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<title>Introduction to the international business environment: relationship between structure and strategy</title></titleStmt>

<publicationStmt><distributor>BASE and Oxford Text Archive</distributor>


<availability><p>The British Academic Spoken English (BASE) corpus was developed at the

Universities of Warwick and Reading, under the directorship of Hilary Nesi

(Centre for English Language Teacher Education, Warwick) and Paul Thompson

(Department of Applied Linguistics, Reading), with funding from BALEAP,

EURALEX, the British Academy and the Arts and Humanities Research Board. The

original recordings are held at the Universities of Warwick and Reading, and

at the Oxford Text Archive and may be consulted by bona fide researchers

upon written application to any of the holding bodies.

The BASE corpus is freely available to researchers who agree to the

following conditions:</p>

<p>1. The recordings and transcriptions should not be modified in any


<p>2. The recordings and transcriptions should be used for research purposes

only; they should not be reproduced in teaching materials</p>

<p>3. The recordings and transcriptions should not be reproduced in full for

a wider audience/readership, although researchers are free to quote short

passages of text (up to 200 running words from any given speech event)</p>

<p>4. The corpus developers should be informed of all presentations or

publications arising from analysis of the corpus</p><p>

Researchers should acknowledge their use of the corpus using the following

form of words:

The recordings and transcriptions used in this study come from the British

Academic Spoken English (BASE) corpus, which was developed at the

Universities of Warwick and Reading under the directorship of Hilary Nesi

(Warwick) and Paul Thompson (Reading). Corpus development was assisted by

funding from the Universities of Warwick and Reading, BALEAP, EURALEX, the

British Academy and the Arts and Humanities Research Board. </p></availability>




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<item n="speechevent">Lecture</item>

<item n="acaddept">Business</item>

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<u who="nm1127"> my name's <gap reason="name" extent="2 words"/> and <pause dur="0.9"/> i'm <pause dur="0.5"/> responsible for the International Business Environment course <pause dur="0.4"/> for the next ten weeks <pause dur="0.3"/> with my colleague <gap reason="name" extent="2 words"/> <pause dur="0.8"/> # <gap reason="name" extent="1 word"/> isn't here this evening 'cause he's actually in Scotland but # <pause dur="0.3"/> as you'll see from the the pack of information <pause dur="0.4"/> i start <pause dur="0.2"/> the course <pause dur="0.6"/> <gap reason="name" extent="1 word"/> comes on for three weeks of <pause dur="0.2"/> economics particularly macroeconomic theory <pause dur="0.5"/> then i continue then we sort of merge together in the end <pause dur="0.4"/> and take a couple of of joint sessions <pause dur="0.5"/> now <pause dur="0.6"/> the first thing i should perhaps say is <pause dur="0.3"/> why am i wearing a radio mike and why is there a camera around <pause dur="0.3"/> let me introduce <gap reason="name" extent="1 word"/> to say why he's here 'cause i <pause dur="0.3"/> i don't normally have my own personal cameraman not <vocal desc="laughter" iterated="y" n="ss" dur="1"/> for these type of events <pause dur="0.3"/> <gap reason="name" extent="1 word"/> </u><pause dur="0.7"/> <u who="om1191" trans="pause"> # <pause dur="0.2"/> yeah # i hope you don't mind being filmed i'm actually involved in a project where i'm making a C-D-ROM <pause dur="0.5"/> and i'm filming lectures from all departments of <gap reason="name" extent="1 word"/> University <pause dur="0.5"/> and # <pause dur="1.2"/> <gap reason="name" extent="1 word"/> very kindly agreed to be filmed for the Business School <pause dur="0.4"/> so # <pause dur="1.0"/> i hope you will just bear

with me </u><pause dur="0.2"/> <u who="sm1128" trans="pause"> do we get paid for it </u><pause dur="0.5"/> <u who="om1191" trans="pause"> # <vocal desc="laughter" iterated="y" n="ss" dur="1"/><pause dur="0.2"/> nobody makes any money out of it </u><u who="nm1127" trans="overlap"> what a <pause dur="0.2"/> typical </u><u who="om1191" trans="overlap"> but the university <pause dur="0.4"/> # i think </u><pause dur="0.2"/> <u who="nm1127" trans="pause"> yeah </u><pause dur="0.5"/> <u who="om1191" trans="pause"> and not even me </u><pause dur="0.4"/> <u who="sm1129" trans="pause"> i think the whole standard of <gap reason="inaudible" extent="1 sec"/><vocal desc="laughter" iterated="y" n="ss" dur="1"/></u><pause dur="0.8"/> <u who="om1191" trans="pause"> well maybe maybe yes <pause dur="0.6"/> i'll have to put those <gap reason="inaudible" extent="1 sec"/></u><u who="nm1127" trans="overlap"> i was the only one who was prepared to do it without being paid <pause dur="0.5"/> i did it for the reason purely that i see this as a way <pause dur="0.3"/> of enhancing the brand <pause dur="0.3"/> which of course you will all be intimately <pause dur="0.5"/> # interested in <pause dur="0.4"/> when you leave this place and so this is brand reinforcement cognitive dissonance <pause dur="0.4"/> and all that jazz </u><pause dur="0.2"/> <u who="sm1130" trans="pause"> you're going to be a film star then </u><pause dur="0.2"/> <u who="nm1127" trans="pause"> <vocal desc="laughter" iterated="y" n="sl" dur="2"/> okay <pause dur="0.6"/> let me just <pause dur="0.2"/> say <pause dur="0.3"/> basically i work in the the M-S-M group the Marketing and Strategic Management <pause dur="1.0"/> i'm on the strategic management side <pause dur="0.6"/> and my particular interests <pause dur="0.4"/> are in <pause dur="0.7"/> early stage <pause dur="0.5"/> high-tech <pause dur="0.5"/> businesses <pause dur="0.9"/> and specifically within that context <pause dur="0.3"/> i spend most of my life either researching those businesses <pause dur="0.3"/>

working in those businesses <pause dur="0.3"/> or advising on government policy <pause dur="0.4"/> in those areas <pause dur="0.2"/> so <pause dur="0.4"/> i'm not actually interested particularly <pause dur="0.3"/> in large companies <pause dur="0.5"/> i'm very very interested <pause dur="0.4"/> in high technology start-ups <pause dur="0.3"/> i'm interested in large companies where <pause dur="0.5"/> # we have say corporate venturing activity <pause dur="0.4"/> i mean <trunc>l</trunc> # <pause dur="0.2"/> couple of months ago <pause dur="0.4"/> # i chaired a session where we looked at # Daimler-Benz <pause dur="0.2"/> # Douwe <pause dur="0.4"/> # Siemens <pause dur="0.3"/> and we looked at where we could actually use <pause dur="1.4"/> structures that would generate <pause dur="0.2"/> innovative young companies both coming out <pause dur="0.4"/> of Siemens <pause dur="0.5"/> using Siemens technology which is non-core <pause dur="0.4"/> but also going into Siemens <pause dur="0.3"/> from other areas of activity <pause dur="0.3"/> where we had # <pause dur="0.3"/> companies which had interesting technologies for Siemens and <pause dur="0.4"/> # a classic sort of structure now i talked <pause dur="0.5"/> to # a Dane <pause dur="0.4"/> # a guy called <trunc>b</trunc> # Bjørn <pause dur="0.2"/> Andersson <pause dur="0.6"/> who is in charge of their telecommunications <pause dur="0.3"/> processes <pause dur="0.5"/> # Bjørn is a Dane <pause dur="0.7"/> working based in Stuttgart <pause dur="0.2"/> but actually working out of San Cupertino <pause dur="0.4"/> so it's the it's the internationalization and

the linkages <pause dur="0.3"/> i'm particularly interested <pause dur="0.4"/> in that area so <pause dur="0.3"/> at the moment i'm doing some work looking at the internationalization of high-tech companies <pause dur="0.4"/> in Germany <pause dur="0.3"/> and in the U-K <pause dur="0.7"/> now whenever i <pause dur="0.2"/> talk in this area people say yeah but if you <pause dur="0.4"/> if you could do it you'll do it <pause dur="0.4"/> so <pause dur="0.3"/> i should also say <pause dur="0.4"/> # i'm a # a recently retired # director of a high-tech start-up which went from nought <pause dur="0.3"/> to thirty-million dollars <pause dur="0.2"/> # in three years and i was the first chairman of it <pause dur="0.4"/> it was a British company British ideas <pause dur="0.3"/> British brains <pause dur="0.3"/> British experience so the first thing we did of course <pause dur="0.4"/> was to become American <pause dur="0.6"/> # <pause dur="0.3"/> the second thing we did was to ignore the City of London as the most powerful <pause dur="0.4"/> financial # area in Europe <pause dur="0.4"/> and take money out of California <pause dur="0.6"/> and the third thing we did <pause dur="0.5"/> was to set up <pause dur="0.4"/> a small subsidiary <pause dur="0.6"/> # in London <pause dur="0.7"/> # our major base was in Boston <pause dur="0.4"/> and still is <pause dur="0.5"/> # the fourth thing was out of our control <pause dur="0.3"/> which was the I-R-A <pause dur="0.4"/> who actually blew <pause dur="0.2"/> our London subsidiary to smithereens 'cause we

were in the South Quay <pause dur="0.3"/> in Docklands <pause dur="0.4"/> if you want to liquidate assets in nanoseconds <pause dur="0.3"/> # do that i mean it's it was <pause dur="0.5"/> luckily no one was killed <pause dur="0.4"/> techies work late at night but thank God <pause dur="0.2"/> they had actually left as it was a Friday night <pause dur="0.3"/> but it was # an interesting experience <pause dur="0.5"/> so i will look <pause dur="0.7"/> in terms of these set of lectures <pause dur="1.6"/> particularly at the environment <unclear>and</unclear> we'll talk about in detail later <pause dur="0.8"/> but i will tend to skew it to my area <pause dur="0.9"/> for two reasons one <pause dur="0.5"/> that interests me <pause dur="0.7"/> and if i am interested hopefully it will be more interesting to you <pause dur="1.1"/> and two <pause dur="0.7"/> if you're not interested in technology <pause dur="0.4"/> if you're not interested in in start-up companies <pause dur="0.3"/> if you're not interested in rapidly growing companies that are international at <pause dur="0.2"/> at conception <pause dur="0.4"/> then you bloody well should be <pause dur="0.4"/> so i will play <pause dur="0.3"/> to my strengths <pause dur="0.2"/> and to my prejudices you may challenge this <pause dur="0.6"/> at any time and i hope we will have a a debate <pause dur="0.4"/> on a whole range of areas and a whole range of sectors <pause dur="0.5"/> # i started off <pause dur="0.4"/> in the

agribusiness sector <pause dur="0.4"/> so i have actually worked for large companies Unilever Imperial Group <pause dur="0.4"/> as well as working for small companies as well <pause dur="0.9"/> okay so that's my background and hopefully <pause dur="0.4"/> as we go through the course <pause dur="0.9"/> you will enjoy it more <pause dur="1.0"/> if you can actually contribute your <pause dur="0.5"/> unique experiences your skills <pause dur="0.3"/> your experiences <pause dur="0.2"/> i may not agree with you others may not agree with you <pause dur="0.3"/> but it will make the whole dialogue <pause dur="0.2"/> # <pause dur="0.3"/> much more interesting <pause dur="0.3"/> # because these type of lectures certainly by <pause dur="0.4"/> myself and my colleagues is not us talking to you <pause dur="0.3"/> it's much more # a debate # <pause dur="0.2"/> that we will engage in <pause dur="0.5"/> and hopefully for some of you you might be interested <pause dur="0.4"/> in say the the venture capital course <pause dur="0.2"/> # i run <pause dur="0.5"/> in the summer where we bring in the sort of great and good <pause dur="0.5"/> of the industry internationally for # a week <pause dur="0.4"/> just talking about the nature <pause dur="0.6"/> of <pause dur="0.3"/> innovation the nature of new businesses the nature of financing <pause dur="0.4"/> growing businesses <pause dur="0.4"/> and how the hell do you get a company like # Amazon which is now capitalized at

twenty-five-billion dollars <pause dur="0.5"/> and hasn't yet made a profit <pause dur="0.4"/> so <pause dur="0.7"/> some <trunc>b</trunc> but last year what happened was a number of <pause dur="0.4"/> the the part-timers and indeed other <pause dur="0.2"/> programmes came <pause dur="0.3"/> onto the full-time course for # an intensive week <pause dur="0.3"/> # <pause dur="0.3"/> but talk to the guys who did it last last year <pause dur="0.3"/> # Phil i know is here <pause dur="0.6"/> # and he did that course <pause dur="0.8"/> okay <pause dur="1.0"/> let's just briefly go through some of the sort of <pause dur="0.4"/> # <pause dur="0.4"/> hygiene factors i suppose <pause dur="0.5"/> # <pause dur="1.0"/> what you will have from me <pause dur="0.6"/> is and from <gap reason="name" extent="1 word"/> is a timetable <pause dur="0.8"/> with <pause dur="0.2"/> # a set of readings <pause dur="0.5"/> # with a set of lecture notes <pause dur="0.4"/> with a set of case studies <pause dur="0.5"/> with the allocation of of case studies to individual groups <pause dur="0.2"/> # <pause dur="0.4"/> can i <pause dur="0.7"/> check that <pause dur="0.2"/> you're all in agreement with that <pause dur="0.5"/> okay <pause dur="0.6"/> so you will <pause dur="0.3"/> you will have everything from us except <pause dur="0.5"/> answers to case studies or an interpretation of case studies which we <pause dur="0.4"/> will give you after the lectures <pause dur="0.8"/> i have <pause dur="0.3"/> from <gap reason="name" extent="1 word"/> <pause dur="1.4"/> a set <pause dur="0.7"/> of <pause dur="0.8"/> economic models macroeconomic models <pause dur="1.0"/> # on a set of disks <pause dur="0.4"/> now <gap reason="name" extent="1 word"/> has prepared two disks <pause dur="0.6"/> for each <pause dur="0.2"/> syndicate group <pause dur="0.6"/> he said he was not

prepared to sit there and knock out about <pause dur="0.2"/> eighty or <trunc>s</trunc> # sixty-odd disks <pause dur="0.3"/> so basically each group <pause dur="0.3"/> will get two disks <pause dur="0.3"/> and it will be up to you to <pause dur="0.3"/> share and interchange those <pause dur="0.2"/> # with the other <pause dur="0.2"/> members of the group <pause dur="0.4"/> i've also got # a single sheet of of observations from <gap reason="name" extent="1 word"/> <pause dur="0.7"/> on the model that's <trunc>i</trunc> contained in the disks <pause dur="0.4"/> now <pause dur="0.2"/> his <pause dur="0.2"/> comment to me was <pause dur="0.4"/> one apologize that he wasn't here <pause dur="0.5"/> today but also <pause dur="0.4"/> to suggest <pause dur="0.4"/> that you might look <pause dur="1.1"/> in addition to the primer which you've got <pause dur="0.5"/> you might look at the model <pause dur="1.2"/> prior to the week <pause dur="0.2"/> <trunc>b</trunc> week two <pause dur="0.7"/> because the model actually is an input-output analysis <pause dur="1.4"/> is based on a set of assumptions about relationships <pause dur="0.5"/> # <pause dur="0.4"/> and you may wish to look <pause dur="0.8"/> to test some of those assumptions by just playing with the model <pause dur="0.5"/> as a spreadsheet model <pause dur="0.3"/> and changing some of the variables to see what actually happens <pause dur="0.2"/> # and that will for particularly for those <pause dur="0.4"/> who have less experience or no experience in economics <pause dur="0.4"/> # that might be quite a good idea to to <pause dur="0.2"/> do with <pause dur="0.4"/> # reading

# the primer <pause dur="0.8"/> okay <pause dur="1.3"/> any sort of <pause dur="0.2"/> questions or issues or uncertainties at this stage <pause dur="0.9"/> they will probably come thick and fast later <pause dur="2.3"/> right let me just mention # assessments <pause dur="1.2"/> now <pause dur="0.7"/> the assessment is based <pause dur="0.6"/> on <pause dur="0.7"/> a term paper <pause dur="0.8"/> that's eighty per cent <pause dur="0.2"/> of the assessment <pause dur="1.1"/> now i will talk in detail about that next week 'cause i don't want to spend <pause dur="0.4"/> the whole of this sort of introduction talking about just the the <pause dur="0.5"/> # <pause dur="0.9"/> the admin <pause dur="0.3"/> but <pause dur="0.3"/> essentially <pause dur="0.3"/> you <pause dur="0.4"/> have been given <pause dur="0.7"/> in groups <pause dur="0.6"/> # an industry sector <pause dur="1.1"/> # it maybe pharmaceuticals <pause dur="1.1"/> within that sector and within the group i have allocated individually <pause dur="0.7"/> a company <pause dur="0.5"/> to each one of you <pause dur="1.3"/> and what you are asked to do <pause dur="0.8"/> is to look <pause dur="0.4"/> at the nature of <pause dur="0.2"/> the past <pause dur="0.2"/> present and future environment <pause dur="0.6"/> you needn't write this down because it's all in the the the <pause dur="0.2"/> the document i've given you <pause dur="0.8"/> and look at how it has changed <pause dur="0.5"/> what are the key changes in that environment what are the key drivers <pause dur="0.7"/> and then to take a view on how well or badly <pause dur="0.8"/> the company <pause dur="0.5"/> has

recognized <pause dur="0.2"/> adapted and responded <pause dur="0.4"/> to those environmental changes <pause dur="1.2"/> now what i have said <pause dur="0.7"/> is that <pause dur="0.4"/> as a group <pause dur="1.5"/> we would like you to analyse <pause dur="0.5"/> the nature of that industry <pause dur="0.2"/> that sector <pause dur="0.9"/> i don't i think it's stupid for me particularly <trunc>gi</trunc> given that you have <pause dur="0.2"/> limited time <pause dur="0.4"/> and i i did a a three year part-time degree at London Business School <pause dur="0.4"/> so i know how difficult it is to sort of match the trinity of life <pause dur="0.7"/> you know and everything else <pause dur="0.4"/> # <pause dur="0.3"/> and also to sort of switch out of M-B-A <pause dur="0.3"/> mode when you go back and meet <pause dur="0.2"/> human beings <pause dur="0.4"/> so i have some considerable sympathy to that <pause dur="0.5"/> but that sympathy doesn't extend <pause dur="0.4"/> to the <pause dur="0.3"/> the the extent of saying well <pause dur="0.7"/> i don't expect them to exercise intelligence effort <pause dur="0.2"/> or creativity <pause dur="0.4"/> so <pause dur="0.3"/> i have some leeway but only just <pause dur="0.5"/> but in that case what i have said <pause dur="0.6"/> is <pause dur="0.3"/> that <pause dur="0.6"/> it is just stupid <pause dur="0.6"/> for a group <pause dur="0.5"/> each <pause dur="0.2"/> to go and use exactly the same resources <pause dur="0.9"/> so <pause dur="0.3"/> as a group <pause dur="0.6"/> you may wish <pause dur="0.2"/> to share <pause dur="1.5"/> the analysis of the industry <pause dur="0.9"/> someone <trunc>el</trunc> may get the keynote # reports <pause dur="0.4"/> someone else

may look at data stream <pause dur="0.4"/> someone else may do a literature view you come together you share the data say we think this is material <pause dur="0.4"/> and work that way i survived an M-B-A <pause dur="0.3"/> a family and a job <pause dur="0.2"/> purely by by working with # a group of mates <pause dur="0.3"/> where we sorted out <pause dur="0.4"/> # the competences of each of us the time of each of us and sort of divvied up the work <pause dur="0.7"/> in terms of the presentation of the final paper that <pause dur="0.2"/> is an individual <pause dur="0.6"/> piece of work <pause dur="0.3"/> and must be handed in <pause dur="0.3"/> as such <pause dur="0.7"/> so and that you know you <pause dur="0.8"/> you can commit serial murder at Warwick <pause dur="0.5"/> but plagiarism <pause dur="0.5"/> is beyond limits <pause dur="0.6"/> so <pause dur="0.3"/> in terms of the final piece of work it's your own <pause dur="0.2"/> okay <pause dur="0.7"/> twenty per cent <pause dur="0.5"/> of the marks <pause dur="1.0"/> is allocated <pause dur="0.4"/> to group performance <pause dur="1.5"/> now <pause dur="0.7"/> i hate that because what the hell do you mean by group performance some of you <pause dur="0.3"/> will give stunning presentations <pause dur="1.3"/> completely content free <pause dur="1.1"/> other people will stutter through <pause dur="0.3"/> an inarticulate <pause dur="0.2"/> but well thought out <pause dur="0.4"/> analysis <pause dur="0.3"/> and most of you will be in the middle <pause dur="1.2"/> the only reason <pause dur="0.7"/> we allocate that twenty

per cent <pause dur="0.9"/> is <pause dur="0.2"/> so that you don't take a game theory response and say <pause dur="0.3"/> if it isn't marked then we won't do it <pause dur="0.5"/> or <pause dur="0.3"/> we'll do it but we'll only do it sufficiently to say well you know we did look at the case study <pause dur="0.4"/> like three minutes in the car park before we came in <pause dur="0.6"/> now that's horrendously boring for me and no one else learns from that either <pause dur="0.3"/> so we give you twenty per cent of the marks <pause dur="0.2"/> so there is a weighting <pause dur="0.7"/> # on that but the major weighting is is the term paper <pause dur="0.3"/> okay <pause dur="0.8"/> # <pause dur="0.3"/> now if there are any queries on that i i'd rather <pause dur="0.5"/> deal with them next week particularly as # half of you have been to the library and half have still to go is that right <pause dur="1.1"/> is that <pause dur="0.3"/> yeah <pause dur="0.5"/> so <pause dur="0.4"/> i think it'd be better once you've actually all <pause dur="0.2"/> # been through the library system <pause dur="1.1"/> okay <pause dur="0.5"/> in terms of readings <pause dur="0.5"/> # <pause dur="0.2"/> <gap reason="name" extent="1 word"/> has given you <pause dur="0.2"/> a reading Nellis and Parker <pause dur="0.6"/> he has also given you # # # a standard # economics book <pause dur="0.5"/> if you wish to delve into it <pause dur="1.4"/> but it's not # a core book <pause dur="0.5"/> # <pause dur="0.3"/> i've used # this <pause dur="2.2"/> document here Grant <pause dur="1.1"/><kinesic desc="holds up book" iterated="n"/> # <pause dur="0.4"/> Grant <pause dur="0.2"/> is <pause dur="0.2"/>

certainly from the sort of economics tradition <pause dur="0.4"/> but i should stress <pause dur="0.2"/> that i don't <pause dur="0.5"/> lecture out of Grant that will become <pause dur="0.3"/> quite clear i suspect <pause dur="0.4"/> # in about <pause dur="0.2"/> twenty minutes <pause dur="0.4"/> but <pause dur="0.7"/> it it's no use saying what chapter <pause dur="0.8"/> are we on <pause dur="1.1"/> i mean i only will response will be how the hell should i know <pause dur="0.7"/> # <pause dur="0.3"/> so you know <pause dur="0.3"/> it is a useful book it is well written <pause dur="0.4"/> # and it's it's it's very timely <pause dur="0.5"/> and so it's the sort of <pause dur="0.5"/> it's the <trunc>c</trunc> it's a foundation <pause dur="1.1"/> of this course in one sense <pause dur="0.3"/> # <pause dur="0.3"/> it's also sort of you know <pause dur="0.3"/> if you want a worry object here's a worry object <pause dur="0.2"/> in another sense <pause dur="0.4"/> if you prefer <pause dur="0.3"/> a less economics text <pause dur="1.0"/> # <pause dur="0.2"/> Johnson and Scholes Exploring Corporate Strategy <pause dur="0.6"/> # is extremely good <pause dur="0.5"/> # <pause dur="0.2"/> but i wasn't going to suggest otherwise half of you feel you must rush out and buy it <pause dur="0.4"/> but it <trunc>i</trunc> it is more from an O-B organizational behaviour side <pause dur="0.5"/> # than <kinesic desc="holds up book" iterated="n"/> this text <pause dur="0.3"/> but <trunc>thi</trunc> this is this is fairly <pause dur="0.6"/> or i think very accessible <pause dur="0.4"/> # as as a <pause dur="0.6"/> # for those that that aren't # economists <pause dur="1.5"/> okay <pause dur="0.2"/> # <pause dur="0.7"/> style assessment oh yeah <trunc>f</trunc>

just <pause dur="0.2"/> just finally <pause dur="1.4"/> # <pause dur="0.7"/> if you want to contact me <pause dur="0.9"/> i invariably <pause dur="0.5"/> # <pause dur="0.2"/> check <pause dur="0.2"/> my e-mail about six or eight times a day <pause dur="0.6"/> # <pause dur="0.2"/> and will come back to you <pause dur="0.3"/> by e-mail <pause dur="0.6"/> or you can take pot luck and phone me <pause dur="0.5"/> # <pause dur="0.5"/> my e-mail <pause dur="0.3"/> # i don't think i've put it there <pause dur="0.2"/> so let me put that down <pause dur="24.4"/><kinesic desc="writes on board" iterated="y" dur="17"/> okay <pause dur="0.3"/> <gap reason="name" extent="1 word"/>-dot-<gap reason="name" extent="1 word"/>-<gap reason="name" extent="1 word"/>-<pause dur="0.3"/>A-C-U-K <pause dur="0.5"/> # i will do my best to come back if # <pause dur="1.4"/> i'm here <pause dur="0.5"/> and i'm here most <trunc>o</trunc> of this # term <pause dur="1.2"/> but please if you have a query <pause dur="1.1"/> ask me but <pause dur="0.3"/> but do read the notes first <pause dur="0.4"/> okay or do read the introductions first <pause dur="0.4"/> i will may be sort of <pause dur="0.4"/> more terse <pause dur="0.5"/> # if you ask me you know what # <pause dur="0.6"/> what subject's being studied in week three <pause dur="0.2"/> so <trunc>ju</trunc> just have a <pause dur="0.2"/> sort of look at the stuff first but if there's a # any queries <pause dur="0.3"/> or any genuine # <pause dur="0.4"/> well <pause dur="0.7"/> any misunderstandings 'cause obviously if you think it's a misunderstanding it's genuine <pause dur="0.5"/> so if there are any queries and i'm sure <pause dur="0.4"/> <gap reason="name" extent="1 word"/> will extend the same sort of invitation to you <pause dur="0.4"/> # but i'll <trunc>l</trunc> and i'll remind him but

# <pause dur="0.5"/> i'll leave him to do that next week <pause dur="0.6"/> okay <pause dur="1.0"/> right <pause dur="0.8"/> any other any sort of issues or anything at the moment <pause dur="2.4"/> fine <pause dur="1.6"/> okay <pause dur="1.5"/> let's <pause dur="0.3"/> start <pause dur="0.7"/> the lecture now i would hope to <pause dur="0.7"/> finish <pause dur="0.3"/> # <pause dur="0.9"/> can someone remind me <pause dur="1.2"/> at ten to eight <pause dur="0.3"/> so just <pause dur="0.2"/> <trunc>wa</trunc> just wave at me i forgot to set my <pause dur="0.2"/> alarm <pause dur="0.2"/> okay <pause dur="0.7"/> # <pause dur="8.1"/> let's <trunc>sta</trunc> <pause dur="7.4"/> well <pause dur="0.3"/> i should yes my wife's in teaching she comes from the sort of democratic end <pause dur="0.5"/> of # the spectrum <pause dur="0.7"/> # <pause dur="0.5"/> so let me ask you <pause dur="0.2"/> # <pause dur="0.2"/> normally i <pause dur="0.4"/> wouldn't have done but # she tends to know more on these things than i do <pause dur="1.1"/> if i do all the talking <pause dur="1.0"/> my voice goes more quickly <pause dur="1.1"/> and i don't learn anything <pause dur="1.5"/> if you do more talking i learn <pause dur="0.4"/> and you also gain more confidence <pause dur="0.7"/> now <pause dur="0.5"/> i can either sort of pause <pause dur="0.3"/> and let <pause dur="1.1"/> you come back to me with various questions or queries <pause dur="0.3"/> or observations or illustrations <pause dur="1.3"/> or i can actually say <pause dur="0.6"/> what do you think <pause dur="1.1"/> now if i pause <pause dur="0.9"/> i suspect what will happen <pause dur="1.2"/> is that <pause dur="0.4"/> a white <pause dur="0.6"/> Anglo-Saxon male <pause dur="0.8"/> will be the first one the second one the third one the fourth one to respond <pause dur="0.8"/> it tends to <trunc>th</trunc> there tend

to be a small group <pause dur="0.5"/> in any class that do most of the responding sort of eighty-twenty rule <pause dur="0.8"/> now that often gets very tedious for everyone else <pause dur="0.3"/> 'cause <pause dur="0.3"/> you can see that look of oh God why doesn't he shut up <pause dur="0.3"/><vocal desc="laughter" iterated="y" n="ss" dur="1"/> you know <pause dur="0.4"/> so <pause dur="0.8"/> you can play it either way i can sort of leave you to respond <pause dur="0.6"/> or i can sort of <pause dur="0.2"/> try and introduce people <pause dur="0.3"/> to respond and # i should look immediately the <pause dur="0.3"/> the people in the top row get nervous 'cause i will be quite random but <pause dur="0.3"/> i do tend to sort of not <pause dur="0.2"/> go to the first row first <pause dur="0.4"/> so what would you prefer what would be equitable or reasonable or enjoyable </u><pause dur="2.2"/> <u who="sf1131" trans="pause"> <gap reason="inaudible" extent="1 sec"/> </u><u who="nm1127" trans="pause"> sorry </u> <u who="sf1131" trans="overlap"> <gap reason="inaudible" extent="1 sec"/> </u><pause dur="1.6"/> <u who="sm1132" trans="pause"> victimization </u><u who="nm1127" trans="latching"> what victimization </u><u who="sm1132" trans="overlap"> <gap reason="inaudible" extent="1 sec"/> <vocal desc="laughter" iterated="y" n="ss" dur="2"/></u><u who="nm1127" trans="latching"> <vocal desc="laugh" iterated="n"/> who said victimization </u><u who="sf1133" trans="overlap"> no </u><pause dur="0.7"/> <u who="nm1127" trans="pause"> guess who's going to be first <vocal desc="laughter" iterated="y" n="sl" dur="1"/><pause dur="0.3"/> okay <pause dur="0.4"/> well but <pause dur="0.3"/> it's victimization on one who # what else eh </u><u who="sf1134" trans="overlap"> combination of both </u><u who="nm1127" trans="latching"> combination of both <pause dur="0.2"/> okay <pause dur="0.2"/> yeah <pause dur="1.4"/> right <pause dur="1.3"/> let's start <pause dur="4.0"/><kinesic desc="turns on overhead projector showing transparency" iterated="n"/> okay now <pause dur="0.5"/> because we've actually got someone using a <pause dur="1.9"/> is it eight

millimetre camcorder whatever it is <pause dur="0.6"/> # <pause dur="1.5"/> i will <pause dur="0.5"/> i i'll keep the lights on if that's that's clear <trunc>f</trunc> <pause dur="0.2"/> for you <pause dur="0.3"/> okay <pause dur="1.0"/> # <pause dur="1.3"/> i'll talk later about # <pause dur="0.3"/> # does <trunc>any</trunc> has anyone seen these i think it's called # they're produced by Diamond Corp <pause dur="0.5"/> these hot-wired walkmen where you can download <pause dur="0.5"/> # music off the the net <pause dur="0.6"/> on an hour's music <pause dur="0.5"/> # on integrated circuitry <pause dur="0.6"/> # <pause dur="0.6"/> and you it's <pause dur="0.2"/> there's no moving parts whatsoever <pause dur="0.2"/> and then <pause dur="0.4"/> you go back to a jukebox on your P-C <pause dur="0.4"/> take another lot down from the net <pause dur="0.5"/> and and then run with that anyone seen those <pause dur="0.7"/> well the the guy who was showing me was a guy from H-M-V <pause dur="0.5"/> who was a was a student here last year <pause dur="0.5"/> # and he was particularly interested in <pause dur="0.2"/> some of the the work i was doing on technology and new start-ups <pause dur="0.5"/> and <pause dur="0.7"/> H-M-V calculate that there are eighty-<pause dur="0.3"/>thousand <pause dur="0.8"/> pirate <pause dur="0.3"/> Internet sites <pause dur="0.4"/> at the moment <pause dur="0.6"/> you know playing their music <pause dur="0.9"/> # <pause dur="0.4"/> and that this stuff <pause dur="0.2"/> can be downloaded <pause dur="0.4"/> totally seamlessly <pause dur="0.8"/> and <pause dur="0.3"/> repeated ad nauseam <pause dur="0.6"/> so

we we were having a very sort of interesting discussion about <pause dur="0.4"/> how technology <pause dur="0.6"/> will actually change <pause dur="0.6"/> his business and his job because the <unclear>outcome of the thing</unclear> of course is Amazon <pause dur="0.5"/> is going into # <pause dur="0.8"/> records in a much bigger way than it has in the past and C-D Now <pause dur="0.5"/> # is one of the biggest record stores in the world and is again is a virtual record <pause dur="0.3"/> store but <pause dur="0.3"/> it's it's one of the areas we'll be talking in i think in week four about the the disruptive nature <pause dur="0.3"/> of technology but it's nice to actually <pause dur="0.3"/> teach it to one group <pause dur="0.4"/> and then actually have one of your your past students coming back and <pause dur="0.3"/> then at the end with a sort of quivering lip say <pause dur="0.4"/> but what the hell do we do <vocal desc="laughter" iterated="y" dur="1"/><pause dur="0.6"/> anyway <pause dur="0.5"/> that's a complete aside <pause dur="0.7"/> # <pause dur="1.2"/> on to the real world <pause dur="0.9"/> i thought i would start <pause dur="0.5"/> the <pause dur="0.4"/> the <pause dur="0.4"/> session by <pause dur="1.1"/> a quote by by Charles Handy because what we're we're looking at here <pause dur="0.9"/> as Grant says we're looking at that link <pause dur="0.8"/> between <pause dur="0.4"/> the environment <pause dur="0.8"/> and the firm <pause dur="1.1"/> and that link <pause dur="0.7"/> in Grant's terms <pause dur="0.3"/> is

what he calls strategy now there's hundreds of definitions <pause dur="0.6"/> but <pause dur="0.2"/> what <pause dur="1.6"/> Charles said was essentially <pause dur="2.2"/> what <pause dur="0.2"/> people don't look at <pause dur="0.5"/> is the nature <pause dur="0.2"/> of the prevailing <pause dur="0.5"/> environment the outside of the organization <pause dur="0.5"/> now i've seen this <trunc>ce</trunc> certainly talking to <pause dur="0.4"/> a number of organizations <pause dur="0.4"/> and you would ask them to explain what they're doing <pause dur="1.0"/> and you will get <pause dur="0.4"/> you will get the politics you will get the internal rivalries you'll get the <pause dur="0.4"/> the products sometimes you get customers you will rarely get an analysis <pause dur="0.4"/> of the <sic corr="context">constext</sic> of the competitive <pause dur="0.3"/> environment <pause dur="0.4"/> in which they operate <pause dur="0.4"/> and it seems to me in many cases that is the first thing that you actually talk about <pause dur="0.4"/> before you talk about the firm <pause dur="0.7"/> now it's interesting i mean <pause dur="0.2"/> this <trunc>i</trunc> this is Charles Handy talking about this <pause dur="0.5"/> this is a guy <pause dur="0.8"/> who is an O-B man <pause dur="1.3"/> you know he's he the the whole stuff of Charles' reputation <pause dur="0.8"/> is that he looks at the sort of <pause dur="0.3"/> the dynamics of firms how people relate within those

firms <pause dur="0.4"/> the natures of tensions the nature of resolutions <pause dur="0.5"/> but what he's saying is that <pause dur="0.3"/> that may be my professional métier <pause dur="0.8"/> but what is really really important <pause dur="0.3"/> is how the outside <pause dur="0.4"/> how the the environment is changing <pause dur="0.3"/> now <pause dur="0.2"/> this <trunc>i</trunc> this is this is <pause dur="0.3"/> Charles on the road to Damascus i mean <pause dur="0.4"/> this guy <pause dur="0.7"/> i always think has a enormous advantage because if you listen to Thought for the Day <pause dur="0.7"/> he sounds like God <pause dur="1.1"/> and then when you meet him <pause dur="0.2"/> you know <pause dur="0.4"/> elderly white hair <pause dur="0.3"/> white Anglo-Saxon WASP <pause dur="0.4"/> he looks like God so at least in Michelangelo's sense so he's got a lot going for him <pause dur="0.4"/> you can see from the charge up rates <pause dur="3.3"/><kinesic desc="changes transparency" iterated="y" dur="2"/> what i'm going to be looking at <pause dur="1.1"/> in the simplest form <pause dur="0.8"/> is <pause dur="0.7"/> really <pause dur="1.0"/> the levels of the environment <pause dur="1.3"/> that we need to understand that we need to analyse <pause dur="0.4"/> because it's rather like <pause dur="0.4"/> like an onion you know you <pause dur="0.3"/> you sort of peel this thing through various layers <pause dur="0.4"/> in order to understand the macroenvironment <pause dur="0.4"/> # <pause dur="0.4"/> the why the the operating environment and in the internal

environment so we'll talk about those in a in a wee while <pause dur="0.3"/> we'll look at competitive forces and i presume you've done this in the the marketing courses looked at things like # <pause dur="0.4"/> Porter's five forces is that right </u><u who="ss" trans="latching"> mm </u><u who="nm1127" trans="latching"> who did you do it with </u><pause dur="0.6"/> <u who="sm1135" trans="pause"> with <gap reason="name" extent="1 word"/> <gap reason="inaudible" extent="1 sec"/></u><u who="nm1127" trans="overlap"> <gap reason="name" extent="1 word"/> right <pause dur="0.2"/> okay <pause dur="0.6"/> i might put a spin on that and see how we go 'cause <pause dur="0.2"/> as a strategist i tend to see it differently from from the marketing guys <pause dur="0.3"/> in some cases but if i don't then i won't waste your time <pause dur="0.3"/> or my my my time <pause dur="0.3"/> reiterating <pause dur="1.0"/> we'll look briefly at value chains <pause dur="0.4"/> and then finally # <pause dur="0.3"/> at what i call a sort of an anti-panic <pause dur="0.2"/> acronym <pause dur="0.6"/> # <unclear>MACOCOTREES</unclear> and <unclear>MACOCOTREES</unclear> was something that <pause dur="0.4"/> # my group # at London Business School developed <pause dur="0.7"/> in order to survive this damned thing we called an M-B-A <pause dur="0.2"/> so it was <pause dur="0.3"/> it was a heuristic to try and actually <pause dur="0.4"/> encapsulate <pause dur="0.4"/> some of the issues we needed to look at when we were looking at a case study so i'll i'll explore that <pause dur="0.4"/> and we we might well use that in some of

the case studies <pause dur="3.5"/><kinesic desc="changes transparency" iterated="y" dur="5"/> i think one of the <pause dur="0.2"/> the <pause dur="0.6"/> the <pause dur="0.2"/> things i most enjoy <pause dur="1.7"/> when <pause dur="1.4"/> looking at companies <pause dur="1.8"/> is when things go wrong <pause dur="0.2"/> now it's not enjoyable for you if you're in the company <pause dur="0.5"/> but as a researcher <pause dur="0.5"/> it is much more interesting looking at failure <pause dur="0.9"/> than it is at success <pause dur="0.6"/> and there is also a rather pleasant schadenfreude <pause dur="0.3"/> at looking at the sort of pillars of industry <pause dur="0.3"/> when they fall flat on their faces <pause dur="0.3"/> and so i've put up # a number <pause dur="0.6"/> of <pause dur="0.5"/> areas <pause dur="1.3"/> where <pause dur="1.0"/> there have been concerns discontinuities <pause dur="0.3"/> cock-ups whatever you want to call them <pause dur="0.6"/> i mean in terms of health and safety issues <pause dur="0.3"/> the agrifood industry <pause dur="0.5"/> the the B-S-E crisis <pause dur="0.4"/> was abysmally <pause dur="0.4"/> handled <pause dur="0.8"/> as a crisis <pause dur="0.6"/> it was abysmally handled in terms of <pause dur="0.7"/> an understanding of the outcome <pause dur="0.5"/> and implications <pause dur="0.9"/> of <pause dur="0.4"/> # <pause dur="0.4"/> having basically an adulteration in the in the food chain i mean i i started my life as a food scientist so i'm <pause dur="0.4"/> quite interested in this area <pause dur="0.3"/> and it's not fair to say well we didn't know how <pause dur="0.4"/> important it was <pause dur="0.7"/> at that stage <pause dur="0.2"/> any understanding any

stepping back <pause dur="0.7"/> and looking at the probabilities and the outcomes <pause dur="0.7"/> and the <pause dur="0.2"/> <trunc>politi</trunc> the <trunc>prow</trunc> profound political costs of say an outlier <pause dur="0.2"/> that this thing could be <pause dur="0.4"/> # contaminate the food chain <pause dur="0.7"/> might have taken <pause dur="0.5"/> you to to take a very different view to that taken by <pause dur="0.4"/> # the Conservative government at that particular time <pause dur="1.1"/> an area which perhaps is is more near to home in <pause dur="0.2"/> in terms of <pause dur="1.1"/> ethical issues but also <pause dur="0.4"/> within the food industry <pause dur="0.4"/> is someone like <trunc>monsan</trunc> Monsanto <pause dur="1.3"/> now <pause dur="0.5"/> Monsanto is a company that's sort of <pause dur="0.4"/> from a # an American tradition <pause dur="0.6"/> there is not the hassle in America about genetically modified food <pause dur="1.5"/> but there is a profound concern <pause dur="0.9"/> within Europe <pause dur="0.8"/> and <vocal desc="laugh" iterated="n"/><pause dur="0.6"/> unlike <pause dur="0.2"/> either Labour or the Conservative Party i do consider <pause dur="0.6"/> Britain to be part of Europe <pause dur="0.3"/> most of the time <pause dur="1.2"/> and you have a situation there <pause dur="1.2"/> where <pause dur="1.6"/> quite literally <pause dur="1.6"/> a major <pause dur="0.3"/> pharmaceutical company <pause dur="1.6"/> and the distributing food chain <pause dur="1.1"/> # through the multiples <pause dur="0.2"/> said <pause dur="0.5"/> we are putting <pause dur="1.1"/> # <pause dur="0.5"/> modified soya <pause dur="0.9"/> within food products <pause dur="1.4"/> and it is

not <pause dur="0.5"/> possible <pause dur="0.6"/> to determine <pause dur="0.5"/> which products have it in <pause dur="0.5"/> so basically <pause dur="0.3"/> that's it lads <pause dur="0.3"/> that's you know it's there <pause dur="0.4"/> and you've got it <pause dur="1.0"/> now <pause dur="0.6"/> while that may have been accepted in America <pause dur="0.6"/> if you look at that and then become surprised <pause dur="0.6"/> that there was <pause dur="0.4"/> a campaign of almost sort of hate <pause dur="0.3"/> against Monsanto <pause dur="0.9"/> i mean i'm not at all surprised and i was all i found <pause dur="0.3"/> was at that time the stunning <pause dur="0.7"/> the absolutely stunning arrogance <pause dur="0.4"/> for someone to say we can adulterate your food <pause dur="0.5"/> # but no we can't tell you <pause dur="0.7"/> where or how <pause dur="0.6"/> and so don't be surprised <pause dur="0.3"/> when Monsanto has to publicly and very visibly <pause dur="0.5"/> retract <pause dur="0.5"/> from an untenable position <pause dur="0.5"/> now again the question is <pause dur="0.4"/> was that completely out of the blue <pause dur="0.8"/> could no one have actually envisaged <pause dur="0.4"/> anything like that outcome <pause dur="0.3"/> happening were they just <pause dur="0.2"/> jolly unlucky <pause dur="0.4"/> or was this some kind of hubris <pause dur="0.5"/> built <trunc>i</trunc> brought on because <pause dur="0.3"/> basically we're technologists technocrats <pause dur="0.3"/> and we know what's better for you guys <pause dur="0.5"/> you know the Americans enjoy it <pause dur="0.3"/> so why don't you <pause dur="0.4"/> # <pause dur="0.2"/> i mean <pause dur="0.6"/> i'm not

trying to make sort of cheap political points but it's it's really very <pause dur="0.5"/> interesting <pause dur="0.6"/> that they got to that stage i mean <pause dur="1.5"/> we had # a friend of mine <pause dur="1.3"/> # is the the head of Greenpeace <pause dur="0.7"/> # <pause dur="0.4"/> and Peter Melchett has come here on two or three occasions <pause dur="0.4"/> to actually talk to to the students <pause dur="0.3"/> # <pause dur="0.3"/> <shift feature="voice" new="laugh"/>that's <shift feature="voice" new="normal"/> <pause dur="0.4"/> it's quite an interesting reaction when you say he's a mate because <pause dur="0.4"/> i was in Iceland # advising <pause dur="0.2"/> # the government <pause dur="0.3"/> small but perfectly formed country and it's got some great glaciers <pause dur="0.5"/> # <pause dur="0.3"/> and i said you know i Peter's a friend of mine and and <pause dur="0.5"/> they didn't say anything they just <pause dur="0.6"/> we were in a restaurant and someone said something in Icelandic <pause dur="0.2"/> which is <pause dur="0.5"/> you know <pause dur="0.2"/> a language shared by two-hundred-and-seventy-thousand people <pause dur="0.3"/> and the next thing i had # a plate of raw whale meat <pause dur="0.5"/> # in <shift feature="voice" new="laugh"/>front of me <shift feature="voice" new="normal"/><vocal desc="laughter" iterated="y" n="ss" dur="1"/><pause dur="0.6"/> which i thought was a fairly loaded response to to that # <pause dur="0.3"/> <trunc>beha</trunc> to my comment <pause dur="0.5"/> # <pause dur="1.8"/> the <trunc>li</trunc> in this actual room two two Norwegians and said the wonderful classic phrase <pause dur="0.4"/> what is so wrong about

killing minky whales and and to see the sort of head of Greenpeace virtually go through the ceiling before coming <shift feature="voice" new="laugh"/>down <shift feature="voice" new="normal"/><pause dur="0.4"/> and sort of killing all in his path <pause dur="0.3"/> # <pause dur="1.1"/> the interesting thing there <pause dur="0.6"/> is actually the Shell <pause dur="0.4"/> Brent Spar <pause dur="0.4"/> episode <pause dur="0.8"/> because again you've got a situation <pause dur="0.2"/> where it really went horribly wrong <pause dur="0.4"/> in terms of how people reacted <pause dur="0.4"/> in that environment vis-à-vis <pause dur="0.3"/> how <pause dur="0.2"/> people thought the system was going to be managed <pause dur="0.6"/> and there were actually errors on both sides and you may well say hang on <pause dur="0.4"/> but Greenpeace got it completely wrong on the technology <pause dur="0.5"/> and that is almost irrelevant <pause dur="0.4"/> in terms of the nature of the issues <pause dur="0.4"/> # at large in that particular case <pause dur="0.2"/> whether or not Brent Spar <pause dur="0.3"/> could have safely been # dumped was not the issue the issue was <pause dur="0.5"/> if Brent Spar <pause dur="0.2"/> was dumped <pause dur="0.4"/> then there was something of the order of two-hundred other installations <pause dur="0.3"/> that could be dumped because there was a precedent <pause dur="0.4"/> and that was the nature of the fight <pause dur="0.3"/> and that was not the nature of the

battle <pause dur="0.4"/> that <pause dur="0.2"/> # that Shell thought it was fighting <pause dur="1.2"/> Shell actually thought it was fighting <pause dur="0.4"/> a technical set of issues <pause dur="0.2"/> a cost benefit <pause dur="0.6"/> and in that sense <pause dur="0.6"/> because they're <trunc>techs</trunc> i my my twin brother is <pause dur="0.2"/> chief <trunc>hydrogra</trunc> graphic <pause dur="0.3"/><vocal desc="whistle" iterated="n"/><pause dur="0.2"/> chief hydrographic surveyor in B-P <pause dur="0.3"/> i mean <pause dur="0.4"/> you know these guys talk in technology <pause dur="0.6"/> that's that's their métier it's a bit like <pause dur="0.3"/> if you go into a high-tech company like a high-tech software company <pause dur="0.4"/> these guys converse <pause dur="0.5"/> you know in digits <pause dur="0.4"/> you know <pause dur="0.4"/> they speak binary most of the time and probably machine code when they're being intimate so <pause dur="0.3"/> you know <pause dur="0.3"/> their their culture their language their their metaphors <pause dur="0.3"/> are all centred round <pause dur="0.3"/> their business <pause dur="0.6"/> and what they've done is get really very far away <pause dur="0.6"/> from the nature of the environment that is actually pertaining <pause dur="0.3"/> so what i'm saying in all of these <pause dur="0.3"/> is that <pause dur="1.7"/> essentially <pause dur="0.6"/> one has to say <pause dur="1.9"/> in all of these cases <pause dur="0.3"/> be it Japanese banks <pause dur="0.5"/> # be it Peter Mandelson or whatever <pause dur="0.7"/> you know were they

just jolly unlucky <pause dur="0.7"/> you know <pause dur="0.4"/> could it reasonably say <pause dur="0.4"/> that they couldn't have <trunc>expect</trunc> they couldn't have expected <pause dur="0.2"/> to see these coming out of the blue <pause dur="0.9"/> or conversely <pause dur="0.9"/> is there an argument to say the problem with organizations <pause dur="0.5"/> is that they become terribly incestuous <pause dur="0.8"/> that they become <pause dur="0.5"/> introvert <pause dur="0.4"/> by nature universities are no different departments M-S-M groups are no different <pause dur="0.5"/> and by being introvert <pause dur="0.6"/> they actually cease to see <pause dur="0.4"/> what's happening in their environment <pause dur="0.7"/> they cease to actually be cognisant of how that environment will change <pause dur="0.8"/> and <pause dur="0.3"/> the question <trunc>i</trunc> because <pause dur="1.0"/> if you don't believe if you think they've just been unlucky <pause dur="0.6"/> well <shift feature="voice" new="laugh"/>then we <shift feature="voice" new="normal"/> we can end the set of lectures now <pause dur="0.3"/> because <pause dur="0.4"/> it's you know # <pause dur="0.3"/> i worked in Africa for a time <pause dur="0.3"/> in Kiswahili <trunc>mu</trunc> Kiswahili <distinct lang="sw">Mungu <unclear>kipenda</unclear></distinct> <pause dur="0.5"/> you know it's the will of God <pause dur="0.5"/> # it's exogenous <pause dur="0.3"/> you know <pause dur="0.2"/> like the the # <pause dur="0.3"/> you know # lottery it could be you <pause dur="0.9"/> # and in these cases it <trunc>cou</trunc> it was them <pause dur="0.9"/> or you could actually take an alternative view <pause dur="0.9"/> and

say that <pause dur="0.3"/> the environment <pause dur="1.1"/> can be monitored <pause dur="0.6"/> it can be appraised <pause dur="0.4"/> however imperfectly <pause dur="0.8"/> that there are signs there are straws in the wind <pause dur="0.4"/> and one of the situations is <pause dur="0.2"/> how do we structure our environment <pause dur="1.0"/> so that we are open <pause dur="0.6"/> to those stimuli that we are open <pause dur="0.3"/> to those signals <pause dur="0.4"/> # <pause dur="0.4"/> i was with # <pause dur="1.0"/> the board of Volvo a couple of years ago <pause dur="1.0"/> and we're talking about corporate venturing <pause dur="0.4"/> and how they actually utilized <pause dur="0.4"/> very interesting innovations that weren't core to the business couldn't be used in a car or a truck <pause dur="0.4"/> but still had been created by their research departments and <pause dur="0.3"/> we talked about the the nature of entrepreneurs <pause dur="0.4"/> where entrepreneurs come and they they said well how do we find <pause dur="0.2"/> our entrepreneurs <pause dur="0.8"/> and i said well it <pause dur="0.3"/> it's actually quite simple <pause dur="0.4"/> they're almost invariably the guys who are troublemakers <pause dur="0.6"/> within your organization <pause dur="0.3"/> and your organization <pause dur="0.4"/> will spend most of its life <pause dur="0.2"/> trying to get rid of them in one form of castrating them gagging them <pause dur="0.4"/> sending them off to you

know Reykjavik # as their key respondent or whatever <pause dur="0.9"/> but ironically it is those guys that are most likely <pause dur="0.6"/> to <pause dur="0.8"/> be aware <pause dur="1.0"/> of fundamental changes within the organization <pause dur="0.7"/> because there's a whole literature <pause dur="0.7"/> on industry recipes <pause dur="0.7"/> # it comes out of Gerry Johnson or it's now called <pause dur="0.3"/> industry paradigms he's got more posh <pause dur="0.9"/> and what that says is that <pause dur="0.4"/> very often <pause dur="0.8"/> the nature <pause dur="0.2"/> of threat <pause dur="0.7"/> the nature of external environmental change <pause dur="0.5"/> is actually recognized <pause dur="0.3"/> within the organization <pause dur="1.1"/> the problem is that there are not systems <pause dur="1.1"/> that actually can incorporate that <pause dur="0.6"/> and work on it <pause dur="0.8"/> 'cause what you tend to have <pause dur="0.2"/> is <pause dur="0.9"/> say for example <pause dur="1.9"/> your your model <pause dur="0.3"/> has worked for several years <pause dur="2.0"/> and then <pause dur="0.5"/> starts <pause dur="0.2"/> not to work <pause dur="1.2"/> what do you do <pause dur="2.0"/> so what do you do </u><pause dur="2.7"/> <u who="sm1136" trans="pause"> change the model </u><pause dur="0.6"/> <u who="nm1127" trans="pause"> change the model <pause dur="0.8"/> is that what most of you would do </u><pause dur="0.6"/> <u who="sm1137" trans="pause"> find out why the <gap reason="inaudible" extent="1 sec"/> why the model's wrong </u><pause dur="1.3"/> <u who="nm1127" trans="pause"> find out why the model's wrong <pause dur="1.6"/> or what you might do <pause dur="1.2"/> i mean both are right <pause dur="0.6"/> but probably the first reaction <pause dur="0.8"/> remember that

most firms <pause dur="0.3"/> run on pretty <pause dur="0.3"/> profound orthodoxies <pause dur="0.9"/> you know most firms don't like change out of habit certainly not universities <pause dur="0.4"/> # you know we are the most conservative <pause dur="0.5"/> of all institutions i've ever worked in <pause dur="0.9"/> but normally when something goes wrong <pause dur="1.7"/> it's not the model that's challenged <pause dur="0.7"/> but the way that you've applied it <pause dur="1.0"/> it's worked for thirty years <pause dur="0.6"/> there's no reason why it should change <pause dur="0.4"/> we're not applying it properly we're not actually understanding the orthodoxy or what have you <pause dur="0.7"/> so what tends to happen <pause dur="0.9"/> if you take that view is what </u><pause dur="1.7"/> <u who="sm1138" trans="pause"> denial </u><pause dur="0.6"/> <u who="nm1127" trans="pause"> denial <pause dur="0.2"/> followed by </u><pause dur="2.0"/> <u who="sm1140" trans="pause"> rejection </u> <u who="sm1141" trans="overlap"> inaction </u><pause dur="0.4"/> <u who="nm1127" trans="pause"> sorry </u><pause dur="0.2"/> <u who="sm1140" trans="pause"> rejection </u><pause dur="0.3"/> <u who="nm1127" trans="pause"> not <trunc>re</trunc> no no normally <pause dur="0.4"/> rejection takes in large organizations you'll see this at Marks and Sparks at the moment i mean that Marks and Sparks haven't sort of thrown out completely <pause dur="0.3"/> the whole logic of their existence their buying patterns <pause dur="0.4"/> # their merchandising their marketing strategy et cetera <pause dur="0.3"/> they're questioning it like hell

at the moment <pause dur="0.8"/> but normally what happens <pause dur="0.5"/> is <pause dur="0.2"/> you apply it harder <pause dur="2.0"/> you know <pause dur="0.3"/> if we're wrong if we're not interpret it properly <pause dur="0.6"/> then <pause dur="0.6"/> you know <pause dur="0.4"/> the model's there <pause dur="0.2"/> let's really sort of <pause dur="0.3"/> you know <trunc>s</trunc> <pause dur="0.4"/> screw it down let's really apply the model rigorously <pause dur="0.7"/> so what you tend to get are recipes or industry recipes <pause dur="0.3"/> it may be <pause dur="0.8"/> you know it took a long time for Tesco's not to pile it high and sell it cheap <pause dur="0.8"/> even when the whole industry was moving towards <pause dur="0.3"/> enhanced value because <pause dur="0.3"/> the value was in our scarce time <pause dur="0.9"/> # <pause dur="0.8"/> so what happens generally and what the literature tends to show <pause dur="0.4"/> is that the model is applied more and more rigorously <pause dur="0.3"/> until it is patently obvious that it doesn't work any more <pause dur="0.9"/> and then what happens </u><pause dur="3.3"/> <u who="sm1142" trans="pause"> panic </u><pause dur="1.2"/> <u who="nm1127" trans="pause"> panic <pause dur="0.3"/> followed by </u><pause dur="2.7"/> <u who="sf1143" trans="pause"> <gap reason="inaudible" extent="1 sec"/> the theory isn't right </u><pause dur="1.5"/> <u who="nm1127" trans="pause"> no it <pause dur="0.3"/> <trunc>u</trunc> <pause dur="0.2"/> usually </u><u who="sm1144" trans="overlap"> <gap reason="inaudible" extent="1 sec"/></u><u who="nm1127" trans="overlap"> that sorry </u><u who="sm1144" trans="pause"> change <gap reason="inaudible" extent="1 sec"/> </u><u who="sm1144" trans="overlap"> <gap reason="inaudible" extent="1 sec"/> </u><u who="nm1127" trans="latching"> yeah <pause dur="0.2"/> usually that <pause dur="0.4"/> i mean <pause dur="0.7"/> if i <trunc>th</trunc> i # anyone watched the the <trunc>troj</trunc> or watched <pause dur="0.4"/> listened to the Trojan wars on Radio

Three over the over <pause dur="0.2"/> Christmas time <pause dur="0.3"/> <trunc>g</trunc> # <pause dur="0.3"/> if you want blood lust sort of i mean you know it's it's all there i mean you <trunc>s</trunc> you don't <pause dur="0.2"/> need to read Charles Handy <pause dur="0.3"/> but <pause dur="0.4"/> essentially there is bloodletting <pause dur="0.3"/> because <pause dur="0.3"/> if you change the model <pause dur="0.4"/> you actually need to change not just the model but but its champions <pause dur="0.5"/> you know <pause dur="0.3"/> you <pause dur="0.4"/> so what you <trunc>e</trunc> normally get is there is a clean sweep and you're you're seeing some of that actually happen <pause dur="0.3"/> even in the august chambers of Marks and Spencer's because <pause dur="0.5"/> the old guard <pause dur="0.2"/> cannot then <pause dur="0.4"/> be the new guard they cannot say well <pause dur="0.2"/> actually <pause dur="0.5"/> what we said for the last three years was a complete <pause dur="0.3"/> utter load of bollocks you know so <pause dur="0.4"/> but <pause dur="0.2"/> we've got a really good model now <pause dur="0.3"/> so it tends to be bloodletting <pause dur="0.3"/> # resignations you change your non-execs might change your auditors or various other things but <pause dur="0.3"/> there's usually very big signals <pause dur="0.3"/> that you're actually going to change and one of the issues <pause dur="0.5"/> is <pause dur="0.9"/> how well <pause dur="0.5"/> do people react to the unpleasant the unexpected

the unavoidable <pause dur="0.6"/> and what pressures work <pause dur="0.2"/> within the i mean organizations are like sort of # you know have <pause dur="0.3"/> huge buffering power <pause dur="0.4"/> to actually stop any change just look at I-B-M for years <pause dur="1.0"/> perpetuating a model that most people in the organization knew <pause dur="0.5"/> couldn't continue in that particular form <pause dur="1.0"/> so <pause dur="0.5"/> the # one of the issues about the environment of being aware of the environment <pause dur="0.3"/> is actually how do you sort of signal <pause dur="3.1"/><kinesic desc="changes transparency" iterated="y" dur="2"/> necessary and legitimate change <pause dur="2.9"/> as i say what we're going to do is <pause dur="0.2"/> is really recognize three levels of environment <pause dur="1.1"/> because <pause dur="2.2"/> when i look at your reports you will tend usually to to analyse the the environment first <pause dur="0.4"/> i'm much more interested <pause dur="1.1"/> if you're going to look at say # a retail company <pause dur="1.3"/> knowing what <pause dur="0.8"/> the the <pause dur="0.2"/> what the position of say <pause dur="0.2"/> Britain is <pause dur="0.2"/> within a business cycle <pause dur="1.6"/> what the situation is in terms of whether # <pause dur="0.8"/> the rate of growth of G-D-P is increasing or declining <pause dur="0.3"/> are we in recession so <pause dur="0.4"/> initially i need to

actually understand the wider <pause dur="0.4"/> economic and indeed often social and political environment <pause dur="0.7"/> before i actually look at the firm <pause dur="1.0"/> i mean if i'm looking at say high-tech firms <pause dur="2.0"/> it's really important that i understand <pause dur="0.3"/> how Europe <pause dur="0.8"/> understands those firms <pause dur="0.5"/> how America understands those firms <pause dur="0.3"/> and how the British government understands those firms <pause dur="0.3"/> if you're looking at <pause dur="0.4"/> new technology based firms <pause dur="0.5"/> without say understanding <pause dur="0.2"/> the new competitive White Paper <pause dur="0.2"/> which is a huge great document <pause dur="0.5"/> you really are not properly informed because there's a whole debate there about the financing of these firms <pause dur="0.4"/> there's a whole debate <pause dur="0.3"/> with the Bank of England and the Treasury <pause dur="0.4"/> about <pause dur="0.3"/> how we actually look <pause dur="0.4"/> at say options <pause dur="1.1"/> now options <pause dur="0.3"/> in the U-K is a dirty word it's what those <pause dur="0.2"/> bloody fat cats <pause dur="0.4"/> in public utilities have been privatized <pause dur="0.3"/> walk away with with doing damn all and taking your money and my money and so on <pause dur="0.5"/> in America options are a legitimate way <pause dur="0.6"/> particularly for young companies <pause dur="0.6"/> of <pause dur="0.4"/> rewarding <pause dur="0.2"/> key staff <pause dur="0.4"/>

who they can't afford to pay their going rate <pause dur="0.3"/> you know <pause dur="0.2"/> i'm only going to pay you sixty-thousand dollars <pause dur="0.4"/> but you're going to have a hundred-thousand options and i've sat in board meetings where we have gone through <pause dur="0.2"/> every member <pause dur="0.4"/> of staff down to the receptionists <pause dur="0.4"/> # not down but you know <pause dur="0.2"/> every grade of staff <pause dur="0.5"/> # from the the founders downwards <pause dur="0.4"/> and allocated options <pause dur="0.3"/> according to the subjective value <pause dur="0.6"/> of them to the business <pause dur="0.4"/> or a value of them <trunc>m</trunc> not being in the business <pause dur="0.5"/> and that seems to be an entirely <trunc>legit</trunc> legitimate <pause dur="0.4"/> and valuable way of rewarding <pause dur="0.3"/> people who are taking risk <pause dur="0.4"/> and it's a way that has been completely adulterated within the U-K now there's quite a lot of <pause dur="0.4"/> # work being done by # the Treasury <pause dur="0.5"/> to actually <pause dur="0.5"/> retrench from that position <pause dur="0.6"/> so <pause dur="0.3"/> if you're actually understanding how say <pause dur="0.3"/> high-tech young firms are working <pause dur="0.4"/> that's actually quite important to know <pause dur="0.4"/> so what i'm saying is <pause dur="0.9"/> look at the general environment <pause dur="0.5"/> then the <trunc>operate</trunc> the general environment is

the environment <pause dur="0.3"/> of <pause dur="0.4"/> basically the the wider economic <pause dur="0.3"/> # socio-economic environment <pause dur="0.4"/> the operating environment to me is looking at the industry and the sector <pause dur="0.7"/> and then the internal environment is the internal environment of the firm <pause dur="0.7"/><kinesic desc="changes transparency" iterated="y" dur="3"/> now what you would expect <pause dur="1.2"/> is to use <pause dur="0.9"/> a range of different instruments <pause dur="0.6"/> to analyse <pause dur="0.3"/> those particular areas <pause dur="0.6"/> # <pause dur="0.8"/> the Treasury model <pause dur="1.3"/> a macroeconomic model <pause dur="0.4"/> to understand <pause dur="0.6"/> the dynamics <pause dur="0.5"/> # of a business cycle <pause dur="0.2"/> to understand <pause dur="0.4"/> some of the issues <pause dur="0.2"/> of <pause dur="0.2"/> # you know the the <pause dur="0.9"/> harmonization of European currencies <pause dur="0.4"/> # the birth of <trunc>eu</trunc> euro <pause dur="0.3"/> <trunc>inci</trunc> has anyone actually # <pause dur="0.8"/> negotiated or charged in euros <pause dur="2.0"/> anyone has anyone you you have in what area </u><pause dur="0.7"/> <u who="sm1145" trans="pause"> buying engines from Germany </u><pause dur="0.3"/> <u who="nm1127" trans="pause"> yeah <pause dur="0.7"/> yeah <pause dur="1.1"/> and <pause dur="1.5"/> i mean you know i <pause dur="0.3"/> i was surprised just how <pause dur="0.2"/> natural it <pause dur="0.6"/> was you know i mean you know <trunc>s</trunc> <pause dur="0.4"/> 'cause quite often people have used ECUs <pause dur="0.2"/> # rather than deutschmarks <pause dur="0.6"/> # <pause dur="0.5"/> # anyone else <trunc>p</trunc> <trunc>ha</trunc> <pause dur="0.6"/> has it <trunc>affect</trunc> <pause dur="0.2"/> # anyone else <trunc>ha</trunc> actually had it mentioned

to them </u><pause dur="1.3"/> <u who="sm1146" trans="pause"> <gap reason="inaudible" extent="1 sec"/> </u><u who="nm1127" trans="latching"> in <trunc>wha</trunc> </u><pause dur="0.6"/> <u who="sf1147" trans="pause"> # </u><pause dur="0.7"/> <u who="nm1127" trans="pause"> <trunc>sor</trunc> </u><pause dur="0.3"/> <u who="sf1147" trans="pause"> <gap reason="inaudible" extent="2 secs"/> </u><u who="nm1127" trans="overlap"> </u><u who="nm1127" trans="overlap"> yeah </u><u who="sf1147" trans="overlap"> <gap reason="inaudible" extent="1 sec"/> </u><u who="nm1127" trans="latching"> yeah </u><u who="sf1147" trans="overlap"> and <pause dur="0.7"/> it's a matter of routine with dealing in finance when you look at <pause dur="0.6"/> currency such as dollar or deutschmark <pause dur="0.3"/> euro whatever it's interchangeable with sterling </u><u who="nm1127" trans="overlap"> yep </u><u who="sf1147" trans="overlap"> <gap reason="inaudible" extent="2 secs"/> </u><u who="nm1127" trans="latching"> yep <pause dur="0.4"/> yep <pause dur="0.9"/> i mean one # when you're actually doing your assessments one of the the <pause dur="3.2"/> it's i mean people have done it quite well i think i mean in in the in the past you used to get <pause dur="0.7"/> interest rates are important being the sort of macroeconomic contribution which is a bit like saying eating babies is wrong <pause dur="0.3"/> # <pause dur="0.3"/> so <pause dur="0.2"/> it <pause dur="0.2"/> you don't get any brownie points for that but <pause dur="0.3"/> you know actually understanding say in an area like pharmaceuticals or in retail <pause dur="0.3"/> what is what is the the # <pause dur="0.9"/> the harmonization of currencies and our <pause dur="0.2"/> our <pause dur="0.7"/> # being outside it as you're going to do <pause dur="0.3"/> in terms of # profitability purchasing and so on <pause dur="0.4"/> <trunc>o</trunc> of major companies <pause dur="0.2"/> so <pause dur="0.4"/> you know the macroeconomic dimension

which <gap reason="name" extent="1 word"/> will be talking about in great detail over the next three # <pause dur="0.3"/> three weeks <pause dur="0.4"/> # is critically important <pause dur="1.0"/> in <pause dur="0.5"/> i said you might use something like the the # Treasury model <pause dur="0.4"/> # <pause dur="1.3"/> you could use things like scenario planning <pause dur="0.2"/> # beloved <pause dur="0.2"/> # again of Shell <pause dur="0.3"/> now the whole issue of scenario planning is not to get it right but part of scenario planning <pause dur="0.8"/> is to think the unthinkable <pause dur="0.6"/> or think outside the frame <pause dur="0.6"/> to actually say <pause dur="0.4"/> look we do this <pause dur="0.6"/> but let's <pause dur="0.2"/> actually conceive <pause dur="0.8"/> doing something different <pause dur="0.7"/> i mean <pause dur="0.3"/> i remember you know <trunc>j</trunc> <pause dur="0.2"/> <trunc>j</trunc> when Jobs i mean when # Jobs # can be a fairly sort of noxious character by all accounts <pause dur="0.4"/> but the idea that you would actually have a computer <pause dur="1.1"/> on a desk <pause dur="1.9"/> managed by a manager <pause dur="1.3"/> which is so obvious to you guys <pause dur="0.5"/> but is was so stunning when that happened <pause dur="1.6"/> i mean you know <pause dur="0.4"/> you'd <pause dur="0.9"/> <trunc>w</trunc> the way data was managed was <pause dur="0.3"/> how many of you work with central processing departments <pause dur="0.2"/> data processing departments <pause dur="0.3"/> yeah <pause dur="0.2"/> i mean you go in there and say this is an urgent job and they <vocal desc="audible inbreath" iterated="n"/><pause dur="0.5"/>

you know <pause dur="0.3"/> and some kid half your age is telling you that you can't get it for two months <pause dur="0.4"/> and all you want is a i don't know histogram of sales by region or something you know and some bloody great machine is chugging in the background there <pause dur="0.5"/> and <pause dur="0.3"/> the the i mean the the <pause dur="0.4"/> the liberation <pause dur="0.7"/> # of Jobs and particularly the the the Macintosh at the time <pause dur="0.5"/> was absolutely seminal <pause dur="0.6"/> but it that was completely thinking outside the box <pause dur="0.6"/> # <pause dur="0.3"/> now that's <pause dur="0.2"/> you know scenario planning in in a different sense is <pause dur="0.3"/> is what if <pause dur="1.5"/> what if Microsoft <pause dur="0.8"/> is actually broken up like like the into the Baby Bells from A-T-and-T <pause dur="0.7"/> what if it completely loses <pause dur="0.5"/> # that # <pause dur="0.6"/> session <pause dur="0.3"/> # sorry that # <pause dur="0.6"/> # case <pause dur="1.2"/> in their Delphi techniques # forecasting models simulation <pause dur="0.9"/> pest analysis <pause dur="0.4"/> each of these may be one way <pause dur="0.3"/> an appropriate way or not <pause dur="0.2"/> of looking <pause dur="0.5"/> at the situation the Delphi technique very much looking at <pause dur="0.4"/> industry leaders industry specialists <pause dur="0.4"/> the the government's # <pause dur="2.1"/> # <trunc>s</trunc> <trunc>w</trunc> exercise

now what the hell's it called <pause dur="0.5"/> # <pause dur="0.2"/> not forecasting <pause dur="0.7"/> foresight <pause dur="0.6"/> exercise <pause dur="0.3"/> is actually based on the Delphi technique going along to a number of people in key sectors and saying <pause dur="0.4"/> how do you think it's going to change in the next five years <pause dur="0.4"/> and then reiterating that view <pause dur="0.3"/> to the other members of the panel <pause dur="0.3"/> and then coming back and the C-B-I is doing something similar on that <pause dur="0.4"/> in terms of corporate venturing where <pause dur="0.3"/> i'm involved Sue Byrne is involved the Bank of England's involved Treasury <pause dur="0.3"/> and <pause dur="0.2"/> they're just saying look we've got this data <pause dur="0.3"/> we've just generated <pause dur="0.3"/> these are what we think it means what do you think it means and then there's a debate and you you reiterate and so on <pause dur="0.5"/> # they're they're <pause dur="0.7"/> they're scientific in a sense but <pause dur="0.2"/> you're not talking about precision because it's not meaningful within the context <pause dur="0.5"/> in an operating environment you can use Porter value chain <pause dur="0.4"/> five forces strategic groups <pause dur="0.4"/> actually looking <pause dur="0.2"/> at <pause dur="0.4"/> the similarities <pause dur="0.2"/> and the differences between strategic

sets <pause dur="0.4"/> of firms <pause dur="0.7"/> you know <pause dur="0.3"/> Unilever and Procter and Gamble will be in the same strategic group for fats and oils they will be in the same strategic group for many <pause dur="0.4"/> # consumer <pause dur="0.2"/> fast moving consumer goods <pause dur="0.5"/> # <pause dur="0.3"/> and finally portfolio analysis you know your Boston boxes G-E matrix and that kind of thing <pause dur="0.4"/> they may or may not be appropriate there there is no rigid <pause dur="0.5"/> you must use a G-E matrix <pause dur="1.2"/> there is no <pause dur="0.4"/> you know Porter <pause dur="0.3"/> is de rigueur <pause dur="0.2"/> it tends to be <pause dur="0.5"/> unfortunately <pause dur="0.5"/> you may or may not use it depending <pause dur="0.3"/> whether or not <pause dur="0.4"/> it gives enlightenment <pause dur="0.9"/> and internally SWOT <pause dur="0.4"/> and then <pause dur="0.5"/> human resource management systems analysis # type <pause dur="0.2"/> # analyses <pause dur="0.4"/> which is certainly not my area <pause dur="0.4"/> but <pause dur="0.6"/> horses for courses different types of techniques <pause dur="0.4"/> used in different types of of area <pause dur="2.2"/><kinesic desc="changes transparency" iterated="y" dur="6"/> now just looking at <pause dur="0.6"/> Porter i mean one of the <pause dur="0.2"/> the <pause dur="0.3"/> the important things <pause dur="1.1"/> about the Porter <pause dur="1.4"/> is <pause dur="5.2"/> Porter <pause dur="0.4"/> in some ways <pause dur="0.6"/> repackaged in a superb sense and it's not to to to

diminish <pause dur="0.2"/> # <pause dur="0.4"/> his role <pause dur="1.3"/> but he repackaged a lot of the <pause dur="0.5"/> # industrial economics of the nineteen-sixties <pause dur="0.6"/> in a form which was manageable <pause dur="0.7"/> and understood <pause dur="0.4"/> by <pause dur="0.2"/> by <pause dur="0.2"/> by business people like you essentially <pause dur="0.8"/> because <pause dur="1.3"/> surprisingly you don't tend to read the Journal of Economics <pause dur="1.0"/> # and surprisingly economists don't tend to write for you guys anyway so you <pause dur="0.3"/> so the economists saw <pause dur="0.4"/> really the firm as a black box and what Porter did was <pause dur="0.4"/> was actually interpret in a way which was meaningful <pause dur="0.7"/> but also highly accessible <pause dur="0.8"/> now one of the things i've learned here i came to a business school late in # about <pause dur="0.2"/> about i changed career at forty-two <pause dur="0.7"/> # and became a <unclear>youth</unclear> in a business school which is # a seminal experience <pause dur="0.3"/> for me at least <pause dur="0.5"/> # starting off you know knowing nothing at forty-two like saying <pause dur="0.3"/> who's Porter <pause dur="0.2"/> and everyone sort of crosses themselves <vocal desc="laughter" iterated="y" n="ss" dur="1"/> and looks at you <pause dur="0.6"/> but <pause dur="0.5"/> there's an <pause dur="0.3"/> interesting thing to me is <pause dur="0.9"/> is just <pause dur="0.8"/> how powerful <pause dur="0.3"/> symbols are like that five forces i mean i i advised <pause dur="0.6"/> the Australian

government a couple of years ago on a new technology policy thing called Industry Investment Fund <pause dur="0.8"/> and which was a <pause dur="0.2"/> it <trunc>w</trunc> <trunc>w</trunc> which was a spin out out of going there and and on a sabbatical <pause dur="0.7"/> and <pause dur="0.2"/> in order to get the government to sort of understand <pause dur="0.8"/> i <pause dur="0.2"/> drew <pause dur="0.6"/> a <pause dur="0.3"/> an hourglass <pause dur="1.0"/> and i put in the demand for I-T <pause dur="0.2"/> based services at the bottom in Australia <pause dur="0.8"/> and i put in the the <pause dur="0.3"/> the research <pause dur="0.3"/> expenditure in Australia which is about six-billion Australian dollars a year <pause dur="0.7"/> and in the middle the constraint <pause dur="0.6"/> i put the amount <pause dur="0.4"/> of money spent on commercialization of R and D <pause dur="0.2"/> by <pause dur="0.3"/> turning these really clever ideas in terms of say <pause dur="0.3"/> # energy # # solar energy <pause dur="0.4"/> into <pause dur="0.5"/> products services and businesses <pause dur="0.3"/> so six-billion dollars <pause dur="0.6"/> got <pause dur="0.4"/> about twenty-million bucks <pause dur="0.4"/> to commercialize <pause dur="0.9"/> and the net result of that <pause dur="0.5"/> was there was some really and still is some really <pause dur="0.2"/> good technology <pause dur="0.4"/> in Australia <pause dur="1.1"/> and in terms of new businesses <pause dur="0.3"/> technically there <shift feature="voice" new="laugh"/>is bugger all <shift feature="voice" new="normal"/><pause dur="0.4"/> i mean you know they they just punch way below their

weight <pause dur="0.5"/> # the beaches are just too nice <pause dur="0.5"/> and i put it in in terms of this hourglass <pause dur="0.6"/> and <pause dur="0.5"/> i actually had the sort of Minister of Industry saying <pause dur="0.3"/> you invented the hourglass <pause dur="0.3"/> you know <pause dur="0.4"/> and it i was <pause dur="0.6"/> i was amazed just how powerful <pause dur="0.6"/> cheap <pause dur="0.7"/> metaphors are be <trunc>tha</trunc> be they graphic metaphors or or or verbal <pause dur="0.3"/> metaphors <pause dur="0.3"/> but <pause dur="0.5"/> that's what Porter did he with that five forces model <pause dur="0.5"/> he made people understand <pause dur="0.4"/> and what he made them understand <pause dur="1.0"/> was essentially <pause dur="0.7"/> some questions that were pretty <pause dur="0.5"/> persistent <pause dur="0.9"/> and pretty damn important to you as managers <pause dur="1.5"/> like <pause dur="0.4"/> why do some industries consistently <pause dur="0.6"/> return <pause dur="0.9"/> better profits <pause dur="0.5"/> better returns under all the indices you can name <pause dur="0.2"/> than other industries <pause dur="0.7"/> you know <pause dur="0.7"/> put another way why is tanning always so bloody awful on any criteria leather <pause dur="0.3"/> leather goods just about hits the bottom of just about every <pause dur="0.3"/> index you know return on capital profitability et cetera et cetera et cetera <pause dur="1.5"/> why do some industries why why <pause dur="0.4"/> why is the structure <pause dur="1.3"/> of supermarkets <pause dur="0.3"/>

like it is <pause dur="0.2"/> why have we only got four or five major supermarkets three or four major supermarkets <pause dur="0.2"/> but why have we got thousands and thousands of corner <trunc>sh</trunc> corner shops <pause dur="0.4"/> you know what are the what are the <pause dur="0.4"/> what are the <pause dur="0.4"/> causal factors that determine the structure <pause dur="0.4"/> and what effect does that structure have <pause dur="0.5"/> and how does it change <pause dur="0.7"/> why does it change <pause dur="1.2"/> and <trunc>y</trunc> you can see <trunc>y</trunc> i mean this is just as relevant now when we talk about Internet <pause dur="0.9"/> and its effect <pause dur="0.3"/> on businesses or pulling <pause dur="0.4"/> # stuff off the web <pause dur="1.7"/> what <pause dur="0.3"/> given this structure what does it do <pause dur="0.3"/> how does it influences the choices that we have <pause dur="0.4"/> as managers <pause dur="0.4"/> the choices <pause dur="0.2"/> in <pause dur="0.4"/> the allocation of scarce resource <pause dur="0.2"/> scarce resource capital labour <pause dur="0.4"/> but more than ever now <pause dur="0.4"/> knowledge <pause dur="0.5"/> sometimes articulated as competencies <pause dur="1.2"/> and finally <pause dur="0.6"/> what the hell do we mean when we talk about industry <pause dur="1.5"/> i mean as an example <pause dur="2.6"/> autos cars <pause dur="1.4"/> would you say cars <pause dur="0.4"/> was now a global market <pause dur="4.6"/> yes no who <trunc>s</trunc> <pause dur="0.3"/><shift feature="voice" new="whisp"/> you're very quiet <shift feature="voice" new="normal"/><pause dur="1.0"/> who says yes <pause dur="1.8"/><kinesic desc="put hands up" iterated="n" n="ss"/> stick

your hands up <unclear>no</unclear> <pause dur="0.3"/> right <pause dur="1.2"/> who says no <pause dur="2.7"/><kinesic desc="put hands up" iterated="n" n="ss"/> yeah <pause dur="0.5"/> two <pause dur="0.3"/> why do you say why why </u><pause dur="0.4"/> <u who="sm1148" trans="pause"> i think it's getting there but not quite </u><pause dur="0.5"/> <u who="nm1127" trans="pause"> dah <shift feature="voice" new="laugh"/>it's <vocal desc="laughter" iterated="y" dur="1"/> </u><u who="sm1148" trans="overlap"> <trunc>i</trunc> <trunc>i</trunc> <trunc>i</trunc> it's becoming a <gap reason="inaudible" extent="1 sec"/> </u><u who="nm1127" trans="overlap"> on the one hand on the other </u><pause dur="0.3"/> <u who="sm1148" trans="pause"> becoming a global market </u><u who="nm1127" trans="overlap"> right <pause dur="0.3"/> why why do you disagree </u><u who="sm1149" trans="latching"> # <pause dur="0.3"/> too many barriers between countries </u><pause dur="0.6"/> <u who="nm1127" trans="pause"> yeah </u><pause dur="0.4"/> <u who="sm1149" trans="pause"> so it's going to be <gap reason="inaudible" extent="1 sec"/> to one country can't sell <pause dur="0.5"/> with equal <pause dur="0.2"/> # <pause dur="0.8"/> # # # on an equal basis with </u><u who="nm1127" trans="overlap"> yeah </u><u who="sm1149" trans="overlap"> somebody in <pause dur="0.2"/> in the <gap reason="inaudible" extent="1 sec"/> </u><u who="nm1127" trans="latching"> no one loves a smart-arse but you're absolutely right <pause dur="1.2"/> do you we <pause dur="0.4"/> it is a global <pause dur="0.4"/> industry <pause dur="0.4"/> virtually <pause dur="0.3"/> though <pause dur="0.4"/> i don't think <pause dur="0.2"/> you know Kathmandu doesn't have many much production facilities <pause dur="0.3"/> it's certainly a supranational industry <pause dur="0.4"/> and it's reasonably you can say global <pause dur="0.7"/> but that is industry industry is about the nature of production <pause dur="1.1"/> there are very few <pause dur="1.6"/> products <pause dur="0.5"/> that are <trunc>g</trunc> are in global markets there's quite a lot of commodities <pause dur="1.1"/> capital above all <pause dur="0.4"/> in global markets <pause dur="0.2"/> and even

there there are <pause dur="0.5"/> # <pause dur="0.4"/> imperfections which allow traders to trade on a margin <pause dur="1.3"/> but <pause dur="1.0"/> global <pause dur="0.2"/> markets <pause dur="0.6"/> are the minority <pause dur="1.0"/> most markets are actually <pause dur="0.4"/> subnational <pause dur="1.0"/> and the car industry <pause dur="0.5"/> is actually a multi<pause dur="0.7"/>national <pause dur="0.5"/> marketplace <pause dur="0.9"/> you know a <trunc>mar</trunc> <pause dur="0.4"/> <unclear>like</unclear> several <pause dur="0.2"/> domestic <pause dur="0.2"/> marketplaces <pause dur="0.3"/> and even here the market throughout <pause dur="0.2"/> the U-K <pause dur="0.9"/> is not perfect <pause dur="0.2"/> that you will have <pause dur="0.3"/> a different price <pause dur="0.2"/> in Coventry <pause dur="0.5"/> as to Penzance because there are transaction costs <pause dur="0.4"/> # related to geography related to volume and # <trunc>r</trunc> various other things <pause dur="0.6"/> but <pause dur="1.8"/> you must not confuse <pause dur="0.3"/> the two <pause dur="1.6"/> and when we're talking about industries we're talking about supply <pause dur="0.6"/> so <pause dur="0.4"/> # <pause dur="0.4"/> you know as John John Kay has got a # a very useful paper <pause dur="0.2"/> in this if you're interested <pause dur="1.0"/> # <pause dur="1.0"/> which i pulled out just before i came here <pause dur="0.7"/> where he says you know basically <pause dur="0.5"/> the term global market is becoming a cliché <pause dur="0.2"/> and he's right <pause dur="0.4"/> identifying the strategic market the strategic market being the minimum <pause dur="0.4"/> scale of market <pause dur="0.4"/> in order to compete

successfully <pause dur="0.8"/> now arguably i think within <pause dur="0.5"/> the car market you're talking about <pause dur="1.2"/> continental <pause dur="0.7"/> being <pause dur="0.7"/> <trunc>i</trunc> a region <pause dur="0.3"/> a supranational region <pause dur="0.3"/> being the minimal scale to compete successfully <pause dur="0.5"/> but we certainly haven't got anything like <pause dur="0.6"/> a <trunc>natio</trunc> # # a global market otherwise <pause dur="0.3"/> i would pay the same price <pause dur="0.5"/> for # a Ford <pause dur="0.4"/> saloon <pause dur="0.4"/> in # <pause dur="0.2"/> Ho Chi Minh City <pause dur="0.4"/> # as i would in Godalming <pause dur="0.4"/> # <pause dur="0.2"/> and i think that's unlikely <pause dur="1.1"/> Godalming is much more reactionary of course <pause dur="1.0"/> # <pause dur="0.5"/> right that's the John Kay's Business Strategy Review <pause dur="0.4"/> spring <pause dur="0.2"/> nineteen-ninety <pause dur="0.4"/> # <pause dur="2.5"/> if the <pause dur="0.4"/> i can't <pause dur="0.8"/> photocopy it for whole reasons of copyright so <pause dur="0.3"/> if you take that and and <trunc>s</trunc> in some cases <pause dur="0.3"/> # i'll try and <pause dur="0.3"/> # get some photocopied for the groups <pause dur="1.3"/> okay <pause dur="3.0"/> so these are a set of questions <pause dur="0.5"/><kinesic desc="changes transparency" iterated="y" dur="4"/> that Porter is really trying to <pause dur="0.4"/> to articulate <pause dur="0.7"/> now i've put down here <pause dur="1.3"/> not out of laziness i haven't taken more more <pause dur="0.2"/> current figures <pause dur="0.4"/> but i've taken figures <pause dur="0.4"/> on return on capital <pause dur="1.0"/> in Britain <pause dur="0.6"/> coming out of the recession and i've taken

manufacturing <pause dur="0.3"/> sectors <pause dur="0.3"/> and i've taken service sectors <pause dur="0.4"/> and what's the first thing you see at that <pause dur="1.7"/> you know if you eyeball those figures what # what immediately sort of comes </u><pause dur="0.5"/> <u who="sm1150" trans="pause"> larger diversity </u><u who="nm1127" trans="latching"> yeah <pause dur="0.8"/> it's huge diversity there <pause dur="0.6"/> now why <pause dur="0.3"/> i i mean <pause dur="0.4"/> do you have name tags here </u><pause dur="0.7"/> <u who="sm1151" trans="pause"> they've all <gap reason="inaudible" extent="1 sec"/> </u><u who="nm1127" trans="overlap"> mm </u><u who="sm1151" trans="overlap"> disappeared </u><pause dur="0.5"/> <u who="nm1127" trans="pause"> they've all disappeared <pause dur="0.5"/> i'll see if we can get some more because # <pause dur="0.3"/> i'm terrible at remembering names and and sort of saying you # <pause dur="0.3"/> thingy you know <pause dur="0.5"/> the guy with the fat nose piggy eyes and dah-dah-dah is # difficult so <pause dur="0.4"/> i'll see if we can get some 'cause it's easier but why do you think that you have that # diversity <pause dur="1.6"/> i'm not suggesting you've got <pause dur="0.2"/> fat nose and piggy eyes <vocal desc="laughter" iterated="y" n="ss" dur="1"/> it was just a <pause dur="0.2"/> illustration </u><pause dur="0.7"/> <u who="sm1150" trans="pause"> # <pause dur="0.7"/> because <trunc>s</trunc> some some industries are invariably more attractive than others due to supply and demand </u><pause dur="0.7"/> <u who="nm1127" trans="pause"> that <pause dur="1.4"/> that's that's a very elegant way of saying some # industries are attractive because they're

attractive <pause dur="0.4"/> # what <pause dur="0.2"/> <shift feature="voice" new="laugh"/>so <shift feature="voice" new="normal"/> </u><u who="sm1150" trans="latching"> well there's different <gap reason="inaudible" extent="1 sec"/></u><u who="nm1127" trans="overlap"> yeah but but what what what is actually driving that difference </u><pause dur="0.2"/> <u who="sm1150" trans="pause"> competition </u><pause dur="1.1"/> <u who="nm1127" trans="pause"> <trunc>com</trunc> <trunc>wha</trunc> so are you saying that the <pause dur="0.3"/> the record industry has less competition than than Windows </u><pause dur="0.7"/> <u who="sm1150" trans="pause"> it's not it's it's the whole range <gap reason="inaudible" extent="1 sec"/></u><u who="nm1127" trans="overlap"> well the the the gentleman behind you </u><pause dur="0.7"/> <u who="sm1154" trans="pause"> technologically i would think yeah </u><pause dur="0.7"/> <u who="nm1127" trans="pause"> yeah i i wouldn't disagree with you <pause dur="0.8"/> the <trunc>k</trunc> the question is why </u><pause dur="1.1"/> <u who="sm1155" trans="pause"> multiple barriers </u><u who="sm1154" trans="latching"><gap reason="inaudible" extent="1 sec"/> yeah </u><pause dur="0.5"/> <u who="nm1127" trans="pause"> why </u><pause dur="1.0"/> <u who="sm1155" trans="pause"> because </u><u who="nm1127" trans="overlap"> i'm not <trunc>disagre</trunc> but but this this is the the this is the whole thing that Porter's trying to get at <pause dur="0.5"/> why is records more attractive </u><pause dur="3.1"/> <u who="sm1156" trans="pause"> there's a lot of added value </u><pause dur="2.2"/> <u who="nm1127" trans="pause"> # listening to my son's record i might debate that but # <pause dur="0.3"/> what in what <trunc>s</trunc> <pause dur="0.2"/> yes there is but how and why </u><u who="sm1157" trans="latching"> demand <pause dur="0.9"/> it's demand </u><pause dur="0.4"/> <u who="nm1127" trans="pause"> it's not demand with there's more demand for Windows i expect than there are of records </u><u who="sm1157" trans="latching"> <gap reason="inaudible" extent="1 sec"/></u><pause dur="2.3"/> <u who="nm1127" trans="pause"> well that's </u><pause dur="0.8"/> <u who="sm1158" trans="pause"> barriers barriers <gap reason="inaudible" extent="1 sec"/> it must be

because there's the amount of # of <pause dur="0.4"/> advertising strategies <pause dur="0.3"/> and marketing </u><u who="nm1127" trans="latching"> it's # it's it's actually going it's back to my high-tech in some ways <pause dur="0.4"/> it's I-P-R it's Intellectual Property Rights <pause dur="0.4"/> you can't clone Cliff Richards <pause dur="0.3"/> thank God <vocal desc="laughter" iterated="y" n="ss" dur="1"/> is the my immediate response <pause dur="0.5"/> but what you've got there in one form or another <pause dur="0.5"/> is very strong branding <pause dur="0.6"/> or alternatives <pause dur="0.6"/> that are barriers to entry into that market <pause dur="0.6"/> # <pause dur="0.3"/> if you take the sort of the # pharmaceuticals <pause dur="0.5"/> it is <pause dur="0.4"/> pure <pause dur="0.5"/> you know active agent plus enormously <pause dur="0.3"/> focused and professional <pause dur="0.3"/> marketing branding promotion <pause dur="0.4"/> # control of distribution channels et cetera <pause dur="0.3"/> if you take the the sports equipment <pause dur="0.4"/> # <pause dur="0.6"/> what you have there is a classic branded industry <pause dur="0.2"/> # <pause dur="0.3"/> i mean <trunc>y</trunc> <pause dur="0.2"/> you know my son's my youngest son's twenty-three now <pause dur="1.4"/> i remember <trunc>whe</trunc> about thirteen years ago he said to me Dad <pause dur="0.2"/> it's impossible to buy a pair of trainers <pause dur="0.3"/> for under seventy pounds <pause dur="0.5"/><vocal desc="laughter" iterated="y" n="ss" dur="1"/> i mean <pause dur="0.3"/> the immediate reaction is <trunc>j</trunc> <pause dur="0.2"/> just watch me son <pause dur="0.2"/> but <pause dur="0.3"/> you know

within his <trunc>ter</trunc> i mean he's a perfect sort of <pause dur="0.3"/> material for <pause dur="0.6"/> you know these are and it must be hell for you people you know with with sort of <pause dur="0.3"/> younger children <pause dur="0.5"/> but enormous power in branding in Nike Adidas and so on <pause dur="0.6"/> so <pause dur="0.5"/> what you're seeing there is <trunc>i</trunc> elements it will be intellectual property rights it may be that the scientific basis <pause dur="0.3"/> # it may be legislation <pause dur="0.3"/> but <pause dur="0.5"/> the industries are not that they are not perfect markets <pause dur="1.0"/> and the products <pause dur="0.3"/> are differentiated by <pause dur="0.3"/> characteristics <pause dur="0.5"/> either <pause dur="0.3"/> psychic or real or what have you <pause dur="0.4"/> whereas as you go down whether it's # hotels <pause dur="0.4"/> some differentiation there but not much for a lot of hotels <pause dur="0.5"/> # leather goods <pause dur="0.7"/> # always seems to me <trunc>j</trunc> and these categorizations are <pause dur="0.2"/> are difficult these days and they're getting more difficult <pause dur="0.5"/> # <pause dur="0.3"/> footwear road hauliers <pause dur="0.5"/> there are lots and lots of substitutes <pause dur="0.9"/> there is lots of supply particularly <pause dur="0.3"/> in times of recession <pause dur="1.9"/> and the other thing with this <pause dur="0.4"/> is often <pause dur="0.4"/> when you take # return on capital <pause dur="0.7"/> it's a completely meaningless <pause dur="0.6"/> # <pause dur="0.9"/>

calculation <pause dur="0.5"/> if you talk about say P-R consultants or advertising agencies 'cause they don't really use capital <pause dur="0.6"/> human capital <pause dur="0.7"/> they're knowledge workers <pause dur="0.2"/> if i was incredibly generous <pause dur="0.7"/> but you know <pause dur="0.4"/> it's so the <trunc>cr</trunc> the the index you use has to be appropriate to the means <pause dur="0.5"/> but what this shows quite clearly <pause dur="0.4"/> is why Porter <pause dur="0.3"/> and the industrial economists are interested <pause dur="0.4"/> because <pause dur="0.3"/> those diversities <pause dur="0.4"/> continue for an incredible length of time <pause dur="0.4"/> and one of the things that Grant brings out <pause dur="0.6"/> is that industries and firms <pause dur="1.1"/> adapt <pause dur="0.6"/> very very slowly <pause dur="0.7"/> very very slowly and the bigger they are the slower they tend to be <pause dur="0.4"/> it's only in my neck of the woods where <pause dur="0.4"/> you you know you can be # a <trunc>b</trunc> half-billion dollar company in six weeks and then be a no billion dollar company in another six weeks and we're <pause dur="0.4"/> you know that the the # <pause dur="0.4"/> i look at areas where <pause dur="1.4"/> we're <trunc>looki</trunc> what we're <trunc>th</trunc> in the study we're doing in internationalization and looking at some of the logic of internationalization <pause dur="0.2"/> # one of the reasons

that <pause dur="0.3"/> you know <pause dur="0.2"/> # i went to a meeting with Mandelson and his cohorts and <pause dur="0.5"/> and someone said there that <pause dur="0.2"/> you know small firms don't internationalize <pause dur="0.4"/> and i said well that's that's complete <pause dur="0.3"/> utter nonsense </u><gap reason="break in recording" extent="uncertain"/> <u who="nm1127" trans="pause"><kinesic desc="overhead projector is on showing transparency" iterated="n"/> this simple diagram <pause dur="0.7"/> is actually so powerful <pause dur="0.7"/> and in some ways so misleading <pause dur="2.1"/> the first thing i would say <pause dur="0.4"/> if you're going to use it <pause dur="0.7"/> then do something with it <pause dur="1.3"/> don't just describe <pause dur="0.8"/> various elements <pause dur="0.4"/> without <pause dur="0.2"/> following through to a conclusion <pause dur="0.5"/> because in most cases when i see this diagram <pause dur="0.7"/> what it tells me <pause dur="0.4"/> is that <pause dur="0.2"/> the student <pause dur="0.6"/> however eminent <pause dur="0.3"/> has mastered the basics of the drawing package <pause dur="0.3"/> on Word ninety-seven <pause dur="1.3"/><vocal desc="laughter" iterated="y" n="ss" dur="1"/> # and often not <pause dur="0.6"/> # you know 'cause he's <pause dur="0.2"/> just out <pause dur="0.2"/> you know <pause dur="0.6"/> but <pause dur="0.9"/> very often it's used purely as description <pause dur="1.8"/> but it can be an extremely powerful <pause dur="0.5"/> # <pause dur="0.3"/> <trunc>techni</trunc> or or or model <pause dur="0.4"/> if it's used properly <pause dur="1.6"/> but what you have to do is actually <pause dur="0.2"/> go on as as this case study today <pause dur="0.9"/> and say okay <pause dur="0.5"/> we have a lot <pause dur="0.5"/>

of competitors <pause dur="1.0"/> ergo <pause dur="1.1"/> the following kind of outcomes <pause dur="0.2"/> or behaviours are likely <pause dur="0.3"/> or reasonable <pause dur="0.3"/> or plausible <pause dur="1.1"/> except <pause dur="0.4"/> when you're involving say I-P-R or <trunc>w</trunc> <pause dur="0.3"/> you know <pause dur="0.3"/> so you need to make a story and a a set of sort of logical constructs that lead on <pause dur="0.3"/> from what that structure means so let's have a actually have a look at that <pause dur="0.4"/> # initially <pause dur="1.5"/><event desc="takes off transparency" iterated="n"/> i mean just as # an illustration i used <pause dur="0.3"/> this diagram i gave a <pause dur="0.9"/> a talk to the # <pause dur="0.4"/> the the venture capital industry in the U-K <pause dur="0.4"/> # in nineteen-ninety-one when i first started looking at this <trunc>com</trunc> this this area that was growing like Topsy <pause dur="0.6"/> and i just said you know sort of smart-arsed comment <pause dur="0.6"/> who are your customers <pause dur="1.7"/> and that <pause dur="0.3"/> debate lasted about two years <pause dur="1.6"/> 'cause there and we <trunc>s</trunc> <pause dur="0.2"/> there's still a debate i mean # i <trunc>w</trunc> <trunc>w</trunc> <pause dur="0.2"/> might <pause dur="0.8"/> might go on <trunc>l</trunc> but <pause dur="0.9"/> who are their customers <pause dur="1.4"/> this is a financial service industry <pause dur="0.4"/> providing money <pause dur="0.3"/> for young firms to grow rapidly or for large firms to do buy-outs <pause dur="0.3"/> buy-ins and restructure <pause dur="0.6"/> so who are the

customers <pause dur="0.5"/> this is an industry <pause dur="0.4"/> that currently has <pause dur="0.5"/> # an overhang as of about Christmas <pause dur="0.4"/> # <pause dur="0.4"/> according to a guy who was here last year <pause dur="0.3"/> of fifteen-billion pounds unspent <pause dur="1.0"/> # <pause dur="0.7"/> and <pause dur="1.4"/> depending who you see see the customers <pause dur="1.0"/> in that diagram <pause dur="0.8"/> everything changes <pause dur="1.5"/> because <pause dur="0.4"/> if you see <pause dur="0.3"/> in this case and <trunc>sor</trunc> <pause dur="0.5"/> well i <trunc>y</trunc> you will be bored rigid or or love venture capital by the end <trunc>o</trunc> of my course but <pause dur="0.6"/> depending <pause dur="0.3"/> but it's a very exciting industry 'cause it's changing rapidly <pause dur="2.0"/> depending <pause dur="0.5"/> how you analyse this <pause dur="0.5"/> if you see the entrepreneurs <pause dur="0.4"/> as the customers <pause dur="1.1"/> okay <pause dur="1.5"/> then <pause dur="0.4"/> substitutes <pause dur="0.5"/> become substitutes to the entrepreneurs <pause dur="0.2"/> for for the entepreneurs <pause dur="0.4"/> and the substitutes might be Aunt Agatha's money <pause dur="0.4"/> it might mean bank money <pause dur="0.5"/> it might mean going and robbing a bank it you know <pause dur="0.2"/> alternative sets of finance <pause dur="0.8"/> from the perspective <pause dur="0.3"/> of the entrepreneur <pause dur="1.8"/> however <pause dur="0.4"/> if you say <pause dur="0.5"/> but only about one in twenty entrepreneurs are ever financed <pause dur="0.5"/> you name me an industry <pause dur="0.3"/> which <pause dur="0.2"/> refuses ninety-five per cent of its

customers <pause dur="2.2"/> but accepts <pause dur="0.2"/> a hundred per cent of its suppliers <pause dur="0.6"/> and its suppliers are Guardian Royal Exchange <pause dur="0.4"/> # <pause dur="0.9"/> # Swiss Re <pause dur="0.6"/> they are financial institutions <pause dur="0.5"/> that wish to invest <pause dur="0.6"/> in a particular asset class called private equity <pause dur="1.1"/> now if you see the customer <pause dur="0.7"/> as some damn great financial institution <pause dur="0.3"/> on Wall Street <pause dur="1.1"/> then <pause dur="0.2"/> the <pause dur="0.4"/> substitute products <pause dur="1.2"/> are very very different they sure as hell aren't bank debt <pause dur="0.4"/> you know Swiss Re <pause dur="0.3"/> does not put you know <pause dur="1.2"/> two-billion dollars <pause dur="0.4"/> into Barclays sort of current account <pause dur="0.8"/> you know the alternatives are going to be possibly gilts <pause dur="0.8"/> equities certainly equities <pause dur="0.3"/> and a whole range of other instruments <pause dur="0.3"/> so depending who you see the customer <pause dur="0.6"/> in this analysis you profoundly alter <pause dur="0.5"/> the nature <pause dur="0.9"/> of the analysis <pause dur="0.8"/> and it's not often it's not always <pause dur="0.5"/> a trivial question <pause dur="0.8"/> okay <pause dur="1.1"/> so <pause dur="0.4"/> in this <pause dur="1.1"/> what we really need to do is actually look at elements <pause dur="0.2"/> and say <pause dur="0.3"/> well what what do they really mean i mean the the <pause dur="0.5"/><kinesic desc="changes transparency" iterated="y" dur="9"/> intensity of # rivalry <pause dur="1.3"/> that's a good one to start with <pause dur="0.5"/> yeah <pause dur="0.7"/> number

of <pause dur="1.2"/> 'cause <trunc>w</trunc> what i mean to <pause dur="0.3"/> <trunc>intenstu</trunc> <pause dur="0.6"/> intensity of rivalry is about where you're at at the moment not what it's like in the past or the future but how it what's the dynamic of it at the moment <pause dur="0.9"/> 'cause one of the criticisms <pause dur="0.3"/> of Porter <pause dur="1.0"/> is its <trunc>timin</trunc> is timeliness <pause dur="0.2"/> i it is atemporal <pause dur="0.4"/> it's there sort of set in aspic <pause dur="0.4"/> but you don't need to use it that way you can actually <pause dur="0.3"/> i on one paper i i did three Porters nineteen-eighty-one to eighty-five eighty-five to nineteen-ninety ninety-five whatever it was <pause dur="0.4"/> and you then look at the different power and it's quite a good way of analysing <pause dur="0.3"/> the dynamics of change over time <pause dur="0.7"/> but if you're looking at say <pause dur="1.0"/> <trunc>na</trunc> <pause dur="0.2"/> you know the the elements of rivalry <pause dur="0.4"/> there's a whole set of things that i would wish to look at <pause dur="0.4"/> in order to understand <pause dur="0.4"/> and you can actually start using i mean <pause dur="0.4"/> # my <trunc>la</trunc> my last sort of reference to to venture capital and buy-outs and all this sort of bit <pause dur="0.4"/> but at the moment <pause dur="0.6"/> <trunc>ba</trunc> there

is as i said fifteen-billion pounds <pause dur="0.2"/> unspent <pause dur="0.4"/> but invested by institutions in venture capitalists <pause dur="0.6"/> who have got to spend it <pause dur="0.4"/> profitably <pause dur="0.4"/> returning with a premium for risk illiquidity and so on <pause dur="0.3"/> back to these guys within ten years <pause dur="0.7"/> so they've got ten years to spend <pause dur="0.3"/> this fifteen-billion surplus <pause dur="0.8"/> and the most <pause dur="0.3"/> <trunc>prof</trunc> # this is for buy-outs <pause dur="0.2"/> only for buy-outs <pause dur="0.4"/> now there are six-hundreds buyouts a year in the U-K <pause dur="0.5"/> biggest buy-out market in the world <pause dur="0.6"/> after America <pause dur="0.8"/> and there's been six-hundred buy-outs last year <pause dur="0.8"/> the year before <pause dur="0.6"/> and the year before that <pause dur="0.9"/> so we have <pause dur="0.2"/> really a constant supply <pause dur="0.7"/> and we have <pause dur="0.5"/> this huge <pause dur="1.2"/> volume of money <pause dur="0.5"/> allocated <pause dur="0.4"/> to about thirty institutions <pause dur="0.9"/> in the U-K <pause dur="1.0"/> now what do you think that's going to do <pause dur="0.2"/> to competition </u><pause dur="2.0"/> <u who="sm1159" trans="pause"> <gap reason="inaudible" extent="1 sec"/><kinesic desc="put hand to ear" iterated="n" n="nm1127"/><pause dur="1.2"/> suppress it </u><pause dur="1.2"/> <u who="nm1127" trans="pause"> suppress it </u><pause dur="0.6"/> <u who="sm1159" trans="pause"> <gap reason="inaudible" extent="1 sec"/> </u><u who="sm1160" trans="overlap"> you wouldn't <pause dur="1.2"/> you wouldn't think the number of buy-outs will increase if venture capitalists shoot up </u><pause dur="1.7"/> <u who="nm1127" trans="pause"> yeah but the <trunc>m</trunc> <pause dur="0.2"/> <trunc>th</trunc> <pause dur="0.2"/> but <pause dur="0.4"/> but increasingly the the # <pause dur="1.1"/> the <trunc>quest</trunc> <pause dur="0.2"/> yeah

they could increase because <pause dur="0.5"/> who provides the buy-outs <pause dur="3.7"/> the corporates from which they come <pause dur="0.9"/> you know they decide that this is non-core therefore we'll spin it off <pause dur="0.3"/> and this is one way of spinning it off <pause dur="0.7"/> now you say this will suppress competition <pause dur="0.2"/> why </u><pause dur="1.3"/> <u who="sm1159" trans="pause"> maybe i misunderstood you i thought you said <pause dur="0.4"/> there's only thirty large organizations who can get this money and they're going to buy and sell </u><u who="nm1127" trans="overlap"> well they've got the money already </u><u who="sm1159" trans="overlap"> okay </u><u who="nm1127" trans="overlap"> they're they're it's been allocated to them </u><u who="sm1159" trans="latching"> it's going to be <pause dur="0.2"/> less and less <pause dur="0.2"/> businesses <pause dur="0.2"/> in their industry sectors </u><pause dur="0.4"/> <u who="nm1127" trans="pause"> yeah <pause dur="0.2"/> so that would suppress competition </u><pause dur="1.4"/> <u who="sm1159" trans="pause"> i would have thought so </u><pause dur="0.9"/><u who="nm1127" trans="pause"> well <pause dur="0.9"/> you've just been given you're you're Schroders you've just got a new one-and-a-half-billion dollar fund <pause dur="0.8"/> and you're going to say <pause dur="0.6"/> well <pause dur="0.7"/> can't spend that <pause dur="0.9"/> so you're going to go back and say # well <pause dur="0.2"/> actually # Californian pension fund <pause dur="0.5"/> # sorry we shouldn't have asked we # we you know <pause dur="0.2"/> will you take a cheque <pause dur="0.5"/> you know <pause dur="0.3"/> you have you're

you have just raised one-and-a-half-billion <pause dur="0.2"/> and you're going to spend that in ten years <pause dur="0.3"/> and there is a constant supply <pause dur="0.7"/> of <pause dur="0.4"/> valuable propositions <pause dur="0.9"/> you know the competition is going to <pause dur="0.3"/> <trunc>k</trunc> hit the ceiling </u><pause dur="0.5"/> <u who="sm1159" trans="pause"> okay </u><pause dur="0.4"/> <u who="nm1127" trans="pause"> <trunc>becau</trunc> <pause dur="0.3"/> <trunc>becau</trunc> no because <pause dur="0.2"/> you know they have got to spend the money it is in the market <pause dur="0.5"/> they won't need to spend all of it but they've got to spend most of it <pause dur="0.3"/> otherwise why the hell did you ask us for it i mean <pause dur="0.3"/> you know there there would be so much egg on so many faces and so many <pause dur="0.4"/> you know careers lost </u><pause dur="0.2"/> <u who="sm1161" trans="pause"> can you not take a limited risk </u><pause dur="0.5"/> <u who="nm1127" trans="pause"> yeah <pause dur="0.2"/> i mean the the risk <pause dur="0.7"/> goes up in <trunc>no</trunc> the people who are going to really win from this <pause dur="0.4"/> are large corporates that need to slough off <pause dur="0.5"/> # <pause dur="0.2"/> non-core divisions <pause dur="0.5"/> because if you have got # # an attractive division that you could do a buy-out or a buy-in or a <pause dur="0.4"/> buy-in buy-out with <pause dur="0.4"/> you know the world's going to beat at your door there'll be Schroders there'll be Morgan Grenfell <pause dur="0.4"/> # there'll be Nomura there'll be Lloyds

there'll be Three-I everyone will be beating on your door <pause dur="0.3"/> and you will say well <pause dur="0.5"/><kinesic desc="indicates member of audience" iterated="n"/> you start the bidding <pause dur="1.0"/> would <kinesic desc="indicates member of audience" iterated="n"/> you like to up that <pause dur="0.3"/> you know i mean it's it's <pause dur="0.2"/> it's going to be <pause dur="0.3"/> but you know <pause dur="0.4"/> what i'm saying is <pause dur="0.6"/> look at the nature <pause dur="1.0"/> because if we take this <trunc>w</trunc> things like okay nature entry and exit barriers <pause dur="0.4"/> well <pause dur="0.7"/> one of the <pause dur="0.2"/> you <pause dur="0.3"/> you quite rightly said or who <trunc>s</trunc> who said something like well perhaps the supply will increase <pause dur="0.8"/> i mean it may force the barriers down but it's not likely to happen in the short run <pause dur="0.4"/> now you need to see competition in short run and longer term measures <pause dur="0.3"/> and in the short run may be very different from the longer run <pause dur="0.4"/> now you can sort of surmise what's likely to <pause dur="0.3"/> to happen <pause dur="2.4"/> in that particular market <pause dur="0.6"/> is there really any diversity <pause dur="1.1"/> in <pause dur="0.6"/> the the competitors <pause dur="3.0"/> you know i mentioned Morgan Grenfell it could be # <pause dur="0.8"/> a whole range of <pause dur="0.3"/> British American European banks venture capitalists or </u><u who="sm1162" trans="latching"> then an interest rate and repayment <gap reason="inaudible" extent="1 sec"/> </u><u who="sf1163" trans="overlap"> i <pause dur="0.5"/>

i'd say the diversity <pause dur="0.2"/> is <pause dur="0.2"/> on the severity of things like covenants <gap reason="inaudible" extent="3 secs"/> so if i was looking for someone to finance my buy-out </u><pause dur="0.4"/> <u who="nm1127" trans="pause"> yeah </u><u who="sf1163" trans="overlap"> i'd look for someone who'd give me the most <gap reason="inaudible" extent="1 sec"/> goods </u><pause dur="1.1"/> <u who="nm1127" trans="pause"> yep <pause dur="0.4"/> but but <trunc>i</trunc> <pause dur="0.4"/> but <pause dur="0.4"/> you're clearly from the financial covenants <vocal desc="laugh" iterated="n" n="sf1163"/> and <shift feature="voice" new="laugh"/>heavy <shift feature="voice" new="normal"/> words like that <pause dur="0.5"/> but in the final analysis <pause dur="1.4"/> they're <pause dur="0.2"/> usually overweight men <pause dur="0.5"/> with a bag of money <pause dur="0.4"/> i mean the differentiation <pause dur="0.7"/> is actually quite limited <pause dur="0.4"/> in this market <pause dur="0.8"/> what's that going to do to competition </u><pause dur="1.7"/> <u who="sm1164" trans="pause"> <gap reason="inaudible" extent="1 sec"/></u><pause dur="0.4"/> <u who="nm1127" trans="pause"> it <pause dur="0.2"/> it's going to drive up competition <pause dur="0.5"/> 'cause differentiation is one way you don't compete <pause dur="1.0"/> you know when i worked for Unilever <pause dur="0.5"/> we'd never <pause dur="0.2"/> i mean fats and oils we competed <pause dur="0.4"/> but we never competed on anything so vulgar as price if we could help it <pause dur="0.5"/> because it's a mug's game to compete on price <pause dur="0.6"/> you know <pause dur="0.3"/> one of the worst examples of competing on price <pause dur="0.5"/> was Sainsbury and Tesco's getting into a price war <pause dur="0.2"/> you know <pause dur="0.4"/> so <pause dur="0.2"/> Sainsbury's goes down threepence <pause dur="0.4"/> on # baked beans <shift feature="voice" new="mimicking an angry voice"/>you

bastard <pause dur="0.2"/> fourpence on ravioli you swine <shift feature="voice" new="normal"/>frozen peas down <pause dur="0.4"/><vocal desc="laughter" iterated="y" n="ss" dur="1"/> and who the hell wins </u><pause dur="0.9"/> <u who="sm1165" trans="pause"> we do </u><u who="sm1166" trans="overlap"><gap reason="inaudible" extent="1 sec"/></u><pause dur="0.3"/> <u who="nm1127" trans="pause"> you do well you what have you got to do with it you're not shareholders <pause dur="0.2"/> you know <pause dur="0.3"/> i mean it is completely shooting yourself in both feet and then trying to run a hundred yards <pause dur="0.5"/> and you know they learn i mean no one well <pause dur="0.6"/> actually Tesco's actually have got a marginal advantage in that they did actually buy share in the first <pause dur="0.5"/> price war <pause dur="0.4"/> but they they've avoided it studiously for another <pause dur="0.2"/> you know <trunc>twen</trunc> fifteen years since then <pause dur="0.9"/> now <pause dur="0.3"/> you have price wars when there is nothing else you can offer <pause dur="1.4"/> that's why the competition <trunc>i</trunc> in the car industry <pause dur="0.3"/> you are desperate to differentiate <pause dur="0.6"/> if you can <pause dur="0.9"/> because who the hell wants to compete <pause dur="0.3"/> against Far Eastern producers on price <pause dur="1.1"/> but when <pause dur="0.2"/> in the final analysis <pause dur="0.4"/> is a bag of money from <kinesic desc="indicates member of audience" iterated="n"/> you or <kinesic desc="indicates member of audience" iterated="n"/> you <pause dur="0.6"/> then <pause dur="0.3"/> when there is pressure when there is limited opportunity <pause dur="0.6"/> then <pause dur="0.6"/> you know <pause dur="0.4"/> it becomes bare knuckle fighting it becomes price <pause dur="0.3"/> it becomes

very intense competition <pause dur="0.4"/> now you can <pause dur="0.3"/> you can surmise this without </u><u who="sm1167" trans="overlap"> <gap reason="inaudible" extent="1 sec"/> </u><u who="nm1127" trans="overlap"> sorry </u><pause dur="0.2"/> <u who="sm1167" trans="pause"> there's ways of combating that </u><pause dur="0.2"/> <u who="nm1127" trans="pause"> sure </u><u who="sm1167" trans="overlap"> <gap reason="inaudible" extent="1 sec"/> focusing on the issue but then there wasn't </u><u who="nm1127" trans="overlap"> absolutely </u><pause dur="0.2"/> <u who="sm1167" trans="pause"> <gap reason="inaudible" extent="1 sec"/> </u> <u who="nm1127" trans="overlap"> yeah </u><u who="sm1167" trans="overlap"> <gap reason="inaudible" extent="1 sec"/> </u><pause dur="0.6"/> <u who="nm1127" trans="pause"> i agree entirely but they they won't be in that market anyway i'm just talking about buy-out funds but <pause dur="0.2"/> i mean <pause dur="0.4"/> what i'm saying here and and i i don't disagree with you at all <pause dur="0.3"/> is in the short run it's difficult to to avoid it <pause dur="1.0"/> in the longer run yes <pause dur="0.6"/> but you without knowing anything about <pause dur="0.3"/> venture capital private equity <pause dur="0.3"/> and i can't conceive of people not <pause dur="0.6"/> # you could actually <pause dur="0.7"/> you could actually give a plausible analysis of how you would see this industry developing <pause dur="0.4"/> over three or four years <pause dur="0.6"/> buy-outs you're just looking at these kind of things <pause dur="0.4"/> the diversity well there isn't i <pause dur="0.3"/> the product differentiation <pause dur="0.8"/> it's coming <pause dur="0.4"/> but product differentiation <pause dur="0.2"/> in <pause dur="0.9"/> in financial services <pause dur="1.9"/> it <pause dur="0.3"/> it <trunc>ten</trunc> in this area it who's

it bought by i mean <pause dur="0.4"/> who actually makes the choice <pause dur="0.7"/> of <pause dur="0.8"/> which which provider to use which financial provider <pause dur="1.7"/> who what type of people make the choice </u><u who="sm1168" trans="latching"> <gap reason="inaudible" extent="1 sec"/> finance <gap reason="inaudible" extent="1 sec"/></u><u who="nm1127" trans="overlap"> yeah <pause dur="0.3"/> it's accountant shall talk unto accountant <pause dur="0.9"/> and it's a very instrumental <pause dur="0.7"/> negotiation <pause dur="1.0"/> and in the final analysis <pause dur="0.3"/> it comes down to informed people professionals <pause dur="0.7"/> negotiating broadly speaking on price <pause dur="0.5"/> in in oversupplied markets <pause dur="0.4"/> so <pause dur="0.4"/> you haven't <pause dur="1.1"/> you haven't got much opportunity <pause dur="0.4"/> to product # to differentiate the product in this particular case <pause dur="0.6"/> the nature of exit entry barriers slow real negative # <pause dur="0.3"/> all of these things <pause dur="0.7"/> are actually likely to profoundly influence <pause dur="0.5"/> how you can compete <pause dur="1.0"/> let's just look at # <pause dur="0.5"/><kinesic desc="changes transparency" iterated="y" dur="5"/> barriers to entry and barriers to exit because one of the things <pause dur="2.0"/> i want to get across <pause dur="0.7"/> is <pause dur="2.8"/> you should really look <pause dur="1.6"/> at barriers to entry i mean that's one of the first things i i would look at <pause dur="0.8"/> i mean <pause dur="0.5"/> just just quickly 'cause <pause dur="0.7"/>

one thing i should say and i should have said at the start <pause dur="0.7"/> i always give you more notes than i will ever get through <pause dur="1.1"/> # so the notes are a sort of resource <pause dur="0.6"/> # <pause dur="0.4"/> and you can say later look i really wish that you would go through <pause dur="0.3"/> # <pause dur="0.4"/> slides twenty-one to twenty-four 'cause i don't understand them or what have you <pause dur="0.3"/> but invariably <pause dur="0.4"/> i will give you more notes than i will ever get through <pause dur="0.2"/> each each term so each <pause dur="0.2"/> lecture <pause dur="0.3"/> # which is indiscipline but <pause dur="0.8"/> # <pause dur="0.3"/> let me apologize <pause dur="1.1"/> after the fact <pause dur="0.3"/> but if we look at barriers to entry <pause dur="0.3"/> just give me some <pause dur="0.3"/> you know give me some examples </u><pause dur="2.1"/> <u who="sm1169" trans="pause"> cost of capital </u><u who="sm1170" trans="overlap"> capital </u><u who="sm1171" trans="overlap"> capital </u> <pause dur="0.2"/> <u who="nm1127" trans="pause"> cost of capital <pause dur="0.7"/> who's that a barrier to </u><pause dur="2.0"/> <u who="sm1172" trans="pause"> # new entrants </u><pause dur="0.5"/> <u who="nm1127" trans="pause"> new entrants <pause dur="0.4"/> also small businesses <pause dur="0.6"/> small businesses will always pay <pause dur="0.3"/> and in some some cases it is # a major <pause dur="1.0"/> power for incumbents that actually <pause dur="0.3"/> have it <pause dur="0.5"/> economies of scale and scope <pause dur="1.0"/> where would you <trunc>s</trunc> find huge economies </u><pause dur="1.2"/> <u who="sm1173" trans="pause"> <gap reason="inaudible" extent="1 sec"/></u><u who="nm1127" trans="latching"> well no not larger it's it's <pause dur="0.6"/> not per se <pause dur="0.2"/> but but what <pause dur="0.4"/> where

would you where <pause dur="0.5"/> the very nature of scale will keep you out <pause dur="0.4"/> unless you're you're very large yourself </u><pause dur="0.4"/> <u who="sm1174" trans="pause"> # if you needed <pause dur="0.2"/> <unclear>crucially</unclear> the number of of customers <pause dur="0.5"/> to actually make <gap reason="inaudible" extent="1 sec"/> </u><u who="nm1127" trans="latching"> yeah </u><u who="sm1174" trans="overlap"> <gap reason="inaudible" extent="1 sec"/> like in the </u><u who="nm1127" trans="overlap"> i </u><u who="sm1174" trans="overlap"> car industry </u><u who="nm1127" trans="pause"> car industry yeah </u><pause dur="0.3"/> <u who="sm1175" trans="pause"> and you've got high development of <gap reason="inaudible" extent="1 sec"/> </u><u who="nm1127" trans="overlap"> absolutely <pause dur="0.5"/> fabrication plant now and integrated chip how much to to <pause dur="0.2"/> put one from scratch </u><pause dur="0.4"/> <u who="sf1176" trans="pause"> <gap reason="inaudible" extent="2 secs"/> </u> <pause dur="0.4"/> <u who="nm1127" trans="pause"> sorry </u><pause dur="0.5"/> <u who="sf1176" trans="pause"> one-point-nine-billion </u><u who="nm1127" trans="latching"> yeah <pause dur="0.3"/> yeah <pause dur="0.6"/> <trunc>s</trunc> <pause dur="0.4"/> just <pause dur="0.4"/> probably you'll get get it <pause dur="0.3"/> you'd even get the car park for two-billion <pause dur="0.5"/> so once you've got that scale <pause dur="0.8"/> you or the scale you need related to that is absolutely enormous <pause dur="0.3"/> so that dictates that okay if you're a Mitsubishi if you're an I-B-M <pause dur="0.4"/> # if you're an Oracle perhaps <pause dur="0.4"/> but if you're not of that scale <pause dur="0.3"/> then <pause dur="0.2"/> you're out you're not in that game any more <pause dur="0.4"/> # <pause dur="0.3"/> and some countries have even seen you know not being able to be in the game <pause dur="0.6"/> government policy and legislation <pause dur="0.5"/> where are you going to see that as a classical

barrier to to # <pause dur="1.0"/> entry </u><pause dur="1.4"/> <u who="sm1177" trans="pause"> state monopolies </u><pause dur="0.6"/> <u who="nm1127" trans="pause"> state monopolies yeah where you're protecting your own <pause dur="0.3"/> increasingly difficult under W-T-O World Trade Organization <pause dur="0.2"/> where would it be legitimate </u><pause dur="1.4"/> <u who="sm1178" trans="pause"> Royal Mail </u><pause dur="0.5"/> <u who="nm1127" trans="pause"> Royal Mail # </u><pause dur="1.0"/> <u who="sm1179" trans="pause"> <gap reason="inaudible" extent="1 sec"/> </u><u who="nm1127" trans="overlap"> well well the government says it is so it must be legitimate by definition </u><u who="sm1180" trans="overlap"> well Sweden is <gap reason="inaudible" extent="1 sec"/></u><pause dur="0.2"/> <u who="nm1127" trans="pause"> sorry </u><pause dur="0.2"/> <u who="sm1180" trans="pause"> in Sweden <gap reason="inaudible" extent="1 sec"/> <pause dur="0.9"/> <gap reason="inaudible" extent="1 sec"/> competition </u><pause dur="0.6"/> <u who="nm1127" trans="pause"> yeah Sweden is interesting because # one of the things that i've found there is that <pause dur="0.7"/> you find it very difficult to have a large differential in in # incomes <pause dur="0.7"/> # <pause dur="0.3"/> say compared to the U-K or America <pause dur="0.6"/> # and that that's quite difficult as labour markets become more international <pause dur="0.5"/> # <pause dur="0.3"/> but that's that's an # aside <pause dur="0.4"/> things like <trunc>f</trunc> # <pause dur="0.3"/> medicine <pause dur="0.4"/> the health industry <pause dur="0.6"/> you have huge <pause dur="0.3"/> regulatory barriers <pause dur="0.3"/> # <pause dur="0.3"/> the classic one of course is is food and drug administration <pause dur="0.4"/> in America <pause dur="0.3"/> # <pause dur="0.4"/> which can determine which has a profound effect on the viability of of of new drugs new systems

and so on <pause dur="0.6"/> # <pause dur="0.2"/> so each of those you need to actually understand because <pause dur="0.5"/> what i <pause dur="0.3"/> also the barriers to exit <pause dur="1.0"/> the other side of this coin <pause dur="0.6"/> is okay <pause dur="0.4"/> you may be able to get in <pause dur="1.0"/> but can you get out <pause dur="1.3"/> and you really need to look at them <pause dur="0.4"/> in conjunction <pause dur="0.8"/> because <pause dur="1.3"/> that is the kind of thing which gives you some indication <pause dur="1.0"/><kinesic desc="changes transparency" iterated="y" dur="5"/> of how people might react now <pause dur="0.4"/> it would be very wrong of me to say <pause dur="1.8"/> people with <pause dur="0.4"/> in situations with low barriers to entry and low barriers to exit you will get low stable profits all the time <pause dur="0.3"/> yeah </u><pause dur="0.2"/> <u who="sm1181" trans="pause"> it's ten to eight </u><pause dur="0.4"/> <u who="nm1127" trans="pause"> sorry <pause dur="0.2"/> ten to eight oh right thanks <pause dur="0.6"/> # <pause dur="0.7"/> <vocal desc="laughter" iterated="y" dur="1"/><pause dur="0.6"/> right <pause dur="0.3"/> speed up <pause dur="0.5"/> # <pause dur="0.8"/> low barriers to entry low barriers to exit <pause dur="0.5"/> you're likely to get low stable profits now <pause dur="0.6"/> there will be exceptions to that <pause dur="0.5"/> but the reason why you probably would <pause dur="1.4"/> is that when the situation <pause dur="0.3"/> is too competitive <pause dur="1.0"/> people can leave <pause dur="1.4"/> and you want <pause dur="0.8"/> the ideal situation for <trunc>a</trunc> any of you or or me <pause dur="0.2"/> is <pause dur="0.3"/> really high barriers to entry <pause dur="0.5"/> you know they've really got <pause dur="0.2"/>

to to to <pause dur="0.2"/> to squeeze all the resources to get into this industry <pause dur="1.3"/> but very low barriers to exit <pause dur="1.2"/> when the going gets tough <pause dur="0.5"/> you want people to be able to leave very easily <pause dur="0.6"/> very quickly <pause dur="0.6"/> because the alternative if the barriers to exit are high <pause dur="0.7"/> what do you do </u><pause dur="1.1"/> <u who="sm1152" trans="pause"><gap reason="inaudible" extent="1 sec"/></u><pause dur="0.5"/> <u who="nm1127" trans="pause"> yeah you can't get out <pause dur="0.5"/> so what do you do if you stay in </u><pause dur="0.6"/> <u who="sm1153" trans="pause"> <gap reason="inaudible" extent="1 sec"/></u><u who="nm1127" trans="latching"> you've <pause dur="0.7"/> you either die or you fight like hell <pause dur="1.0"/> and no one wants a competitor whose only other choice <pause dur="0.3"/> to competing with you is dying <pause dur="0.7"/> you know kamikaze competitors <pause dur="0.3"/> are not very attractive in any sort of strategic environment <pause dur="0.5"/> so <pause dur="0.2"/> you know the the nature of the barriers to exit and entry <pause dur="0.3"/> and if <pause dur="0.4"/> i mean <trunc>th</trunc> one of the things about say # mature industries <pause dur="0.4"/> i mean people sort of equate maturity with low profits very often mature industries <pause dur="0.3"/> can be actually highly profitable <pause dur="0.2"/> why </u><pause dur="1.1"/> <u who="sf1182" trans="pause"> 'cause everyone else has left </u><pause dur="0.4"/><u who="nm1127" trans="pause"> everyone else has left <pause dur="0.9"/> and no one's coming in <pause dur="1.3"/> so those that are there <pause dur="1.2"/> have usually come to some modus operandi <pause dur="0.2"/> you know <pause dur="0.8"/> <gap reason="inaudible" extent="1 sec"/> we've been old friends for a long time

you know there's there's plenty for both of us you know <pause dur="0.2"/> in our twilight years <pause dur="0.7"/> # secondly you're probably at the the bottom of the long run cost curve <pause dur="0.6"/> you know you <pause dur="0.3"/> you know it chapter and verse you know <pause dur="0.3"/> you know every <pause dur="0.5"/> wrinkle of the process <pause dur="0.3"/> and so <pause dur="0.3"/> in those circumstances it can actually no one's going to go into it <pause dur="0.3"/> but it's actually still profitable for those in there <pause dur="0.5"/> so look in your industries or your sectors <pause dur="0.3"/> and actually determine the nature of the barriers to entry <pause dur="0.4"/> and the nature of the barriers to exit <pause dur="0.3"/> but also think outside the frame <pause dur="0.4"/> not just existing competitors <pause dur="0.5"/> but also often new competitors <pause dur="0.4"/> because you may say the barriers to entry are high <pause dur="1.4"/> and then one turns around and says <pause dur="0.4"/> what <pause dur="0.2"/> to General Electric <pause dur="1.2"/> you know <pause dur="0.3"/> so it depends on the context and it depends on <pause dur="0.4"/> on the the market you're looking at <pause dur="0.7"/> # <pause dur="1.3"/> let's who's doing the the case study this evening </u><pause dur="2.3"/> <u who="sm1183" trans="pause"> A and B </u><u who="sm1184" trans="overlap"> <gap reason="inaudible" extent="1 sec"/></u><pause dur="0.4"/> <u who="nm1127" trans="pause"> A and B <pause dur="0.5"/> has A and B met </u><pause dur="1.2"/> <u who="sm1185" trans="pause"> no </u><pause dur="0.6"/> <u who="sm1186" trans="pause"> no </u><pause dur="1.3"/> <u who="nm1127" trans="pause"> # right <pause dur="0.7"/> this is always a

problem on the first one <pause dur="0.4"/> well tell you what and it's nine <trunc>th</trunc> let's <pause dur="0.6"/> let's have <pause dur="0.3"/> have A and B met </u><pause dur="1.2"/> <u who="sm1187" trans="pause"> no </u><pause dur="0.4"/> <u who="nm1127" trans="pause"> no </u><u who="sf1188" trans="latching"> suggest we do it next week <vocal desc="laughter" iterated="y" n="ss" dur="1"/> </u> <pause dur="1.4"/> <u who="sm1189" trans="pause"> <gap reason="inaudible" extent="1 sec"/> </u><pause dur="0.5"/> <u who="nm1127" trans="pause"> what's who's read the case study <pause dur="2.8"/><kinesic desc="put hands up" iterated="n" n="ss"/> thank God for the film that you all stuck your hands up <pause dur="0.6"/><vocal desc="laughter" iterated="y" n="ss" dur="1"/> # </u><u who="sm1190" trans="overlap"><gap reason="inaudible" extent="2 secs"/> </u><pause dur="0.2"/> <u who="nm1127" trans="pause"> sorry </u><u who="sm1190" trans="latching"> it wasn't particularly clear that we had to read <gap reason="inaudible" extent="1 sec"/> </u><pause dur="0.8"/> <u who="nm1127" trans="pause"> right <pause dur="0.2"/> okay <pause dur="0.4"/> <trunc>o</trunc> on that # <pause dur="0.2"/> fulsome and well well thought out argument <pause dur="0.4"/><vocal desc="laughter" iterated="y" n="ss" dur="2"/> may i suggest </u><pause dur="0.9"/> <u who="sm1190" trans="pause"> desperate <gap reason="inaudible" extent="1 sec"/> </u> <u who="nm1127" trans="overlap"> <vocal desc="laughter" iterated="y" n="sl" dur="2"/> <pause dur="0.3"/> can i suggest that we actually do it as # a general <pause dur="0.7"/> case study <pause dur="0.5"/> # <pause dur="0.9"/> so <pause dur="0.4"/> it means i'll have to read it <pause dur="0.4"/> # <pause dur="0.2"/> so <pause dur="0.8"/> we're <trunc>d</trunc> <pause dur="0.2"/> we're doing it yeah <pause dur="0.5"/> so <pause dur="0.6"/> so we'll continue and then we'll bring in that # in a rather more shortened fashion 'cause there's a couple of other things i want to cover <pause dur="0.3"/> so let's break for say till a quarter past <pause dur="0.3"/> but can we be here at a quarter past