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The Bottom Line

Evan Davis gets to the heart of the big finance stories at The Bottom Line.

‘The power of technology’ and ‘How long is long in years of service in the same organisation’ are the twin themes of the latest BBC/Open University The Bottom Line programme. Evan Davis's three guests are drawn from General Electric International, SES Global, which brought us the Astra broadcasting satellite system, and Ford Europe. The central thrust of their argument about the power of technology is that partnerships with the state are crucial in enabling technological change and innovation. The guest from SES Global, echoing the Open University‘s new Vice Chancellor, suggested that technology is not enough in itself: it is about the role of processes and people engaging in entrepreneurial and innovative activity. The rider should have been added to all three guest contributions that the love of the “new” does not preclude the “old”. That is, many of the technologies their companies deal in are based on “old” technologies, including the internal combustion engine and the aero engine. Indeed, the inspiration for Astra came from the first Soviet Union satellite, Sputnik, launched in the late 1950s.

BBC Micro in Broadcasting House window.
Picture © copyright Rain Rabbit, used under Creative Commons licence.

The fixation with the new informs every society as the art historian and critic, Robert Hughes, wrote and narrated in his 1980 television series entitled The Shock of the New: Art and the Century of Change. In the accompanying book, Hughes examined the development of art and culture from the late 19th to the late 20th century: the period of what is known as modernism. Essentially, modernism is a view of the world that posits the progress of science and technology and its underlying culture as the organising principle of rational modern society. The early proponents of modernism proclaimed that it had dramatically changed the world in a very short period.

The late architectural writer, Reyner Banham, was the author of the book, Theory and Design in the First Machine Age. For Banham, the First Machine Age was ushered in by the invention of electricity which created the conditions for innovations like the telephone, the gramophone, the washing machine, etc. The Second Machine Age, starting around the 1960s, is characterised by mass production techniques producing electronic devices, which are consumed universally and symbolised by a single source of mass communication – the television. The Third Machine Age can be said to have started with the invention of the personal computer and the mobile. Whether the Internet represents a fourth age or a fifth Kondratieff wave (named after the Soviet economist Nikolai Kondratieff, who developed the idea of 50 year cycles of technological innovation) is open to question. But, despite the recent febrile claims that we live in a weightless economy, it is the mass of human interaction with technology that appears to be the central condition of our species.

This truism leads us to the question of employment longevity. There have always been claims that how we organise our economy is a break with the past. Labour market flexibility, portfolio and virtual workers are part of the heady stuff reported by journalists every day as though it was the global reality of the contemporary work environment. Unfortunately, journalists too frequently psychologically externalise their own experience onto everyone else. My grandfather was a flexible worker: he was part of the casual labour system at Southampton Docks at the start of the 20th century – he worked when he was chosen from the queue of men similarly seeking a day’s pay. My father worked for 30 years for a nationalised industry that, in the 1950s, threatened to sack all the staff at the engineering base on a Friday night and re-employ them on inferior contracts on the following Monday morning: flexibility is nothing new.

The average length of employment in the same company is 5.6 years in the UK, yet there appears to be a cultural aversion to long service in this country as though it was antediluvian. It was heartening to hear that the three guests on The Bottom Line had been with their companies for a long time and that a third of Ford workers had spent twenty-five years there. In a society in which there are more 60 year olds than 16 year olds, it is doubly curious. Moreover, the loss of corporate and policy memory was shown to almost devastating effect at the onset of the financial crisis. In many important sectors of the economy, experience is at a premium. Yet discrimination in the workplace and too strong an emphasis on the beauties and beatitudes of new technology, sui generis, and every associated ‘nouvellle vague’ blights all our lives. Ageism like any form of short or long discrimination is not rational. More importantly, it is not right.

Find out more

Over 50 and in their prime

Radical innovation

The long view on innovation

Courses

Technology Strategy

Creativity Innovation and Change

Strategic Human Resource Management

About the author

Leslie Budd is Reader in social enterprise at The Open University Business School. He is an economist and has written extensively on the relationship between regional and urban economics, and international financial markets.

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Money Programme

Get the facts behind the big business and finance stories from around the world – and down your street, in The Money Programme.

The UK economy is going through a tough time and this is affecting many businesses very directly. Several well known businesses have already floundered in recent months, others are reporting a severe drop in business. It is not obvious that the world economy is going to recover very quickly, so we must expect to see more businesses struggling in the coming months, perhaps even years.

Struggling businesses all too often translates directly into job losses. Thousands of people lost their jobs when Woolworth’s closed, many more are being made redundant from struggling car manufacturers. RBS has also announced its intention to lose a large number of jobs as part of its restructuring.

Is it right for companies to make thousands of workers redundant or do they have a duty to protect their employees in difficult economic times? This is actually not an easy question. Business ethics suggests different answers to it, depending on the ethical perspective you take, and also depending on the circumstances in which the company and its employees find themselves.

Employment definition in a dictionary.
[image © copyright Photos.com]

On the one hand, a utilitarian perspective suggests that companies must do what brings the greatest benefit and the least costs for all concerned. This might well mean having to reduce their workforce if this means the company can stay afloat and thus continue to offer employment to the remaining employees.

On the other hand, care ethics suggests that companies have a particular responsibility to those who are dependent on them, which would normally include their employees.

It may not be reasonable to expect companies to keep employing people if there is a serious downturn in business, which is expected to be more than a momentary blip. But if the company is not actually facing closure and particularly if it is a large and profitable company, perhaps it is not unreasonable to expect it to put some thought into how it can help employees threatened by unemployment, so that the transition is eased and they may find other employment more easily.

Courses

• Ethics in Real Life
• Introduction to Business Studies
• Business Organisations in their Environment

Take it further

• Ethics bites: business ethics
• 24 hour working
• Dealing with redundancy

About the author

Anja Schaefer is a Lecturer in Management at the Open University Business School. She’s been lecturing in marketing and corporate social responsibility for eight years. Anja has published material on consumer behaviour, sustainable consumption and corporate environmental management.

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Blogging about

Money Programme

Get the facts behind the big business and finance stories from around the world – and down your street, in The Money Programme.

As the fake trade mushrooms and with internet sites already awash with World Cup merchandise at knock-down prices, Umbro is braced for an influx of copycat kit.

The company is right to be anxious. With 12% of all sports goods now counterfeit, global figures reveal the shocking scale of the problem. Dozens of unscrupulous suppliers are preparing to replicate Umbro’s designs and products.

Consumers queuing to exchange their cash for cheap and cheerful imitations have one question on their lips. Why pay 40 quid for a genuine football team strip when a tenner buys a pretty good rip-off? For Umbro, stemming the supply of these cheap copies is only part of the problem. Handling the demand side: persuading the public to ditch the fakes in favour of genuine items from authorised outlets, is even more of a challenge!

At a time when all types of consumer goods are fair game for the counterfeiters, Umbro’s drive to interrupt supply is understandable. In a market awash with everything from fake watches and designer labels to cosmetics and prescription drugs, even the artificial tan is fake. Soon car boot sales, market stalls, newspaper classifieds and Internet auction rooms will swell with soccer gear, as cup fever fuels demand for the best-loved strips.

For Umbro the stakes are high: these counterfeit encounters are much more than a short-term threat. The risks include long-term damage to its brand and consequences for its financial fortunes.

Supply is fed by an overwhelming influx of dubious goods from counterfeiting hotspots such as the Far East. Consumer protection specialists explain that there is a high price to pay for supporting the fake trade. The image these experts present is stark, and their warning for consumers is bleak: your kit may be cut-price, it may even be the right colour and fit, but it’s likely to be shoddy quality and your consumer rights will disintegrate when the second-rate materials and printing fail in your washing machine.

"Your soccer shirt could be funding illegal trade, gun crime and even terrorism"

More shocking still, your soccer shirt could be funding illegal trade, gun crime and even terrorism. And that’s not all. Legitimate business is paying the highest price. Last year alone 17,000 European jobs were lost as a result of brand counterfeiting. According to the Anti-Counterfeiting Group (ACG):

Legitimate traders are hit when fakes undercut their markets, and the black market each year is worth around £9bn, on which unpaid VAT alone would fund several new schools and hospitals.

Despite such dire warnings, many consumers remain relaxed about the counterfeiting malaise. A recent report for The Organised Crime Task Force revealed that shoppers see fakes as a bargain, justifying their behaviour on the basis of the prohibitive price tags of genuine items. Many are either unaware or unwilling to acknowledge the darker side of the trade.

"Ultimately it is the consumer who decides whether to pay full price or be lured by the bargain-prices of copycat kit"

For Umbro, this is the root of the problem. Ultimately it is the consumer who decides whether to pay full price or be lured by the bargain-prices of copycat kit. These shoppers are savvy, and a growing number are prepared to pay for counterfeit brands. Umbro’s best chance of solving the problem is to develop an effective marketing strategy based on a clear understanding of consumers’ motives, perceptions and behaviour.

Consumer behaviour is defined as the purchase and consumption activities of ultimate consumers who buy products and services for personal or household use. Anticipating these buying patterns is the challenge for all marketing practitioners as they strive to influence this behaviour. Consumer expert Bernard Dubois explains that analysing these aspects of human behaviour involves answering three fundamental questions:

1. Who buys? What is the consumer’s identity?
2. How? What is the purchasing process like?
3. Why? What factors explain the purchase?

This last question is particularly intriguing for businesses striving to understand key customer drivers. Dubois expands on this point by describing three groups of explanatory factors, occurring at these levels:

• individual
• interpersonal
• sociocultural

Taken in combination these variables influence consumer preferences and purchase patterns. At the individual level, this involves an appreciation of consumer motivations, perceptions, experience and attitudes. It is with these factors that Umbro must grapple if it is to successfully attack the fake demand problem.

Umbro needs a twin strategy to tackle the fakers. Whatever action the company takes to locate the counterfeiters and stem supply, it must also strike at the heart of consumer demand. The sports gear supplier must rapidly tune into what motivates shoppers to buy these cheap imitations. Is it really all about price? Is quality a key consideration, or are there other factors at play?

Recent research by ACG pinpointing cost as a key driver in the market for fakes, also suggests that decisions are not purely driven by economic considerations. For buyers of DVDs, speedy access to new movies has fuelled the fake trade, while availability is also an issue for toy buyers. It is these kinds of nuances which soccer strip suppliers must grasp if they are to dissuade consumers from their errant behaviour. Ready, convenient access through a mix of retailing channels may be as important to consumers as low price.

Football pundits are already speculating about which nation will lift the 2006 World Cup. The victorious team will be assured an enthusiastic response from its supporters. Whether the football strip sported by these fans will be genuine, is much less clear. Some of the omens are good, not least because enforcers are demanding tougher legislation and stiffer jail terms for fakers.

For Umbro the message is clear. Winning the game depends on a twin strategy to tackle both the demand and supply side issues. The final whistle in Umbro’s encounter with the counterfeiters may be getting closer, but the tournament is only just beginning.

Further reading

• Understanding the Consumer by Bernard Dubois, published by Prentice-Hall
• The Deadly Trade in Counterfeit Goods by Tim Phillips, published by Kogan Page
• Anti-Counterfeiting Group
• Fake Nation? A study into an everyday crime research conducted by Dr Jo Bryce (University of Central Lancashire) and Dr Jason Rutter (University of Manchester)
• Securing your brand – how do you build value into a brand and  how do you preserve that value?
• The trainer tamer – how Jonah Perretti became the scourge of Nike

About the author

Sally Dibb is Professor in Marketing at the OU Business School. Sally chairs the Academy of Marketing's Special Interest Group in market segmentation.

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