Assignment 7 – Governmental actions over LCA (proposition)

Government on LCA

LCA is a representative tool to change the perspective of the BAU (business as usual) to a more circular economy. Free economy market will, under some circumstances be suitable for implementing totally new way of production, but as the human race lacks the time for that to happen, Government is needed to regulate the implementation of tools of IE to a certain percentage.

Four ways that could help society to adapt, but also business to implement LCA will be presented, but before that, it is needed to set a number of prerequisites in order for this suggestion to have the real impact.

Prerequisite No1:

• Mature market that doesn’t have a GDP problems.

Prerequisite No2:

• Developed recycling market.

With this setup, application of suggestion may apply. An effort has been put in order to get the wider scope and to tackle the LCA usage from different points, meaning: marketing, financial incentives, controlling and social aspect.

No1: LABELING (Marketing)

     Every product that is made by a company who takes care of the whole life cycle should have a certain distinguished label on it’s package. In that way, the product is differentiated from the others, and people who care will more certainly take that one, instead of the other that does not stand that ground. In this era of diversification, it is needed that products on shelf or in a commercial be different and to evoke emotions in order to be sold. This small addition to the market could mean a tipping point for increasing a turnover.

     One thing more is to be mentioned. New brands could be developed, which would tackle that target market. (People who care about the sustainability).

No2: Subsidies for investment in recycling and remanufacture. (Financial)

     Advertising and marketing approaches are made long before results are being visible, meaning, investment could be great, but with no results in near future, it is easier for an idea to be abandoned before main (financial) benefits appear. In order to facilitate the change, governments could financially incentivise producers, so they could feel less pressure when investing.

     One of the possible measures would be tax free measures for capital put in the recycling plant or remanufacturing process, or reduced taxes on products that are being remanufactured. With applying less taxes directly on end products, they (products) become less expensive and more attractive in eyes of a consumer.

     Labeling and possibility to create a less expensive product, already presents a powerful weapon for the market.

No3: Emission control. (Controlling)

     With introducing yearly report controlling the emissions, the government puts the other external system for the companies to be aware of. With complying with the legislation of emission controlling, people of the country should know which company is the greatest polluter, but also which company does the most to prevent greater pollution, or to decrease its current level.

     The other side of a coin would be- The fining. With proper penalty policy, all companies will be fined well enough to re-consider they business style and think twice before continuing the usual way of their work.

By now, we should have a situation where companies are treated with a “reward and punishment” system, and they should be incentivised enough to change their approach. 

The final proposal of an governmental action could be No4: Education (Societal factor).

     Everything written should be boosted with more education about the topic. Formal, informal education and information availability are the key of getting to the thought of people, thus considering options mentioned earlier in the paper.

Two main streams are seen in this case:

     – Formal education where students are thought about the LCA, IE and measures that are undertaken by a government.

     – Informal education mainly through NGOs that communicate with lots of different social groups. Governmental support for the “green” NGOs, should represent a positive strategic way that could be followed by many.

Education of course provides more educated and skilled employees to support the growing market of renewable technologies, but also gives a scientific approval for the whole story about the IE and more precisely-  LCA.

To sum up:

1. Labeling – marketing
   1. Incentive to be different on a shell
   2. More marketing approaches (options)
   3. New brands
2. Subsidies for investment in recycling and remanufacturing.
   1. financial incentive
3. Emission control (reporting and fines)
   1. Annual reports on emissions
   2. Rules of fining companies that not oblige
   3. Shifting technologies towards LCA
4. Education about IE (and LCA)
   1. More educated employees and skilled workers
   2. More awareness
   3. Scientific confirmation

Sabatier’s framework:

We will reflect in short on a a Sabatier’s framework in order to see which option is good at what point. Besides External Control (EC), we have Threat of an external control (TEC) and setting Boundary conditions (BC).

Material Variables:
In this part we have numbered tangibile structures that affect poliicies and should be taken in account with every new policy made. Putting that in order, we have

• Technical difficulties
• Diversity of a target group behavior
• Target group as percentage of the population
• Extent of behaviour change required

The first one is more technology dependable, but the latter are more social oriented.

EC could be very difficult when talked about technology, simply because it could be so diverse, that EC could only be an obstacle in developing new technologies. TOC comes similar, but the BC could be of a benefit in setting and constantly tweaking boundaries; e.g. punishment and reward system.

Social aspects are more controllable when they are of a small scale. The larger the social group is, the more difficult it comes to control it. It is my opinion that with increasing the number of people, diversity and with the greater change needed, control methods are to be shifted from the EC, to TEC, to BC. In other words, the less controllable factor is, more liberate constraints should be put on it. 

 

Assignment 5 – The production network

Introduction

Coming across the TOYOTA brand and their way of doing business impressed me so much that I had to stay a little bit longer on this subject and explore everything I could, regarding this, really unique and representative approach towards the economy, that continues to develop even now.

First of all, I would have to introduce you several terms that are going to be used in the article:

• TPS – TOYOTA production system. This is the core philosophy of production and development in TOYOTA , recognized as one of the most efficient approaches to production and systems. We will discover more on this topic later on. (More about this term on the following link).
• JIT – Just in time production. Philosophy developed by one of the most famous Toyota directors, which represents tendency to create such a production that would not need storage space if it is not really needed. Also, more on that topic, later on. ( More about this term on the following link).
• MUDA – The waste. One of the most important points of Toyota production is the elimination of (unnecessary) waste production by the philosophy proposed in:
• Lean production – Production strategy that comes along with the JIT and MUDA. Focal point is eliminating unnecessary work and half-product(s) that doesn’t directly create added value for the end customer.

All these terms are mainly with the focus on efficiency, introduced to the world by Toyota think tanks, which are, again, mainly responsible for creating this automotive monster, or, in other words, the biggest automotive manufacturer in the world. Many companies tried to replicate TPS because it represents steady but secure and sustainable growth in economical way.

One of the most important values that TOYOTA respects, is the value of information and knowledge sharing. We will see how the production is divided in wide network of suppliers, how they are stuck together, and which network concepts we could recognize in the production process. Knowing that our key brand here is global company that covers all continents (except Antarctica) we could recognize pretty much all concepts of production and knowledge sharing.

At the end of the introduction, I have to point out that the sustainability is within the core principles of the TOYOTA business.

TPS

The main reason I made this as a separate subheading is that TPS is viewed as a philosophy that is spread through the whole network of TOYOTA production. That means horizontal and vertical diffusion of the term. Both within the company AND the suppliers or sub-contractors.

Figure 1 – TPS and TOYOTA values

I would like to try to explain in more details key terms here, relevant for the continuing of this presentation.

JIT

Just-in-time production relies on finely tuned processes in the assembly sequence using only the quantities of items required, only when they are needed. Thus, reducing the unnecessary storage space, and in the same time trying to level the production which brings even more efficiency in the process.

Imagine a process designed to produce six different types of product, where the total weekly demand for the range of products varies up and down by 25%, and the daily mix of product types is continuously changing. A planning challenge, but also a typical scenario in many types of business in which the process (manufacturing or otherwise) has to continuously respond to demand. TPS has responded to this reality of life by developing an approach that can meet the challenge in an efficient, cost-effective way, which is JIT.

Elimination of Waste – MUDA

The driving force of the Toyota Production system is the elimination of waste aimed at ever improving quality, cost, productivity, safety and morale. The result is greater satisfaction for major constituents: customers, employees and investors.

Continuous improvement focuses on the elimination of seven major types of waste.
1. CORRECTION/SCRAP
2. OVER-PRODUCTION
3. WAITING
4. CONVEYANCE
5. PROCESSING
6. INVENTORY
7. MOTION

The waste is defined as anything that does not add value – includes things that might not normally be considered as waste such as overproduction, holding too great an inventory, the need for rework, and unnecessary movement, processing and waiting.

The production network of Toyota

The “ production network” in TOYOTA is consisted of the group of firms which collaborate to develop and manufacture a motor vehicle. The automaker, Toyota, is the “central” or core firm in the network because:

1. Toyota is the only firm with direct ties to every other firm in the network, and
2. Toyota coordinates the activities of all firms in the network.

As the central firm, Toyota also has the most to gain from developing learning routines that increase the efficiency of the entire value chain or production network.

Toyota has developed a wide range of organizational routines to enhance “supplier development” and inter-firm learning. Purchasing takes the lead role in coordinating supplier development activities, but all divisions have specific “supplier development” responsibilities. When necessary, these different functions work together to solve problems with suppliers.

This being said, we can conclude that the TOYOTA network is central based (or star) type of network with the TOYOTA Motor Corporation is in the middle. Further unfolding the network, we could define that other actors are also connected in mutual networks of collaboration which we defined as bridged networks through TOYOTA M.C. (Figure 2.)

Figure 2 – Toyota network as a bridging central type of network

That network is being diffused all around the globe with local and global partners, from which, the most important role play Japanese and US supplier networks.

As we would proceed further with trying to define the concepts of network creating, we could conclude that all three proposed are present.

Concepts of networking

AGGLOMERATION

Agglomeration is mentioned in almost all 7 points of the waste reduction (mentioned before), but mainly in Conveyance where it is defined that material should progress from one cell or position to the next as quickly as possible without stopping at any intermediate storage place.Shipping areas should be close to the end of the process. Work teams and support units should be located close together.

That was why the Supplier Association was created. Toyota’s supplier association (kyohokai) in Japan was established in 1943 to promote “mutual friendship” and the “exchange of technical information” between Toyota and its parts suppliers with three stated “purposes”:

1. information exchange between member companies and Toyota,
2. mutual development and training among member companies, and
3. socializing events.

*(Internal Toyota Document, 1996).

Toyota has created three separate regional associations because it recognizes that for the supplier associations to
achieve their objectives, the suppliers must be in close geographic proximity (e.g., within 3-4 hours by car or train).

INDUSTRIAL COMPLEX

Within their own production system, TOYOTA has created the whole city of interlinked factories, thus creating a huge, industrial complex, called – TOYOTA city, shown on Figure 3. (Click on photo for more info)

Figure 3 – Toyota city

SOCIAL NETWORK

TOYOTA is investing a lot in creating a unique social network between the suppliers, and that is maybe the crucial differentiation point with which TPS is so different from other systems. That is why I will elaborate this in more details.

Developed were bilateral and multilateral knowledge sharing routines with suppliers that were resulting superior inter-organizational or network learning. The unique way to do this is by teaching partners in network that sharing information and know-how is mutually beneficial, thus resulting in constant learning from each other, thus constantly improving the system. As a result, production networks that are particularly effective at transferring know-how are likely to outperform competing networks.

Within these routines, several processes were developed as well, and we will mention some of them :

1. Voluntary Learning Teams (Jishuken)
OMCD (Operations Management Consulting Division) facilitates knowledge sharing across suppliers in a way that is quite unique within the automotive industry (and perhaps within any industry). In 1977 OMCD organized a group of roughly 55-
60 of its key suppliers (providing over 80 percent of its parts in value) into “voluntary study groups” for the purpose of assisting each other with productivity and quality improvements.

The basic idea is to help each other increase productivity in areas of common interest, such as reducing lead times or
inventories. Supplier executives that participate in jishuken activities are typically plant managers, assistant plant managers, and/or section managers (each member company usually has 5-8 people taking part in the activity).

2. Interfirm Employee Transfers (shukko)

In Toyota’s case, shukko is also an important mechanism for transferring knowledge to suppliers.Overall, Toyota transfers approximately 120-130 individuals per year to other firms in the value chain, most of whom go to suppliers.

3. Problem solving teams

Toyota has a process of forming problem solving teams designed to bring knowledge to bear in solving emergent problems within the network. In some cases, Toyota may determine that the relevant knowledge resides within a competitor of the supplier. In this case, Toyota will attempt to orchestrate a supplier-to-supplier knowledge transfer.. According to Toyota executives, upgrading the skills of the inferior supplier not only improves the quality of the weaker supplier but also stimulates long-term competition.

4. Performance Feedback and Monitoring Processes
Finally, by providing frequent performance feedback to suppliers and by monitoring whether or 18 not suppliers implement new knowledge/technology, Toyota pushes suppliers to learn and implement new knowledge.

Concluding this paragraph, I would like to stress out the evolution of this system. In the beginning it was strange that suppliers (that are often in competitive relation among each other) share information and the know-how. However, after a lot of time and other resources invested in this idea (especially in US), the result was that suppliers are pushed to develop faster, thus creating more competitive surrounding for the others, which closes the loop of striving for better and more perfected products and processes.

Non local actors

We have concluded that as a global company, it is a necessity to have global partners. Maybe the most important ones are positioned in US, where TOYOTA tried (and succeeded) to implement, in that time totally unfamiliar system – TPS.

Now, Toyota is preforming with the crucial suppliers, coordinating companies, manufacturing companies, etc, depicted on Figures 4 and 5 (click on the figures for more details).

Figure 4 – Overseas coordinating and manufacturing companies

Figure 5 – Overseas and liaison offices

Toyota started its U.S. supplier association (Bluegrass Automotive Manufacturers Association, or BAMA) in 1989 with only 13 suppliers. Involvement was voluntary and most of the initial members were U.S. suppliers and Japanese transplants located in close proximity to the Georgetown, Kentucky plant. The initial objective was to provide a monthly forum for  haring information with suppliers and for eliciting supplier feedback.

Nielsen, assistant general manager for purchasing planning commented on a new, strange system introduced by TOYOTA:
“We really didn’t know if this would work in the U.S. Getting suppliers to talk to each other was a key element of the program. Before BAMA, it was not very natural for supplier executives to talk and share information. It was uncomfortable. Over the years that has changed significantly as suppliers have built relationships at senior levels” (Interview, November 17, 1997).

This message is echoed by the plant manager of a Toyota supplier.
“Before BAMA, we really didn’t know or share information with executives at other suppliers. And we just didn’t think about calling them up or visiting. It just didn’t happen. BAMA has helped us to get to know each other and now it feels a lot more comfortable calling up another supplier for information or even visiting their plants” (Interview, November 18, 1997).

The general assembly, top management meetings, and executive meetings are designed to allow for high-level communication within the network with regard to production plans, policies, market trends, etc. Thus, these meetings primarily facilitate information sharing among members. More frequent interaction occurs within the divisional committees and topic committees (cost, quality, safety, etc.) where members engage in both information and know-how sharing. Divisional committees are comprised of suppliers who join the meetings because of the nature of the parts they produce or the production processes they employ. For example, division committee 2 is comprised of suppliers who primarily supply parts to the powertrain (engine, transmission, etc). of Toyota vehicles. This allows Toyota and its members to share knowledge with others that are making parts which interface with each other. It also facilitates knowledge sharing among members using similar production processes. This method of grouping suppliers ensures that the information and know-how shared is relevant to the supplier member.

The topic committees on cost, quality, safety, and general affairs are designed to facilitate knowledge sharing on topics that are critical to all members in the network.The PR-Sports committee is created with the goal to create a positive social network among all actors within the network.

The quality committee, established in 1961, engages in a number of activities designed to improve
the quality capabilities of members of the network. The “regular committee” picks a theme for the year and meets six times each year to share knowledge with regard to that particular theme. These themes are selected by suppliers (with Toyota’s input) in areas believed to be important and relevant to a large number of members in the network. In addition to the “regular committee” meetings, the quality committee also sponsors “basic quality training,” “excellent plant tours,” and an annual “quality management conference”.

In summary, the supplier association’s primary objective is to develop ties among members and transfer explicit knowledge through multi-lateral knowledge transfers. The subcommittees are designed to facilitate the transfer of both explicit and tacit knowledge.

Operations Management Consulting Division (OMCD)
The purpose of OMCD is to maintain a group of internal consultants with high levels of expertise in operations to assist in solving operational problems both at Toyota and at Toyota’s suppliers.These individuals are assigned the task of assisting plants achieve productivity improvements, inventory reductions, and quality improvements.

OMCD facilitates knowledge sharing by providing direct assistance to suppliers, who must request OMCD’S assistance (usually through the purchasing division). This typically involves sending a team of consultants to the supplier for a period of time ranging from 1 day to many months, depending on the nature of the problem.

The U.S. version of OMCD is called the Toyota Supplier Support Center (TSSC).

Toyota does not charge fees for its assistance but does demand that participating suppliers be willing to let Toyota bring other companies to see their operations when the project is completed.This allows Toyota to:

1. develop some “showcase suppliers” that have successfully implemented the TPS; this provides a valuable learning laboratory for other suppliers attempting to improve their operations, and
2. start the process of getting suppliers their operations to one another.

It is worth noting that Toyota does not ask for immediate price decreases or a portion of the savings from
the improvements. However, suppliers claim that they often pass on some of the savings due to a feeling
of obligation.

Closing material loops

One of the main goals of TPS is destroying waste as the term, and working in sustainable way. That means that with knowledge transfer described, Toyota should be capable of creating such a network that could eventually close the loop of production in several areas of it.

Currently, I cannot find the example of such a production within the TOYOTA network, but I believe that it is the way of future direction of TPS. Baring in mind that the JIT and Lean production both promote continuous flow over the batch processing can lead us to conclusion that TOYOTA way is striving towards the most efficient production as it can manage or create.

Conclusion

Working with Toyota as a supplier is not easy because Toyota is extremely demanding and expects continuous improvement (learning). But Toyota’s efforts to assist suppliers and to encourage them to improve have resulted in a supplier base that is the most productive in the industry,creating networks of communication, information sharing and collaboration.

In summary, Toyota has created a number of complex routines designed to store and diffuse knowledge within the network and facilitate both bilateral and multi-lateral transfers of both explicit and tacit knowledge, thus evidently improving the efficiency of production. Furthermore, network members know where to find different types of knowledge so it reduces their search costs.

Toyota’s ability to effectively create and manage knowledge sharing processes within its production network at least partially explains the relative productivity advantages enjoyed by Toyota and its suppliers (Lieberman et al, 1997; Dyer, 1996).  As Toyota’s international purchasing chief, Michio Tanaka, observed, Toyota is simply better at “knowing how to implement TPS in specific factories and contexts.” Maybe… the most important know-how to be implemented in the network…

Resources:

1. http://dspace.mit.edu/bitstream/handle/1721.1/1441/147b.pdf
2. Wikipedia, under tags: JIT , Toyota , Lean production ,
3. http://www.artoflean.com/files/Basic_TPS_Handbook_v1.pdf
4. http://www.toyota-forklifts.eu/SiteCollectionDocuments/PDF%20files/Toyota%20Production%20System%20Brochure.pdf

Assignment 4 – The Nokia case

Nokia… Connecting people… Everyone remembers this quote. Right? Other that people who use their product, Nokia has to connect markets, has to connect operations, has to create a supply chain… worldwide. If we would express worldwide, it unambiguously means different, or maybe better diverse markets, operations and… suppliers. After all, all these terms are consisted solely of organization… of… people. So, definitely Nokia has to connect a vast number of people, and not only the consumers. This second group of people who are interconnected via many process routines are a heavy burden to organize, connect and promote a way of work.

Saying that it is a hard work to be done, maybe means that not at every market it must be done. What evolves from this mind of mine is a question that was actually asked in the observed documentary. “Should Nokia pretend that they care about the supply chain?” At a glance, it could be viewed as a possible solution, but. It is very known that one of the main sales postulates is “Don’t lie about your product. For every penny earned in this way, you will pay a pound worth of money”.

That postulate dates from the very birth of the sales as a technique, or act. Which was… way before the birth of the Internet and information era. In that time, before internet bloom, very convenient skill emerged just after the WWII, with the goal to present facts in a way consumers should see companies, countries, or.. brands. That was a gold era of the public relations. 

Public relations’ goal was to form the public opinion about certain actor (a company, or a state, or a brand, etc), which was.. in one way very good thing if some actor, did good deeds. In that way, public has to hear about good deeds, form a bit more positive opinion about the certain performer of a deed. I would, however, focus more on hidden goals of the PR, solely because it was suggested in the documentary, and I would like to connect it with my division of two eras. (Remember? Pre-internet and internet era?) More hidden goal of the PR is to convey and support (at the very end of all information, risks and acts of the company) only the positive acts or beliefs of a certain company. Only positive opinion is a satisfying outcome of the PR.

In the pre-internet era, people could be more easily persuaded to believe in the prevailing, public opinion about the company, thus in that time, Nokia could play the PR role playing game and get with it quite easy. People in Europe or US would most probably never hear about the problems of workers in China, etc.

But, eventually, everything would collapse if certain amount of information would reach their customers, and change the whole story. Remember how we got the information about workers? Yes. Over the internet. Today, only real acts count, only real stories sell the product. That is why I think that Nokia approached this problem in a proper way, thus leaving all flanking positions well defended.

At the end, the documentary is published. Only in favor of Nokia. Doesn’t it seem like something called a “silent PR”? A puzzle to think about.

The Factory on the other side, was stalling in giving the real information, trying to provide nice overall picture, until all fell apart in front of mere evidences. In developing countries, a money from the investor is crucial for the survival of some (or many) companies. For some, every measure must be taken to maintain the money inflow. That is why they struggled so much in their try to present everything in a better light. At the end, as we know they had to present the real measures, conditions and data, which led to Nokia’s conditional proposition. Good move was to present the (partly) real situation of the work conditions and conducting all changes proposed by Nokia.

Was it a good approach trying to diffuse sustainability criteria? Yes. Simply because of very possible chain of events. Those workers will be in more favor position to speak about conditions they work in, it will be seen that some companies care, and others will eventually try to fight for the same or similar rights. If we could speak about the isomorphism, I would compare competition and institutional one with the people isomorphism. All people try to fit in the society, at whatever scale we are talking about. Being on the class level, community level, country level, or cosmopolitan one. If there would be enough bargaining power, the proposition (in whatever form) will be proposed to level the rights and rules in a particular societal organization.

At the other side in organizational isomorphism, we could take the example of the coercive force that will take place and try to uniform the “market playground”.

If I would have to further propose some better coordination mechanism, I would say that normative mechanism would benefit more for both sides in the beginning. Especially for the supplier. That means that the factory would have to invest less to comply Nokia requirements, it would have a greater supplier negotiating power (following Porter’s five forces theory), it would influence in stabilizing the market where other suppliers would have to oblige one of the two remaining mechanisms: either mimicry or coercive one.

In conclusion, not all markets are the same, but they tend to became isomorphic which was beautifully explained in the documentary about Nokia. There will always be some force that will tend to reshape of what the actors on markets, and eventually on one, global market, do. Besides that, only true act of market actors will matter to the consumers, for which I believe will become the next generation of employers, bearing in mind the era of the internet and the availability of information; thus the bargain power of the consumer.

Assignment 3 – The SES of the internet

Hello everyone. Pretty strange resource, but very very helpful nowadays, right? 🙂 It is not unfamiliar that in these times, we  were very much stressed out if we did not have the internet approach while trying to manage our everyday obligations, right? We became dependent of the information after technology revolution,  which could lead to good things when it comes to the question of speed of resolving problems, but there are 2 challenges emerging on the basis of the internet popularization.

1. Internet dependency
2. Access to the internet.

As we live in era where every 8 out of 10 people relying on the internet for everyday activities, we are slowly approaching the time that not only information, but actual things like chair, pen, car, pillow, etc. will be dependable on the internet. That era of internet, scientists call the Internet of things.

In that time, access to the internet will be somehow an absolute must, and the importance of accessibility will be almost as important as the accessibility of the electricity today. More about this challenge, I will write later in my presentation.

One could say: This is all right, but where we can find the eco system in this topic? Let me try to organize our system a little bit in graphical way (Figure 1.)

Figure 1. – Internet SES

I would stick only to the user – provider system, in order to avoid complicated external influences on the system and in order to keep it as simple as I can. Scientists are trying to prove that human products or actions do not differ so much from the nature ones, also with putting the SES framework. Even though maybe it cannot be seen that internet has a direct connection to the eco-system, I would argue that with the claim that internet would not be possible without power. From that word we could develop the whole chain of reactions and consequences that are applied in nature, of course, ending with some CO2 research. With this paragraph, I wanted just to eliminate any doubt about the “eco” part of the system.

From the Figure 1, we can see key factors of this system and let me explain those in more details.

RESOURCE SYSTEM

• Predominately system of data flow, electricity and internet coverage grid, aggregation and organization suppliers (Facebook, Twitter, E-business, E-governmant, etc) or in other words, the ones who “put data (in near future also things) in order or in some form of organization”.

With this system we are enabled to have internet as we know it today.

RESOURCE ITEM

I would simply put – The Internet.

The question that must be answered here is: How would one measure The Internet? I would suggest hours spent on-line. Moreover, that is the way everything is measured if something is related to the internet.

GOVERNANCE SYSTEM

Lot of regulations and rules have to be followed in order to actively participate in the internet circle. Places where I would put boundaries for this system is over these two areas of governance:

1. Market (competition, consumers and their needs, possibilities, etc). This part of the governance system could be partly, or mainly self organized, due to the free market system in which we live today (Friedman).
2. Government (regulations, anti- piracy laws, online fight against hackers, frameworks for e-business / e-government, etc).

USERS

This one is simple: All users of internet, eventually the whole world, or… people in whole.

CHALLENGE

Self organization is mainly triggered tackling some challenges in a group of people, over the same goal. In these times, even though the internet is very cultivated resource, there are still challenges in many parts of the world. Right now, it is more question of modesty or trend maybe, but in near future it will become moderate challenge.

Even now, people do a self organization to reach the information over the internet, but in the Internet of things era we will struggle even more to make up the no-hassle system that would provide us with the non-stop connection with the rest of the world.

FRIEDMAN with constructive inputs

The way I see Friedman’s thought, is that it was only concerning business which should be in one particular branch of economy, meaning: Ford is in automotive industry (mainly), Sony is in appliances industry, US Steal is in extraction economy, etc. In that way companies should have narrow(ed) circle of competition, but will still have competition. Further explaining, if one company has greater financial power, that means that it will stand better against competition, and it has better chances of survival. From that point of view it is completely justified that one could say “The business of business is to make a profit”.

On the other hand, internet world, framework or.. WWW is somehow self-organized system, which does not have competition (until now), does not have the niche economy  branch, actually, it serves the human kind as a type of platform for making business easier to handle. That being said, it means that we don’t have some company who is behind the internet, gathering all the money of users spending the on-line hours. Seeing the picture in this, broad way, I cannot say that Friedman’s principle could be applied on this matter.

Nevertheless, if we would take couple of systems within a big resource system boundaries, we could see that there are many actors in the product chain who could benefit from the provision of the internet. The way I see that Friedman’s principle could be implemented is to put the companies to fight for the innovation through the fight for the survival on a free market of internet.

On the other side, we have some kind of threat when it will come to the single supplier of everything. By everything, here I mean on the internet of things era. If we will become depended on the internet, Google seams to be the first who will be capable for providing that kind of a product. What if the circumstances are made for the Google to become monopolist in providing such a valuable resource? Globally? There is no regulation that could prevent them of setting their own rules. Your thoughts?

Thank you,

Bye,

M.

Assignment 2.2 – Friedman

I would like to give a contribution to the reviewing the Friedman’s paper, and then I would refer to my post concerning “Business of business is to make profit”, only because my opinion have not being changed after collecting all the information.

Friedman’s sayings that I agree with are mainly concerning the viewpoint of business as the person, and that we would have to change the perspective and look into the actual participants of the business itself – meaning – people. People are those who have the responsibility, from the shareholders to the very last assembly line worker in one company.

What I would agree more, is that, eventually, businessman are all about the profit, but only if we would look from the capitalism perspective. What I am suggesting in my previously mentioned post is actually socially responsible capitalism, which is also proposed in the documentary – “Not business as usual “.

Now, referring to the paper writing:

Friedman repeatedly mentions term SPENDING, and let me quote :

“For example, that he is to refrain from increasing the price of the product in order to contribute to the social objective of preventing inflation, even though a price increase would be in the best interests of the corporation. Or that he is to make expenditures on reducing pollution beyond the amount that is in the best interests of the corporation or that is required by law in order to contribute to the social objective of improving the environment. Or that, at the expense of corporate profits, he is to hire “hardcore” unemployed instead of better qualified. In each of these cases, the corporate executive would be spending someone else’s money for a general social interest. Insofar as his actions in accord with his “social responsibility” reduce returns to stockholders, he is spending their money. Insofar as his actions raise the price to customers, he is spending the customers’ money. Insofar as his actions lower the wages of some employees, he is spending their money.“

In common business, spending is something that will never have the return side (in proper form). That is why I would have to suggest a slight modification of his wording and instead of spending, would try to introduce the word investing . Why to invest if it is obviously a cost for a company? I would incite to more thoughts with upside- down example. What if company would not leave its prices low, insofar ignite the inflation, insofar depress the value of the market and money, insofar decrease the purchase power of the society, insofar get to the problem of demands on destroyed market?

Investing in the society will eventually be beneficial with number of reasons. Strong purchase power, high employment rate, stable currency, more stable public budget, thus creation of more educated or skilled workers, etc.

Next quotation:

“On the grounds of consequences, can the corporate executive in fact discharge his alleged “social responsibilities”? On the one hand, suppose he could get away with spending the stockholders’ or customers’ or employees’ money. How is he to know how to spend it?”

Why executives are put in such a degraded as they are not to be so skilled as they should? Actually, they don’t need to know how to spend money, but need to manage to get things done up to the end goal.

I also believe that no executive knows how he /she should spend the money on investment of the “new product for the new market”, but he/she should know how to find proper employees to deal with the challenge.

What I would also need to argue is next opinion:

“The difficulty of exercising “social responsibility” illustrates, of course, the great virtue of private competitive enterprise–it forces people to be responsible for their own actions and makes it difficult for them to “exploit” other people for either selfish or unselfish purposes. They can do good–but only at their own expense.”

People should always be responsible for their actions, which is good regarding the next part of the sentence. But the last part is again altered in my opinion. The one could do good and look at it as an investment, not expense. Of course, considering Jones theory of the bounded rationality; with less planning, the greater is the risk that the investment goes without profit. Because of our bounded rationality, everything is about making constant decisions about priorities and trade-offs, that is why we sometimes will have to have an impression of “doing good at my own expense”.

In one of the next statements, Friedman speaks about the imposing larger taxes and puts it as spending the proceeds. I would like to question myself again. Is it that if the taxes are raised, that means that more money is going to the public budget, which should lead to the overall prosperity of the society, eventually? Meaning, creating more education for people, better market, better life for the people? The question arises: What is happening with the (in most cases) larger portion of the proceed of multinational companies which is not staying in the country? Does it not have a negative effect on the society, thus on the workforce, thus on purchase power, thus on the profits?

As the last reference to the paper:

“there is one and only one social responsibility of business–to use its resources and engage in activities designed to increase its profits so long as it stays within the rules of the game, which is to say, engages in open and free competition without deception or fraud.”

I remember that Friedman would like to say that every society runs on greed. If that is true, who should put the rules of the game, and who should define deception or fraud? Richer layer of the society, or the rest of the world?

At the end, a little controversial point of view when comes to Friedman, but interesting to see:

Assignment 2.1 – “Germany removes University Fees – what we Should Learn from That”

“All German Universities will be free of charge as of this year. The last German area to remove fees, Lower Saxony, has officially done so, in what promises to be a historic moment for German (and European) education.”

The introduction line in the article from the headline pretty much explains the point of the article, but for further reading, please refer to the link.

I will try to be concrete in following lines about the RAM (Rational Acting Model)and BR (Bounded rationality), but before that, I would like to underline the difference between the US Universities and EU universities approach.

More and more Universities in the EU have a “no fee” approach towards the high education, while in the US, approach is different and they do charge hefty fees.

Well, by my opinion which was also mentioned in the article, US sees the education from the business point of view, or in other words: “Pay to sway”. EU countries on the other side, see the education as the investment in the development of the country itself, by providing equal chances to successful students to learn, thus opening a new market of “smart brains”, thus improving the market for companies to invest into the area full of “brains” and improving the country image of taking care of the young people to perfect the knowledge in the area of their interest. That would be my point of view while tackling these two theories about the reaction.

RAM:

• World Universities rankings and more comperhensive researches do not show that the German universities are very popular (for furher information, see rankings). Therefore, the main “players” (British and US universities) can leave their system of education with fees – on. Why? Because, if anyone wants to get into the top ranking University, he / she will have to pay the price, and the price will always be paid. The same model should not be followed if the University is not in the first 100 ones (as we can see, majority of  German Universities are not in first 100). The argument on that is it will not be interesting for most of the students to search for some mediocre University, and still have to pay a fee. But, it might open a new market of the private loan companies who would, eventually enable some poor students to try, educate and look for better opportunities in life. In that way, Universities will not get more “popularity”, they will still have the obstacle of the money needed to study, and they will create a non popular market of money loaner firms, which is not such a sustainable market if looked on the US example.

Concluding this point: German Government realized that the education will not be a profitable branch because of the popularity of other ones, therefore, it should be at least more equal for successful students to study and popularize the same faculty (University).

• Secondly, why only the rich ones should be considered as the smart ones? Abolishing the study fees means that the gates are more open to every societal level, and the only measure to judge the eligibility is knowledge and skill testing. Creating such atmosphere is good in many reasons, but simply follwing the RAM model it is:
  • Evidence: Well educated people contribute more to the society
  • Belief: With more well educated people, a greater market of smart people will be created
  • Action: Create a more available atmosphere to create more- well educated people.
• Thirdly, if number of great students approach these Universities they could benefit Universities as well. With greater minds, come greater advancement or inventions, or… innovation. This way, it could be expected that Universities, in order to meet students’ needs will be constantly encouraged to change form of education, thus improve it more rapidly.

B rationality:

When, on the other hand we look from the perspective of bounded rationality, we could argue the efficiency of the decisions made.

• First of all, it is broadly accepted that the history repeats, and it should be that it will repeat regardless of the input, or changed circumstances. Loop of actions is partially copied from the Swedish, Norwegian and Danish systems, but with different regulations, different circumstances (lower monthly dollar, industry more oriented to the production, etc) it could be a different outcome for the Germans. What might happen is that the investments in the high education become so high, that the Germany will have to focus on the other areas of industry and eventually abandon the idea of enlarging the capacity, promoting quality, and lastly, but maybe most importantly – will have to stop innovations in the education system.
• As prediction depends on the information, emotion (let’s say culture for this example) and future situation (let’s say political situation for this example) it cannot be anticipated that all circumstances will be the same as in the mentioned three countries (by the information gathered). After all, there is a vast number of Eastern European students who would like to improve the knowledge, but were not being able to do before, because of the – fees. Climate and social situation in Germany is more acceptable than in Nordic countries, so it could be believed that the new system will support international, more than German students. That could put aside the German primary education system and create under educated German social level, that could’t fit the education system needs. Needless to say, German people are not in such a need to finish faculties in order to… live the life normally, so the determination and motivation of the Germans to go to the faculty could be expected to be, slightly lower.
• Making trade-offs. In this particular case, Germany decided to give away their profit from potential students, in order to “invest” in the German future. From my point of view that is good for now, but the Government should be aware of the consequences if.. another trade-off, or re-prioritizing steps forward once again.