experienced the phenomena,

d. judge whether the events were desirable or not.

(In short, sociology may be said to report on, explain, describe and evaluated the structure of social relationships.)

8.    Social movements are distinquished from other collective actors, such as political parties and pressure groups, in that they have mass mobilisation, or the threat of mobilisation, as their prime source of social sanction, and hence of power.

9.    Individual decisions are conditioned by the knowledge, aspirations and conventions of people in similar social circumstances, they are also influenced by state policy. The contribution of sociology to anticipating social change is in terms of probabilities and aggregates rather than outcomes for particular individuals. The whole is more than the sum of its parts. People act within structures.


What is modernism?


-Refers to the economic, social and technological innovations associated with the rise of capitalism in 50s to 70s


Economic social and technological innovation association with the rise of capitalism


Life under capitalism particularly as can be observed in the cities of the 19th & 20th centuries. Increased questioned of institutions of authority – royalty, religion, the police and justice systems


Arts movement conceived in response to metropolitan life – (architecture, art, interior design, etc.)

Post Modernism

Universal logic of the market, late capitalism. Old oppositions, eg science vs art, left vs right, high culture vs low


Modern Societies

1.    Sociology distinquishes between modern and traditional societies.

2.    Modern societies have undergone processes of urbanisation, secularisation, demographic transition (especially in terms of extended life expectancy), industrialisation, rationalisation (especially in adopting scientific approach), bureaucratisation, centralisation and democratisation.

3.    These processes occurred in the West from 18C onwards in association with the extension of capitalist economic relations.

4.    Modern society is characterised by having high proportions of people living relatively anonymously in cities, comparatively limited importance of religious belief, a capacity to support large populations, large, efficient, highly productive economic organisations, rational and bureaucratic organisation of firms and the state, a powerful and centralised state, and some degree of popular participation in political decision-making.

5.    Experience of modernityà living in metropolitan cityà everything moves quickly, the streets are full of people, all strangers, there are glittery shops, but also vagrants, new and exciting activities are available.

6.    To be modern is to find ourselves in an environment that promises us adventure, power, joy, growth, transformation of ourselves and the world.

7.    Martin (The Expressive Revolution) à description of the paradoxes of modernity à societies become increasingly complex, experience becomes specialised and fragmented. “What it gives is affluence and a new possibility of freedom and individuality; what it takes away is a natural rootedness and automatic structures of belonging.à Voluntary associations – sports clubs, new religious sects, trades unions, neighbourhood community centres are often a way of establishing a sense of belonging in a modern urban society. Contradiction between individuality and belonging became more acute during the 1960s with the onset of what Martin’s calls the expressive revolution. These new values were transmitted through the arts, the underground, youth cultures and rock music. Expressive revolution, counter-culture ’60 (hippies) expressive values, symbols.  Egoistic narcissism or total sect.


Sources of Differentiation

1.    One central source originates in economic arrangements. In modern societies, the division of labour is highly specialised, with different people doing different jobs and tasks. These differences occur between occupational groups, between men in factories and women at home, between young junior workers and their more senior colleagues. The specialisation of work has social ramifications: it leads to differences of wealth and power; it means different groups use their time differently; and it means that individuals change their occupational positions during a lifetime.

2.    People do a different job, is the difference in remuneration just?

3.    When interpreted as inequality, diversity may become a basis for social divisions. We will examine the social environment in terms of group differentiation which have in recent decades been sources of conflict.


What is postmodernism?

-Alan Warde

-the post-Fordism or postmodernism

-no workable definition has yet emerged (David Mercer)


The shift to post-Fordism

1.    Sociologists are rarely the first to notice signs of change; rather they tend to start from insights of new behaviours reported to specialist practitioners (like advertising agents, management consultants, popular music journalists) or from expressions of discontent by social movement activists (feminists in the 1970s or environmentalists in the 1980s).

2.    Economic adjustment à shift from Fordism ( based on the mass production introduced in car manufacture by Henry Ford) to post-Fordism, from organised to disorganised capitalism, from industrial to post-industrial. (Fordist à Flexible Regime (more flexible technologies, development in ideology and culture, new forms of individualised consumption and postmodernism).

3.    Postmodernism (Dick Hebdige)à it gives a flavour of a world dominated by signs, where difference, expressed through style and symbol, is a key motivation.

4.    Some authors would maintain that the features attributed to postmodernism are inherent in modernism. The fragmentation and diversity of contemporary social relations simply continue in the paradoxical mould of modernity, where life experiences are transitory, restless, uncertain and shallow but also full of excitement, promise and opportunities for self-development and transformation. Postmodernism is a play with a “difference”. Being different, appearing different, experimenting with and altering self-identity are key motivations in postmodern culture.

5.    Challenge to sociology is whether it can satisfactorily explain difference and diversity.


Fordism and Post-Fordism

Aftermath at early ’70 – shift : Five areas



(search for flexible)

Production process

·          based on economies of scale, uniformity and standardisation product


·          based on economies of scope small batch production


·          single task performance

·          job specialization


·          multiple task

·          continuous on-the-job training


·          Homogenization of regional labour markets


·          Labour market diversification


·          Collective bargaining

·          Firm/industrial lead R&D


·          Individualisation or local firm-based negotiation

State-led R&D


·          Mass consumption of consumer


·          Individualised consumption

End of mass production, replacement of flexible technologyies and working practices; alterations in nature of workforce, its skill and training; different spatial (geo) distribution of industrial facilities; diff forms of state intervention; new cultural forms

The way in which economic transformation is said to coincide with developments in ideology and culture.  Moulaert & Swyngedouw called individualised consumption; postmodernism.


Elizabeth Nelson- Marketing in 1992 & beyond

Social values include the anti-authority, the  demand for individuality and personal expression, consumerism,  return to nature, rejection of the benefits of technology, equal opportunities for women, anti-bigness and reflection of industrial social values.



Karl Marx- Production resources

-class struggle between labor and capital

(1)owners of productivity resources exploiting the others who own nothing

(2)proletariat, owned nothing but labor power to sell to survive.

-the working class would become a powerful political force

dismantle socio-economics sys (revolution) – inequality arising our of work.


-classes are founded in a shared material position which affects the nature of their work and the reward they receive.

-identify may be expressed in terms of shared interest

a link between position in mode of production, social identity and political action.


The current significance of class (p.42)

Offe and Gorz – class becoming blur

- People more concern with other spheres of life with sufficient income. Workers become more interested in quality of life and can accumulate capital. The implication is that since class conflict is based on production and capital becoming blurred. The era of class politics is near its end.


Pahl- Informal economy (p.52)

-include domestic work and carried out without cash payments by household an non-household members (from DIY to wine-making). This is an emergence of internal divisions within the working class, a process of social polarisation that is drawing the more affluent sections of the working class away from the less fortunate. The evolving structure is said to comprise a ‘middle –mass ‘ and an ‘underclass’.


(1)     changing shape of class structure

(2)     emphasis importance of household worker rather than class position in determining its fortunes

(3)     break-up of political alliance around class


It is argued that class is becoming less important, it usually implies that class position is less determinant than it used to be of people’s identity and their political behaviour.

People have been more likely to identify themselves socially in terms of their consumption patterns rather than their role at work, class position has become less significant.


Class structure refers to the architecture of class positions.. A person is allocated to a category (A,B,C1 etc) largely on the basis of occupation.


-the most widely adopted model of the class structure in sociology is that of Goldthorpe. He use the concept of the service class to contain workers in these professional and managerial occupations. They are distinguished from intermediate classes (white-collar, petit bourgeois, supervisory workers) and working class (distinguished skill and non skill)

1.  Service class – higher prof & managerial

2.  Service class – lower prof & managerial

3.  Intermediate class – routine white collar

4.  Intermediate class – Petit-bourgeois

5.  Intermediate class – technical & supervisory

6.  Working class – skilled manual

7.  Working class – semi-& unskill manual


1.  Half the population not have occupations

2.  Occupation titles conceal severe differences of conditions % places

3. People pass thru some occupation position in a predictable trajectory.


Model of the British class structure (p.67)

-Occupational class -

service class

-higher professional & managerial (1)

-lower professional & administrative (2)


----- Mobility line -------


Intermediate class                   Working class

-routine white collar(3)           -skilled manual(6)


-technical and supervisory(5) -semi &unskilled manual (7)


Using Research Reports (Mercer)

Depend what is contained in the report and what you want from it

Relevance –subject is relevant to yr specific needs. (justification, time for study)

Reliability –judgement of researchers; examine the methodology

Accuracy –appreciate the appendix, sample size.

Bias –assume the materials still contain distortion. What assumption.

Scope –range of information, looking at the questionnaire.


Then Read summary procide the context for understanding), detailed result (challenge the result) and your own summary (key result of your own work)

Be aware of:

Rounding figures

General differences

Use graphs


Social Mobility (p.77)

Concerns movements between social classes of individuals.

(1)It raised the question of fairness and whether opportunities are exists (restrict by birth?)

(2)Question of class organization (low, more solidaristic; high, reduce resentment vs stru inequality.  Destablised a static class in politic


Identity and Respect (p.79) (Henley Centre)

The role of external influences on the way people behave.

People are constrained or encouraged in their activities by a perception of what is the right thing for ‘people like me’ to do


There possible identity

Geographical associations

-national, local area or immediate neighbors

Affiliation to various institutions

-church, government, trade union etc

Groups of  everyday contacts

-work colleagues, friends, family


Peer Group Influence- 1989 PSC Survey (p.85)

Two obvious conclusions

-the more minority an activity is, the higher the increased likelihood of a person doing it if they have friends who do it (e.g. eating out at a health food restaurant (10% of population doing the activity) –more likely to be influenced (3.5); using hair conditioner (58% population doing the activity)- less likely to be influenced (1.3)

-some activities friends are relatively more influential on a person’s chance of doing it, for other activities friends are relatively less so.


O’Brien and Ford: Both social class and lifestage are powerful discriminators in term of purchasing pattern.


Marketer less obsessed with class (as an analytical tool)

Sociologist – enlighten in terms of examine the transfer of power


Social Difference

Major dimensions of social inequality and difference

(intersect each others)


Gender & Sex (p89)

Gender is a powerful basis of social differentiation (for understanding the real social inequalities)

“Gender is socially constructed” - Behavior associate with masculinity and femininity vary between society and across time.

The reawakening of feminist politics since the mid-1960s has ensured sociological discussion. Various things have changed:-

-Family form and size

-household composition

-relatively education attainment

-career opportunities

-levels of woman’s participation in work force

(whether they can reduce inequalities?)


Women’s employment (p90)

Age and economic activities of women in Britain, 1901-81

-years 1901, 1951, 1971, 1981

-married women began to return to the labour market in their 30s until retirement age

-shorter periods of absence during child-rearing

-participation increased rapidly in the 60s

-more women continued to enter paid employment through increasingly as part-time workers (part-time women worker from 2.8 million in 1971 to 4.1 million in 1986)


UN report 1980, women constitute half the world pop, perform nearly 2/3 of its work hours, receive one-tenth of world’s income and own less than 1/100 of world’s property.



Women and Work

-Mean age of Mothers giving birth (26.4 in 1971; 27.5 in 1991)

-Most important in new job (flexible working hours and able to work part-time are important factors for women age groups 25-44 /45-59), maternity/paternity benefits and good salary important to age group 16-24.


Women’s multiple roles

-worker, mother, wife, home maker

-women are juggling paid employment with domestic responsibilities

-one major advantage is that job gives women some financial independence

-many women are making more financial decisions such for their themselves, their partners and children.

-women have to perform a high standard in a number of roles. They gradually move into the higher profile , professional employment sector, at the same time the pressure to nurture the family.

-being a woman in 90s will mean not choosing one role or another, but as many as possible.


The price woman pay


-Leisure Futures Time-Use Survey in 1988 (UK)

man w/o children- 49 hrs per week

men w children- 42

women w/o children- 42

women w children- 22



-juggling work and family

-less than men to say generally slept well and describe their health as good (Henley Health survey)

-they consider themselves more likely to suffer from stress than men (41% of women, 29% of men)

-however, women generally display more concern and knowledge about health than men



-increased pressure on women to balance home and work responsibilities

-many women remain traditional in their attitudes towards the role they ought to play in the family

-feel they are unable to put in the hours most of their colleagues do and unable to be with their children whenever they are need

-business opportunity to use their increased independent incomes to assuage their guilt



Future business implications

Time-Saving Products – fast food, specialty in holiday

Personal Services – cooking a dinner party, selling clothing, cosmetics etc at home/office; evening meal for family

Children – integrating child into adults’ leisure activities; children care package

Products for multi-faceted of woman – specific aspects, cosmetic, food, “executive” & “wife” mode

Financial service –saving plan, pension, life insurance.



C20, reduction in age of marriage, longer life expectancy, decrease in family size.


Life course (family life cycle) alter with passage of time

Leave parental home; get married; rear children; children left home


Long term prediction:

usually very inaccurate due to:

War, migration, natural or technological disasters, disease and new medical practices, family arrangements, contraceptive techniques, intercede, genetic engineering.



Age structure of the population


-remarrying is increasing

-single person people marrying has fallen


-changing attitudes towards marriage


Age Cohort (p122)

An age cohort is a group of people sizes of cohort. There were the children of the ‘baby boom’ of the 1960s.

-the most obvious long-term trends in 20s centry are a reduction in age of marriage, longer life expectancy and a decrease in family size.



Shared experience

Beliefs and actions

Same education system

Common social conditions and event


Class/Age group/Life stage – purchasing pattern


Life course stages

Different household composition

-households have got smaller with a very sharp rise in one-person households

-lone parent families increase

-rising divorce rates

-increased longevity for women especially


Profound social policy consequences

Ethnic group

Refers to a distinct category of the population which shares common cultural features like language, customs or institutions. Ethnic groups often form into political communities, and ethnicity is one basis of claims to nationhood.


Regional Variations

social differentiation concerns geographical boundaries. Regions at different stages of economic development. The most common reason for people moving their place of residence is to obtain a new job.


Lifestyles (p123)

People seek to distinguish themselves, and can be distinguished by others, in terms of their style of life.  Featherstone sees a calculating of hedonism developing in C20.


Featherstone- display their individuality by assemblage of goods, clothes , practices, experience, appearance and bodily dispositions they design together into a lifestyle.


The new conception of lifestyle can best be understood in relation to the habits of the new middle class.


Thompson Lexicon -originally referred to specific form of structure quantitative research that classified people by their attitudes, interests and opinions (AIO). Now commonly refer to differences in behaviour that relate to social values and attitudes as measured by quantitative research.


Consumer culture

Tendency for consumer culture to differentiate, to encourage the play of difference, must be tempered by observation that differences must be socially recognized and legitimated.


Class and Status (p128)

Weber-  classes stratified in relation to the production and acquisition of goods.



Appear a corollary of occupational or class position.

represents a form of exclusion, a way in which a particular social circle marked out its honour from other groups. (eg, Li Ka Shing in commercial field and Lee Lai Shang in sport field)


Making sense of life- Henley (p133)

-why we do what we do?

-1988/89 PSC

hypothesis is that life is about accumulating a series of assets- such as money, time, health-in order to enjoy the pleasures. The relative importance of accumulating assets and enjoying the pleasures of life varies from person to person and occasion to occasion.

-assets: time, money, health, security (feel safer and confidence), knowledge, space (making living space less cramped), social relationships, power (more control over my life)

-pleasures: status(people respect) , gratification (enjoy myself more), altruism (helping a good cause), fulfilling obligations (to others)


-Aspiration Gap in Asset and Pleasures 

the reason we do what we do is to raise the level of these assets and pleasures (what we have) towards what we would ideally like to have.










Social relationship






Fulfilling obligations


PSC Survey in 1989

what we want out of reality

-health (70%), security (60%), (obligation(58%)…. Social relations, space and status are below40%


Why important?

Analyzing the mode can provide a new and unique way of understanding consumer behaviour.

Provide more relevant and profitable segmentation strategies

Link to the production and supply side realities of a business




(p4)-Salience of change to corporation positioning


                                Even handedness of effect of change




Major Stru consequences


Extremely important


Eg – Packing industry

- use of internet via mobil



Potentially important


Eg watch VCD for film industry



Low Stru consequences


Potentially very important


e.g. time is money for transport industry



Probably unimportant


Eg. Like to walk

 (transport industry)

          Uneven competitive                  even competitive



Structural consequences of change






































What is  technology ?

-Oxford Dictionary

it defines technology as ‘ the science of  the industrial art’


-OU Technology Faculty undergraduate foundation course

Technology is the application of scientific and other knowledge to practical tasks.


-1939 Schumpeter defined as

 Technology simply as a way of doing things, and technological change as using new knowledge to do things better

3 stages:  invention / innovation / diffusion (linear model)


Twiss & Goodridge: Technical change

-          affects all business

-          is of increasing strategic importance

-          almost invariably requires org change to be effective

-          is a process that must be actively managed

-          requires a co environment that encourages creativity & innovation

-          is a prime responsibility of top management

-          has an impact throughout the business affecting all functions

-          must be planned & implemented w regard to the knowledge about the innovation process which is available


Types of forces

Demand –led : sometimes called market-pull. The needs of individuals or groups often spring from ideas such as desire for movement eg. Are automobile and the aeroplane


Technology-led :  is generally due to pressure from manufacturers. They wish customer to buy what the producers feel most competent to make. Eg computer industrial (added numerous small changes to PC)


Ideology-led : need to reduce CFCs  to save the ozone layer and to use less fossil fuel to  restrict global warning


Freeman’s 4 ways of  technological change: p.170

Technological revolutions

System change (new technologies)

Radical changes (discontinuous events)

Incremental changes (low-level improvement)


Conditions: (model)

·          Drastic reduction in costs of many goods creating investment opportunities

·          Dramatic improvement in technical characteristics of many products and process

·          Social and political acceptability

·          Environmental acceptability

·          Pervasive eco effects

(e.g. stream power, railway, microelectronics)

Technological revolution in Info processing shows all above


System change and technological revolutions

-both are rare

-they affect the whole society, sometimes called as ‘ techno-economic paradigms’

-they affect the structure and conditions for almost every branch of the economy

-eg steam power, railways, electric power

-they are described as a social phenomenon, a process rather that an event. The process cannot be controlled , great inventions cannot be made to order. The conditions must be right: social, economic and often military.

-technological revolutions are highly complex  series of interrelated events. The great revolutionary change the industrial revolution were helped by the diffusion of knowledge which expanded in 18 and 19th centuries through new journals and societies. These changes created not only  a series of new industries but also strings of radical and incremental changes afterwards.


Radical Technological change

-radical changes are produced by both large and small org

-large firms can afford R&D  are becoming more important as source of innovations

Japanese org  6-point system for innovation


-global scanning  for tech insights

-org study teams to other countries

-attending conferences and trade shows

-scrutinising foreign publications

-sponsoring R&D in foreign universities

-closely linking R&D with commercial production


Incremental change (low level improvement)

-is enormous

-through suggestions from producers and consumers

-motivations ranging from increased profitability to simply more convenience for the user.


Product and process innovation cycles (p175)

Product ®    stabilized ®   Process

There is uncertainty about its most desirable characteristics, changes are made to maintain profitability and technological leadership (lots of product innovations), and eventually  the character of the product and market become stabililised. Producers turn to the process to reduce costs and  improve competitiveness (process innovations)


Time advantage (George Stalk )

Time- the next source of competitive advantage

Time based competitiveness

Honda managed structural changes that enable their operations to execute their processes much faster. As a consequence, time become their new source of  CA.


Cost based vs time based

Cost based-tactics reduced costs but at exp of responsiveness

Time based

-strategies based on the cycle of flexible m rapid response, expanding variety and increasing innovations.

- factories are close to the customers they serve

-org structures enable fast response rather than low costs and control.

-companies concentrate on reducing if not eliminating delays and using their response advantages to attract the most profitable customers.


e.g. Time based Jap competitors are Japanese. They are Sony, Sharp, Toyota, Honda, time based Western companies are Federal Express, McDonald’s.

-by reducing the consumption of time in every aspect of business, these companies also reduce costs , improve quality, and stay close to their customers.

-by kept their lead time from growing and even reduced them, thereby diminishing the planning loop’s damaging effects.


Time-based manufacturing

Differ in 3 keys dimensions:

·          Length of production runs-shorten it as much as possible (means more frequent production of the complete mix of products and faster response to customers’ response.

·          Org of process components-factory layout, organised by product, to minimize handling and moving of parts,  the manufacturing for a component or a product are close together as possible. The production process eliminates the need to pile and repile parts, they flow quickly and efficiently through the factory.

·          Complexity of scheduling procedures- local scheduling enables employees to make more production control decisions on the factory floor without time-consuming loop back to mgt for approval.

The combination of the product-oriented layout of the factory and local scheduling makes the total production process run more smoothly. Flexible factories enjoy big adv in both productivity and time.


Time-based sales and distribution

Toyota Motor Sales needed form 15 to 26 days to close the sale, transmit the order to the factory, get the order scheduled and deliver the car to customer. Toyota found , had handled customer orders in batches. Orders and other crucial information would accumulate at one step of the sales and distribution process before dispatch to the next level, which wasted time and generated extra costs.

-to speed up the flow, the size of information batches are reduced. Computer system tied its sales people directly to factory levels and bypassed several levels of sales and distribution function and enabled with very small batches of orders.

-Toyota reduced system responsiveness to 8 days including the time required to make the car,

-the results were predictable, shorter sales forecasts, lower costs, and happier customers.


Time-based innovation

-a company can bring out new products three time faster than its competitors enjoys a huge advantage

-US companies reduce their new product development and introduction cycles from 36/48 months to 12/18 months.

-Japanese introduce innovations in air-conditioners 4 times faster than USA.

Japanese approach

-Manufacturing -stress short production runs and small lot sizes (favour smaller increments of improvement in new products, introduce them more often); western-big improve, less often

-Product development -use factory cells that are cross-functional teams; western-carried out by functional centres.

-Scheduling or work- factories stress local responsibility, product  development scheduling is decentralised. Western-centralized scheduling, plotting and tracking.


Time-based strategy

The possibility of establishing a response time advantage opens new avenues for constructing winning competitive strategies.

(1)co-existence(2)retreating(3)attack direct/indirectly (creates opportunity for real growth)

e.g. Atlas Door, a ten-yr –old US company achieved the number one competitive position in its industry

-the company’s product: industrial doors involving limitless choices of width and height and material. Most doors can be manufactured only after the order has been placed.

-the industry had needed almost four months to respond to an order . Atlas’s strategic advantage was time. It can  response in weeks to any order

-First, Atlas built just-in-time factories. It starts and completes all the part at the same time

-Second, compressed time at the front end of the system. Automated its entire order entry, engineering, pricing and scheduling processes.

-Third, just-in-time logistic operation, ensuring arrival of all necessary parts at the shipping dock in time


Flexible manufacturing (Stalk)

Prime justification:

-allow the production of a wider variety of products.

-offers major advantages in terms of the resources and time needed to bring on-stream new models

rich mix of Conditions, including:

JIT- inventory control

Design- for ease of production

Quality,- commitment to ‘zero defects’

training/education- to develop knowledge and skill

culture- impact on attitude, change culture

(Toyata-“got it right, turn out to be straightforward” – half a century)

Others elements for rapid respond to innovation:

Incrementalsim/variety of inputs to development/location of R&D/multi-disciplinary teams/close involvement of suppliers/parallel development



Technological forecasting (p187)

-Freeman’s typology of change it appears that scientific breakthroughs simply cannot be forecast

-Trend Analysis can be useful

link to personal expectation

the cost of many non-essential goods (such as cameras, video-recorder and so on) is reducing. This is due to improvements in design, lower manufacturing costs and larger markets

-we cam predict some items are going to be used more widely

-we can assume that technical problems at present restricting certain development will be solved eventually.

-trends may be limited by demand or by uncertainties about environmental threats, political and social pressures.


Technology Forecasting

Makridakis and Wheelwright (p188)

-Analogy about the forecasting of  technological change is that of a radar system

-detect the existence of  a missile (a technological idea or product) and calculate the position and time of impact (estimate its effect on you and your org)


Relation map of system (p190)

Social system, legislation, market, company, competitors, standards, education


Process Model  (p191)

Inputs -> process -> outputs

-a model which views an org simply as a transformation system, the purpose of which is to convert inputs to outputs.


Product design in terms of materials, etc.

Fig12.3 Component interactions:













Change in input may originate from market, process itself or output. For improve in some way. Able to meet the aims (lower cost/h.q.) legal restriction (asbestos); social pressure (natural fur), both beneficial and adverse.



-two main inputs are materials and human resources


-technology can affect materials in many ways

-one material for another with minimal change in methods of use. Eg copper has been replaced by aluminum in electricity cables

--substitute other input factors for materials, we may use less of the original materials by increasing the use of  other factors such as labour eg of carpenter to use uncut logs rather than higher price for imported ready-cut planks

-trade off quality for materials , possible to use fewer or lower quality inputs

-inter-production substitution function of the input may be carried out equally well by another input. Eg  Information can be provided well by telephone as by letter.

-technological substitution allow less or a different material to be used. Eg. electrolytic tinplating to replace glass bottle in soft drink


Value analysis

This process often employing the use of brainstorming tech, examines the design of parts (or the whole) to see if costs can be reduced (or reliability improved) by changing the specification.

Dobler et al (p196) suggested a checklist

-first to determine the function of the item

-then check whether



Weight reduced?




New materials  have been born

-light alloys (with aligned crystals for electronic applications

-refractory metals

-engineering plastics (as substitutes for aluminum. It is important in automobile industry)

-reinforced plastics and metals

-synthetic fibres,

-ceramics (for high temperature use)



Implication to Human Resources

People are affected by technological change in several ways

the number employed

-reduction of employment due to machines to replace the labour job. A shift of manufacturing shift to developing countries

-information technology to reduce some processes



-Use of computers in designer (Computer Aid Design)

-word processing and many office and planning


work practices and  condition of work

-working at home


Child concludes that general use of tech change to achievement of HR objectives

-eliminate direct labour if at all possible

-spread the use of contracting

-remove job and skill demarcations

degrade jobs through deskilling (use computer to remove skilled job)


Transformation change:

·          Changes in inputs

·          Changes in outputs

·          New market needs

·          External factors (such as legislation)


Effect on Transformation

Improvement in either Efficiency or effectiveness

Effectiveness means achieving the objectives of the org better in some way. Two common ones:-

-to react to customer demand quickly

e.g. IT, Notebook PC for insurance agent.

-to achieve a high standard of quality

e.g. TQM


Efficiency means using fewer inputs for the same outputs or generally having fewer resources, such as equipment, in the system. It can also looked on as minimising waste.

e.g. new packing mach works to smaller tolerances or less packing materials.

The use of IT probably the most important factor in speeding up reaction times, high volume data handling and quicker and less processing.  Elec control mechanisms on cars – minimum fuel is used; min exhaust gas pollution.


Obsolescence and Survival

-Any tech has life-cycle. As a general rule, it seems that the more complex the tech, the shorter the life. Eg. Hammer have hardly changed in centuries and aircraft manufacture has changed often during a single century

-resources need to be deployed to introduce their successors, is essential to long-range planning

-use of CAD

-computer image may be a representation of a physical object, as with an engineering product, or of the design of a textile fabric. The computer system allows many parts of design process to be carried out on computer, allow client to ‘walk through’ a new building on the computer screen, to simulate the actions of a new robot and check for possible problems in the movements of a new machine.


1984 survey by Senker and Arnold showed the benefits

-reduction in design lead times

-economies in design and draughting lead times

-better service to customers

-economies in material usage

-allows computer Aided manufacturing


the survey showed on significant changes in the number of employees, but some changes in working patterns. Shift working had been introduced in some offices to make better use of expensive equipment


-Clients can see the effect of their suggestions immediately, and other managers can also join in to make proposal for improvements. This lead to a blurring of demarcations between managerial functions, another typical result of technological change.


Variety reduction and variety increases

Historically, economies of scale have led to a restriction of choice. Assumed to be influence mainly by price.

More recently a counter-trend towards product differentiation and customer focus via amore and variety and specialisation of product offerings. As providing a competitive edge. Greater customer focus.  A merging of the cost adv of scale-based manufacturing with the marketing adv of customer segment focus and rapid response. Eg telephones variety of services


Effects on outputs

New products provide the most visible evidence of technological change.


Tech may help org improve its products or services in several ways

-reduce product costs

-make product satisfy more user needs

-meet new standard or legislation

-improve distribution

-reduce maintenance and prolong product life

-meet changes in demand

-increase convenience of use


Tech to flow new ideas


-quality circles

-attribute listing

-morphological analysis

(the problem is broken down into parts for analysis)


(Synectics company analyse on by inverting, transposing and distorting existing situation to see new ideas)


-innovative imitation

(Theodore Levitt points out that, despite the rhetoric, most so-called innovation in the field of product development is actually imitation.; IBM got into computers as an imitator, Holiday Inn  into motels as in imitator..)

(Peter Drucker… creative imitation is a strategy aimed at market. But it is much less risky.)


Product function development

One role of tech is to allow new benefits or functions to be added.


Typical modifications

Features modification

-sometime called functional modification

-usaully changes in minor ones of product or services

-usually easy to implement with minor engineering changes

e.g. CD player add programming and remote functions


Quality modification

Improve the quality of the basic product


Style modification

Build in style into the product (eg Coco-Cola to IBM PC)


Image modification

Associated with style modification (perceived quality changes). The customers feel total package has changed, but in essence the product or service itself remain unchanged

(Ovaltine and Bovril)


Development process

The complete (Western ) development process can be broken into stages


-idea generation

-strategic screen

-concept test

-product development

-test market



Users and Customers


Detecting and reacting to tech change

Personal sources




-accidental events

-chance encounters

-non-members outside





-outside members


Impersonal sources


-trade magazines

-reports, conferences

-scheduled meetings

-regular and general meetings



Who is responsible

-establish a centralised ‘intelligence function’ with one group of people scanning the changing tech world and reporting on it

-place the requirement to  scan for tech change upon all mgrs, technologists and specialist

-the staff should have incentive, time, expertise and contacts

Senior management should ensure the task is undertaken, and that staff are given the resources, responsibility and authority to do the job properly.  (right culture/attitude from top, positively encouraging a networking approach to information gathering and sharing)


Three main types of surprises (for taxonomies)

·          Historical analogues (historical surprises, natural disasters)

·          Event which have not happened but possible occurrence with much discussion (lack historical precedent, global warm)

·          Event which have not happened have never been seriously considered as remotely possible (totally unexpected, depletion of polar stratosphere ozone)






Strategies for responding to change (p230)


-removal (ban a hazardous substance)

-avoidance (high ground to avoid floods)

-risk protection (strengthen building foundations)

-mitigation (crop insurance)

-learn by experience (information retrieval)

-diversification (multiple crops, stage planting)

-small is beautiful(several small dams rather than a large one)

-save for a rainy day (food banks)

-self-sufficiency (recycling, ecodevelopment)

-develop ability to react rapidly to surprise(keep options open, contingency)

develop early warning indicators (weather forecast)


Commercial point of view

·          Ignore it (short term strategy)

·          Plan carefully for all reasonable contingencies so that future decisions become unnecessary

·          Defer decisions (get more information to reduce uncertainty)

·          Discharge the risk to others (contracts with penalty clauses)

·          Adopt flexible strategies allowing easy and inexpensive change (securing resources, short lead time, low capital cost, small unit sizes)

-          Combination of options

-          2 key points – flexible strategy based on good information


The steering approach in mgt

(traditional, Burton & oths)

                                                                Managerial control  









Corporate goal  ®     Plans   ®   Activities ®    Results





         ­                            ­               ­     

Environment           ¬               Steering       ¬


Steering is a managerial process comprising planning, tracking, controlling assessing and replanning.  Keep asking, a broad overview across all org’s objectives.


Key factors for Tech work

-top mgt support

-links with supplier

-cross-functional implementation team


-keeping informed

-involving the workforce

-acquiring appropriate skills


Innovation of Technology

Org and innovation


Riedle cycle

Different co has its resource & strength


Basic       Applied   Process       Product          Manufacturing

research  research    technology   engineering    Marketing















Kim et al. - Korean pharmaceutical companies

Four types of innovative org.

Scale of operation (finance res. Bargaining pwr, mkt share, size of HR)


                                          High                              low






Type 1(high internal capability w/flexibility e.g. Glaxo)


Type 2 (low capability e.g. Hanson)





Type 3 (high integration capability)


Type 4 (low cap, opportunistic)


Technological capability

                (production cap; investment cap; innovtn cap)

Type 1, can diversify tech effort by investing own R&D, gathering all external sources of tech input.

Type 2, reply on foreign multinational new products/production tech thr’ licensing agreements.  Allow domestic monopoly, patent and brand name

Type 3, maintain close relationship w/local R&D, CA fr agg. Local co-operative efforts.

Type 4, depend on informal tech transfer. Imitation, hire key personnel from competitor.

Type 1 & 3, highly innovative 2 & 4 not

Type 1 is a common goal






Org Style

Strategic Focus

                                      Traditional                        Progressive


Q.1 (Bureaucrats; Autocrats; strong culture)

Q.2 (Innovating terms)


Q.3 (Liquidators; would-be cost leaders)

Q.4 (Butterflies)


Innovativeness and org style; Pearson


Innovativeness requires an org to be positioned in concentrated area at top of matrix

Strategic focus must be concentrated for effective innovation