COMP6044   Just another ECS Blogs weblog

I pick up from where I left off last week – in particular, consideration of the field of management studies from the perspective of an organization (to be managed) as an ‘open system’. This conceptualization implies that various sub-systems should be considered from a management engagement viewpoint: the internal (towards maintenance of the system) and external (towards the competitive position of the system). One of the challenges under management theory is how to balance these competing values upon management time: in particular, how to trade-off the encouragement of flexibility and change, while still retaining control to ensure employees act appropriately.

In returning to the main research focus – how the Web/Internet is changing the nature of competition between businesses – an open system emphasizes how objectives, plans and solutions must adjust rapidly to changes in the external environment. These changes can come from a variety of sources. Boddy gives examples of the increasingly global nature of the economic system at large, deregulation in certain industries, the closer integration between many different areas of business (such as telecoms and entertainment), increasing consumer expectations and computer-based information systems. Many modern-day organizations operate in non-linear systems in which small changes are amplified through many interactions with other variables so that the eventual effect is unpredictable. In other words, management decisions should be grounded in the external context in which the organization is situated and the long-term consequences of a management decision can be majorly disrupted by circumstances in the outside world in an unforeseen manner.

Boddy goes on to introduce the idea of the competitive environment (defined as “the industry-specific environment comprising the organization’s customers, suppliers and competitors” or “micro-environment”). He distinguishes it from the “general environment (defined as the “political, economical, social, technological, (natural) environment and legal factors that affect all organizations” or “macro-environment”), as illustrated below:

Together, they make up the “external environment” or “external context”. Forces in the external environment become part of an organization’s agenda when internal or external stakeholders pay attention to them and act to place them on the management agenda. In turn, these demand a response (see next week for more on management theory related to the type of response).

In terms of analyzing the competitive environment, Porter put forward a theory of five forces which most directly affect management and the ability to earn an acceptable return. These are also found in economic theory and competition law: the ability of new competitors to enter the industry, the threat of substitutable products, the bargaining power of buyers, the bargaining power of suppliers and the rivalry amongst existing competitors. This analysis can also be applied at an industry level to determine overall profitability, being factors which influence prices, costs and investment requirements, as illustrated below:

To give one example, technological change can affect the proximity of competition between products which in turn can constrain a firm’s ability to raise price (Boddy gives the example of YouTube threatening established media companies and online recruitment threatening the revenues that newspapers receive from job advertisements).

Where management differs from economics is the nature of the response. Through analyzing the forces in the competitive environment, managers aim to seize opportunities, counter threats and generally improve their position relative to their firm’s competitors in the future. Like economics, however, management also looks at trends, such as the state of the economy which is a major influence on consumer spending and capital investment plans. Sociological trends can also be relevant. For example, many consumer businesses are changing direction from a strategy aimed at mass market towards developing much small brands directed at small, distinctive groups of consumers. This reflects the growing diversity of the population, with many personal and individual preferences more apparent (such as through the Web). Again, in turn, this shift has severe implications for media that relied on advertising from mass market advertising. There are also many examples of digital technologies affecting established markets (such as DVDs, MP3s, broadband services offering delivering online content, VoIP and digital photography).

In summary, critical reflection on business environment conditions is essential to the type of management strategy adopted. Next week I turn to theories of generic management activities of planning and decision-making, including strategy and marketing (to lead into discussions of how e-marketing has revolutionized the business world).

What is sociology? Sociology is the systematic, sceptical and critical study of the social. It studies the way people do things together. [..] it becomes a form of consciousness, a way of thinking, a critical way of seeing the social. Sociology, a global introduction, Macionis and Plummer. As I was reading Chapter 6. Groups, organisations and the rise of the network society, Manuel Castells‘s ideas about the network society and the Information Age (this is the name of his 3 books on this topic) were described: people, cities, businesses and states are nodes in networks through which information, money and people flow. These flows make time become a perpetual present and space becomes global, being everywhere at the same time. A guide to this trilogy is David Bell’s Cyberculture Theorists which discusses the ideas of Castells and Haraway.

Haraway, the other theorist besides Castell discussed by Bell, is a professor at the University of California in the History of Consciousness. She published in 1985 a cyborg manifesto suggesting enhancing our human bodies to transgress the boundaries of nature. She is recently interested in the links between humans and animals.

A quick browsing through the Cyberculture Theorists google book http://goo.gl/yS4n1 brought me to Carl Popper‘s World 3 about which I read last year. Popper’s elegant philosophy explains the world on 3 levels:

World 1: the world of physical things
World 2: the world of mental events and objects
World 3: the world of abstract objects produced by the mind such as scientific theories

Bell states that world 3 is sometimes referred to when cyberspace is discussed. Cyberspace is a term coined by William Gibson in his novel Neuromancer. In this novel cyberspace is entered as disembodied consciousness by joining the network which is the battleground over ownership and access to data, much like today’s internet where Google, Facebook and other players are crunching user data to provide the best sponsored ads.

People like to spread information and social networks, microblogging  helps them do that easily through webpages like Twitter or status updates on Facebook. For example, 100 billion updates are processed each day on Facebook. People care what others think, more than what Google thinks. This is why rating appeared recently on Wikipedia and that is what the Facebook Like button is all about. Socialnomics, Erik Qualman

The Zeitgeist, the spirit of the age, our common consciousness is the one leading us in this connected, common, social direction.

By selectively reading through these books, I think that the most comprehensive is the Sociology book. I was particularly interested in the chapters about the future of society and the internet. It contains valuable information regarding these topics. I have the feeling they are all predicting the future. We don’t really realize where we are heading, but the change is already here, we are already this cybersociety.

I also read 3 chapters on Social Marketing (Marketing to the Social Web – Larry Weber), but I couldn’t find some valuable information, something that Qualman didn’t mention in his book – the main idea emphasized is what I already mentioned in my previous post – that the new marketer’s perspective should take into account the customer,  he should be an aggregator and not a broadcaster.

I will keep on reading about Social Marketing and Sociology.

Am now looking at a book on economics called, ‘Markets not Stakes: The Triumph of Capitalism and the Stakeholder Fallacy.’ This is written by Professor Patrick Minford and was published in 1998. He outlines why he thinks that the stakeholder culture was mistaken and how capitalism was thriving. The stakeholder concept was supposed to find the middle way between ‘failed socialism and free-market capitalism.’ The blurb discusses the way in which regulatory proposals were to create more rights for workers, allow the government to override the pull of market forces on investment in an attempt to curb the 80s short term corporate culture.

I am particularly interested in this because it would seem very easy now to say how obviously mistaken this view was. However, it goes on to say that ‘Stakeholding is no different in essence from interventionist and redistributive taxation, its only difference is its lesser transparency, which therefore deceives people into believing it to be innocuous.’ Although he then apparently goes onto argue that it destroys incentives (the meat and blood of economics, according to ‘The Armchair Economist’ ) I’m initially quite interested in the transparency issue.

When I worked for a FTSE100 company that was quite concerned about corporate governance and hence ‘transparency,’ a word which we hear all too often nowadays, the other word that was always brandished was ‘stakeholders.’ Generally the more your job was to do with explaining figures and processes to people, the more you had to take ‘stakeholders’ into account. This actually meant not just anyone who had a right of some sort (surely just one’s bosses in a monolithically hierarchical company structure?) to poke their nose into what was going on, but those who felt that they ought to have a right. Or those, like me, who were just very, very curious about how it all worked. The more stakeholders there were (in a PLC serving most of the country’s households, that was at least 18 million) actually the less possible it became to be transparent. I’m increasingly convinced that the possibility of transparency decreases exponentially in any very small company (say, 7 or fewer employees) or any company that has over say, 300 employees, just because of organisational factors. I’m also wondering whether this is not accidental, but actually deeply tied into company size (depending on its structure, or how the power gets passed around). So am quite interested to read this book and see what comes out.

Am reading it alongside ‘The Armchair Economist’ which is interesting, but is leaving me feeling vaguely unsatisfied at present.