Introduction

After reading our last PBL text, we tried to summarize it. Fujifilm had challenges because of the change of demand in the past, and, instead of staying in the business, they adapted to new industries.

So we came to the main problem of the text: How do companies react to changes in the market?

What causes changes in different types of markets?

Market conditions relate to the attractiveness (or otherwise) of the overall market in which a business operates.

Market conditions tend to affect all businesses in an industry, although their ability to take advantage or respond to changes in market conditions will vary. Two key indicators of market conditions are Economic Growth and Market Demand.

(Riley J., 2019)

All this makes a lot of sense for me, levels of supply and demand will be more efficent, productive and will increase if the Economic Growth has increased. Thanks to Economic Growth, the people demands more products, the power of acquisiton tends to be higher therefore industries will make sure to produce enough products for the increase of the demand, increasing supply.

But Market Conditions are more than Supply & Demand and Economic Growth, it’s also the enviroment for business, investors or employees. (Spacey J., 2018)

For example, when an economy is contracted or contracting, banks tighten their lending standars making it harder for companies to invest.

Same happens with interest rates, when they are low, it’s easier for firms to expand their profitability.

There are other conditions that work the same way as interest rates for companies like Asset Prices or Inflation & Deflation.

Periods when demand is far higher than supply can change the market too. For example, a fast growing city will have a shortage of restaurants, making them unusually profitable, new investors will rush to build new restaurants having an oversupply of restaurants.

New business models, alternative or substitutive products for a specific market will make this old market adapt to the new competition.

There is also the political & legal part. Governments can influence market conditions easily. For example, enviromental regulations might benefit clean energy firms.

But I still haven’t written about one of the most important conditions nowadays and it’s the creation of new technologies and innovations that can change the market and increase or reduce the demand for your existing product or service.

For example Artificial Intelligence, machines are able to observe and learn from established markets or behaviors and improve them, being a modern AND unique concept that every industry in the world can benefit from. But companies have to start investing in it or they will be kicked out of their own market.

Blockchain, when we talk about it we are not only talking about bitcoin, it’s a tech that offers a new method of exchanging information, doing it through a decentralized network making it almost imposible to be hacked.

Internet of Things, nowadays almost every object we have can be conected to internet making things much easier for the every day life. Even fridges can have WiFi! If a company doesn’t addapt this they will also be kicked out of their own market sooner or later.

Virtual reality & Augmented Reality, at the moment almost everyone who uses it uses it of curiosity or entertainment, it’s still limited for both businesss and individual ussers but even that it”s still a growing market and it must be checked by companies.

The appearance of Smart Places and 5G Networks. As we said about, objects can be conected to WiFi nowadays so businesses have to think of creating fully digitalized homes and working areas. And last, but not least, 5G, the latest innovation in mobile. This new tech increases speeds and low latency, this is awesome considering how much a common individual uses his phone every day.

Companies must anticipate the change and be prepared, because innovation is growing exponentially at the moment.

How companies react to changes in the market? (Examples of why they succeeded and why they failed)

Some of the world’s most profitable and enduring companies have achieved their long track record of success by constantly reinventing themselves.

For example, Nokia started selling rubber boots. Shell, the oil giant used to import and sell actual shells, but they decided to evolve their product line to stay one step ahead of their customers’ needs.

Let’s start with companies that reacting to changes succeeded.

-The Hathaway Manufacturing Co. Was a textille mill in New Bedford EEUU. In the early 60s textile industry was shrinking and Warren Buffett, one of the wealthiest persons on the planet decided to buy it’s stock for cheap and selling it back to the company for a profit. But a trick from the owners made Buffett mad, buying a majority stake in the company and forcing the owners out. Buffett eliminated the textile business in 1985 but kept the name and made it a corporate holding company making it one of the most profitable companies in the world.

-Shell company, one of the largest energy companies started as an antique store in 1830s specialized in decorative shells. The sons of the owner decided to expand into a broader import/export business. With the global oil boom, they built the world’s first bulk oil tanker. Making it a Transport and Trading Company. Merging in the early 20th century with Royal Dutch Petroleum, everyone knows how it ends.

-Nokia, we can talk about the success of evolving of Nokia, but also the failure. The company began manufacturing rubber tires and galoshes. Afte some merges, in 1963, Nokia’s electronics divisions began making radio phones for the military and everyone knows how it continued.

–Nintendo was founded as a playing card company, when the grandson of the founder took over, he transformed Nintendo into the world’s most successful gaming company. Testing other products, even food, hit the point with toys and games, taking interest in video game popularity, they got the rights to distribute some videogames. In 1977 it released the world’s first video game console.

( Roos D., 2019)

Now let’s list some corporations that failed to innovate.

-Kodak, the technology company that dominated the photo film during most of the 20th century blew its chance to lead the digital photography revolution. They developed a digital camera but they didn’t get approval to launch or sell it because of fears of the effects on the film market.

-Nokia, their mistake was the fact that they didn’t want to lead the drastic change in user experience, they developed a mess of an operating system in the era of smartphones getting “destroyed” by the new keyboardless phone of Steve Jobs, the “iPhone”.

-Blockbuster, The video-rental company had it’s pick at 2004. Seeing that they had been the leader of the movie rental market for years, management didn’t see why they should change their strategy. In 2010, Blockbuster filed for bankruptcy.

-Segway, the personal motorized scooters were invented in 2001, even the product was revolutionary, the few that could afford it 5000$, were having difficulty finding practical uses for it.

-Tie Rack, tie retailer founded in 1981, failed to do its research about men’s shopping behavior. Their stores only sold scarves, ties and cufflinks, but it turned out men were mostly buying their ties when they bought shirts.

-Blackberry, they changed the game offering a device with an arched keyboard but they weren’t thinking of user experience. A few years later instead of focusing on bigger touchscreen displays, Blackberry was more concerned about protecting what it already had.

(Aaslaid K., 2018)

Risks of adapting into new market conditions

To be successful and stay successful, businesses must carefully adapt its products or services when the market changes or if there is a new competitor, or a new technology has appeared into the market.

What is the risk of trying to beat your competitors against a new technology in the market?

First of all, when the market condition changes, there has to be some extra costs. This extra costs can be in researching methods, investments or buying new and better assets for the company. This will always have the risk that, if it fails. The company will have lost the money ‘invested’ in this transition.

A good option to reduce the risk of bringing the company into bankrupcy is keeping Cash Flows during the “transition” time positive. Companies trying to transition from an old product to a new one should have a plan B, and to be able to make it posible they will need cash.

Since this Learning Objective was not clear at all I think my response gives a sincere answer to the question made before.

Conclusion

I think we didn’t understand quite well what the trigger was about, since all our Learning Objectives are really simple. I imagine that during the PBL session on Friday everyone will have the same information but anyways, it was nice to search this topic eventhough I already knew 80% of all information written here.

References

Riley M., 2019. Market conditions. Available at: https://www.tutor2u.net/business/reference/market-conditions [Accesed October 2, 2019]

Aaslaid K., 2018. 50 Examples of Corportations that failed to innovate. Available at: https://valuer.ai/blog/50-examples-of-corporations-that-failed-to-innovate-and-missed-their-chance/ [Accesed October 2, 2019]

This time, the text was about how India, the world’s fourth-largest economy in the world is growing rapidly despite the Great Recession.

The change and evolution has started since India elected Modi as prime minister and rejected the leadership of Gandhi’s party. Modi is a businessman and it’s changing the way India works. Which type of economy is he applying? Which types of economy exists? and which one is the best?

What are the different types of economies?

Each country in the world has a different economy, with different features and it’s own identity, but looking at the big picture we can distinguish four economic systems.

-Traditional Economic System

This is the most traditional and ancient type of economy in the world. There’s still a big part of the world that functions under a traditional economic system. Mainly third-world countries. In this economy everyone has it’s own role and surpluses are rare. What does this mean? A member of this economy doesn’t think about creating, working, or growing more than what is needed for self-consume. There isn’t a big market and everyone works for selfsurvival.

This kind of economies will eventually evolve to form a different type of economy.

First, the economy relies on the families or tribes, but the need for trades and starting to produce more than needed will make the economy evolve to a more developed way of economical system. (Amadeo, 2019)

-Command Economic System

Almost all the economic system of a commanded system is controlled by the government and centralized. One example of this was the URSS when the owner of all industries was mainly the government. This type of government is supposed to supply and redistribute all needed resources around all citizens. Creating a healthy supply of its resources at affordable prices for all citizens. The point that the government owns the industries can provide jobs for all citizens making the unemployment rates be almost inexistent. If there is a lack of some resource there is the need to ration since every citizen has the “same right” to get it.

-Market Economic System

Also known as capitalist system, is a free market economy. Industries and companies are mainly private sector. Every individual works in self interest, price and quantity is settled by the supply and demand of the product. If there is lack of something, not everyone will afford buying it. It’s the total oposite of the Commanded Economic system.

The point that companies are private sector and their main goal is to have as much benefits as posible, there’s a lot of competence, this competence leads into “competitive” races, leading into more innovation and growth.

The government in this economic system has not the power to control the market at all.

-Mixed Economic System

A mixed economic system is a combination of a market economy and command economy. The market is more or less free of government ownership except for some fields like sensitive industries.

The market is regulated by itself but if there is the need of the government acting, the government is able to act to control business, industries and the market in general. For example, if large companies are abusing monopoly powers, government can enter the market and breake it up, or taxating harmful products like alcohol or other drugs. (Agarwal, 2019)

What actions are taken by a government to develop an economy?

There are a lot of actions that a government can take to develop an economy, but it depends on the system it’s following. For example, in a commanded country. Government theoretically eliminates poverty, it provides equal access to health care and education because noone is discriminated.

The unemployment rates are low because government can create jobs thanks that they own all industries. For example, if there is high unemployment in one province. The government can settle the construction of roads there giving employment to the unemployed people from that province.

While working on strengthening domestic taxation and raising more revenues to finance public goods, the priority needs to be on improving the business enviroment to attract private capital. (Izvorski, 2019)

Some governments since 1960 have increased significantly their spendings in things like education, health care or public industries and all kinds of industries but however, creating a large redistribution may create substancial disincentives to work and invest.

One important way of promoting economic growth is through innovation. Start-ups are the ultimate job creatos who start with ingenious ideas, take risk and create value.

Inmigration policies that aggressively reach out to skilled immigrants will give more competitiviness to the country employees leading into more innovation and growth.

Unemployment programs, unemployed people has to be offered a job by governments, even in capitalist countries, governments give help to unemployed people constantly educating them to new scenarios and make them able to swap from old industries to new industries.

Also one of the easiest ways of a country developing economic growth is using it’s own natural resources.

Pros of Economic Growth

-Higher Income Per Capita, economic growth always will mean higher income per capita.

-Lower Unemployment.

-Reduction of government borrowing, deficit is likely to be reduced making more money available in the economy.

-Encourages investment, power of acquisition is higher, bigger change of major investments.

-Higher living standards, thanks to the increase of power of acquisiton.

-Employment effects. Higher wages and profits for both employees and employers.

-Increase of the productivity.

Cons of Economic Growth

-Depletion of non-renewable resources, such as lands or non renewable energies.

-Does not guarantee happiness, more money in the pocket does not bring happiness.

-Higher interest rates, higher purchasing power leads into inflation and inflation of interest rates.

-Higher inflation.

-Higher inequalities of income and wealth.

-Increased consumption may cause shortage.

-Huge industrial waste, due to the increase of productivity.

-High likelihood of recession after inflation, the aftermath of an increase of inflation is sometimes a recession.

-Corruption cases may increase, there is more money floating in the economy.

-Excessive government expenditure.

(ProsAndConds.com)

Conclussion

In conclussion, all economies start with a traditional economic system, after some time it starts developing new features that leads into evolving into one of the 3 other systems. Is there one better than others? In theory all three have their good things and bad things compared to others but in the reality, a commanded economy usually leads into a dictatorship, it doesn’t matter the type.

Economic growth it’s a good thing for a country in general, but in a mixed or capitalist economy, it will lead into more inequality between citizens.

References

Agarwal P., 2019. The Four Types Of Economies. Available at: https://www.intelligenteconomist.com/types-of-economies/ [Accesed September 26, 2019]

Amadeo K., 2019. Traditional Economy With Its Characteristics, Pros, Cons, and examples. Available at: https://www.thebalance.com/traditional-economy-definition-examples-pros-cons-3305587 [Accesed September 26, 2019]

Amadeo K., 2019. Capitalism, Its Characteristics, with Pros and Cons. Available at: https://www.thebalance.com/capitalism-characteristics-examples-pros-cons-3305588 [Accesed September 26, 2019]

Amadeo K. 2019. Socialism and Its Characteristics, Pros, Cons, Examples and Types. Available at: https://www.thebalance.com/socialism-types-pros-cons-examples-3305592 [Accesed September 26, 2019]

Izvorski I., 2019. 4 lessons for developing countries from advanced economies’ past. Available at: https://www.brookings.edu/blog/future-development/2019/02/20/4-lessons-for-developing-countries-from-advanced-economies-past/ [Accesed September 26, 2019]

Shapiro G., 2013. Six ways to Create Economic Growth. Available at: https://www.forbes.com/sites/garyshapiro/2013/01/23/six-ways-to-create-economic-growth/ [Accesed September 26, 2019]

Amadeo K., 2019. Economic Growth, Its measurements, Causes, and Effects. Available at: https://www.thebalance.com/what-is-economic-growth-3306014 [Accesed September 26, 2019]

EDUCBA.COM 2019. Economic Growth vs Economic Development. Available at: https://www.educba.com/economic-growth-vs-economic-development/ [Accesed September 26, 2019]

PROSANDCONS, 2018. Pros and Cons of economic growth. Available at: https://www.prosancons.com/business/pros-cons-economic-growth/ [Accesed September 26, 2019]

Introduction

This new trigger started saying that oil production is going to peak, but not for geological reasons as it has been always said, but because we will no longer need oil.

The reasons? The increase in biofuel production and the growth in electric vehicles. But the truth is that oil production is still growing faster than biofuel production and the growth in electric vehicles.

What factors are preventing the switch to renewable energy?

Oil is supplying 33% of all energy and is the world’s primary fuel (Clemente, 2015). World’s industry has gone through a lot of revolutions. The first one, thanks to the steam machine, accelerated the growth of production around the world. But it was in the Second Industrial Revolution, when electricity and OIL started being part of all industries, since that point, the growth in all industries has increased exponentially until present, and it keeps being like that.

But what is preventing us from transitioning from oil needed industries to more ecological ways of producing energy, like biofuel production, solar energy, wind energy, geothermal energy or hydroelectric energy.

Vehicles. The vehicle market exists thanks to derivatives of oil (gasoline and diesel). The amount of cars that need gasoline and diesel is inmense.

It is estimated that over 1 billion passenger cars travel the streets and roads of the world today. (worldometers.info).

In adition, it’s not only that, almost all motors used in industries are diesel.

But if we focus on vehicles, in EEUU, 2015, 16.5 million cars were sold during that year. But only 120000 were electric vehicles. That’s 0.72% of all sales but also becoming the largest electric vehicle market in the world.

(World Oil Consumption, ycharts.com)

As we can see on the chart one of the main problems of transitioning to other energies is that there’s still industries that are starting to use oil. All industry infrastructures around the world are, or are becoming oil required. The economies of scale makes it way cheaper than other options.

There is the need around the world to find solutions, and here is where goverments have to take part of it.

What is the role of law and government in facilitating the transition to alternative energy?

Everyone knows there is the urgent need of transitioning to more ecological energies than oil. But companies can’t lose that much money transitioning, it’s not worth for them to spend millions on a new infrastructure because using oil will still be cheaper for some companies.

The role of law and government is clear in this field. All governments have to create and apply laws, grants, facilities to companies. So it makes it worth for them to transition from oil to renewal energies.

One clear example is the so-called “New Green Deal”. This name is used to describe various sets of policies that aim to make systemic changes. (Dsouza, 2019)

United Nations announced this measures back in 2008.

But EEUU is not the only country trying to make measures in this field, European Union settled back in 2009 a binding target of 20% of the energy consumed in 2020 in Europe had to come from renewable energies. Are they achieving it? Yes, since in 2017 it represented the 17.5%.

Therefore, all EU countries are adopting their own laws according to this European Union plan.

Since the plan created in 2009 is going to be completed, in 2018 the Renewables Energy directives established a new binding renewable energy target. In 2030, 32% of energy must come from renewable energy.

How they control it? Every two years European Union publishes a report where it can be seen the transparency of this project.

Conclusion

Since almost all industries are settled with oil. It’s not worth for them to transition to renewable energies for many reasons, it’s still more expensive than oil, or the cost of transitioning will not be worh in the short-mid term (And companies take this very seriously). So the only solution for this problem is the intervention of governments. It’s seen that the biggest countries or organizations like EEUU, European Union or China are doing big efforts to transition to renewable energies. But can they do more?

References

(Three Reasons Oil Will Continue To Run The World, Jude Clemente) https://www.forbes.com/sites/judeclemente/2015/04/19/three-reasons-oil-will-continue-to-run-the-world/

(Cars produced in the world) https://www.worldometers.info/cars/

(The Green New Deal Explained, Deborah Dsouza)

https://www.investopedia.com/the-green-new-deal-explained-4588463

(Renewable Energy, European Commission) https://ec.europa.eu/energy/en/topics/renewable-energy