Marketing Midterm #1
Based on what we know now about markets, why did the planned economies in the Soviet Union and China fail/falter?
1. A centrally planned economy, also known as a command economy, is an economic system in which a central authority, such as a government, makes economic decisions regarding the manufacturing and the distribution of products. 1. Property rights not protected - not a lot of ownership in those economies so workers did not have a lot of motivation to work i. *In many industries, people had no incentive to work harder to try to do something differently - they had incentive to show up but they didn't own the property and weren't going to get anything else out of it 2. Corruption in Russian gov could lead to 5-15% increase in price of goods and services - shuts down information and prices go up and it breaks trust - no trust in the market when corruption is present 3. Set salaries: In many cases, prices were set, not based on cost or accumulation of value in the value chain, but set by the gov - not easy for individuals to get info about why the market was the way it was
What makes a market a market? What are the characteristics of a market transaction? Give examples.
1. A market for something exists if there are people who want to buy it and people who want to sell it 2. A market brings forward demands from consumers, it's a venue to match buyers and sellers, 3. Market transaction: an exchange that is voluntary - participation is voluntary - each party can veto it - each freely agrees to the terms (subject to the rules of the marketplace) 4. Market is the forum in which market transactions happen.
How does the Internet mimic the original bazaars? What is the same? What is different? Give examples.
1. Certain kinds of transaction costs have been lowered by the internet: the cost of acquiring info, the time, effort, and money needed to learn what is available where and at what price. 2. The internet and original bazaars are not perfectly frictionless markets. 3. On the internet, the costs of locating sellers or learning their prices are close to zero. 4. The remaining transaction costs are more subtle. They come from difficulties of observing quality. 5. The need for buyers to be able to trust sellers has been heightened by the internet. 6. The internet quickly and cheaply connects people anywhere in the world 7. It has transformed markets by allowing exchanges between buyers and sellers who might not otherwise find each other 8. eBay and Amazon and other platforms create a global market for goods that could only before exist on a local level - Internet auction brought active trade in goods - Mimics original bazaars with auction-style bidding - People place bids on an item and can drive the price up 9. What is different - the internet reduces transaction costs incredibly 10. Cost of acquiring information, time, effort and $ decreased 11. Companies can bypass the "middleman" / middle buyers and access consumers directly 12. Useful tactic for startups to exist and thrive - EX: Marketplace for 2nd hand books - Amazon 13. Old books available on the internet - EX: Stock exchange used to be a physical place (NYSE), now anyone can trade online
Why does small-scale production go together with low national income?
1. Fewer supporting industries 2. Minimal competition 3. Where labour is cheap and capital is scarce, firms use simple equipment for which a small scale of equipment is economical. Firms in poor countries are small, in part because, they should be small 4. Furthermore, firms in poor countries lack the market-supporting institutions that enable firms to grow and, if they do grow, to operate efficiently
How do markets get messed up? Give 3 specific examples.
1. Government hampers market growth - Obstructs markets --EX: Russia - Business operates under state harassment - Gov. officials take bribes from firms - Firms have to pay corrupt officials and criminal gangs --More corruption = less growth 2. Externalities - Congestion: Americans lost 4.5 million hours stuck in traffic - Total negative spillover from driving- congestion, pollution and accidents- totalled $446 billion - Markets must account for externalities and impose policies to limit them → subsidies and taxation 3. Monopolies - Need competition - Competition changes the balance of bargaining power - If buyers have options, they will have more power - Competition lowers transaction costs - Likelihood the seller will have the lowest transaction costs - Competition helps discipline firms - Firms with lowest costs are rewarded with higher sales 4. Hyperinflation - Growth is too fast - Role of the Fed
When markets are in trouble, what are 3 mechanisms that can be used to help repair them. Give specific examples.
1. Government intervention - Provide support, subsidies, regulations - Airline industry 2. Central Bank - Buys stocks... directly props up stock markets 3. Fed can change rates - Tariffs --Fed is 'propping up' the stock market by keeping interest rates low - Increase production within the U.S. to make the nation more self reliant
List and explain three mechanisms that are used to set prices in markets as explained in Reinventing the Bazaar. Give specific examples.
1. Individual Pricing - Bazaar merchants giving different customers different prices 2. Competition - Apple v. Samsung - Pricing: if multiple people are selling the same thing they will look at each other to set prices - In neglecting tropical diseases and in setting drug prices high, the pharmaceutical companies are responding to the system they are in: they are reacting to the incentives of the marketplace 3. Auctions - Let buyers influence each other to set prices and pressure prices to increase - In a Dutch auction, a company reveals the maximum amount of shares being sold and sometimes a potential price for those shares. Investors then state the number of shares they want and at what price. Once a minimum clearing price is determined, investors who bid at least that price are awarded shares. If there are more bids than shares available, allotment is on a pro-rata basis--awarding a percent of actual shares available based on the percent bid for--or a maximum basis, which fills the maximum amount of smaller bids by setting an allocation for the largest bids
List and explain the five conditions of a well-functioning market.
1. Information flows smoothly i. Buyers need information about price, quality, sourcing, where the product is from, how long it takes to get, alternatives? (important that info is available when you don't know sellers personally) ii. Sellers want to protect cost of manufacture/production, specifics about supply chain or manufacturing processes - not always ethical or something about it gives you an advantage iii. Mechanisms that help info flow smoothly: customer reviews, word of mouth, friends iv. *critical for a market to function - information has to go back and forth so buyers and sellers get what they need 2. Property rights are protected i. You can't sell something you don't own ii. Rights that need to be protected: Intellectual property, copyright, patents iii. Relationship between property rights and productivity: If you own something, you're more likely to work for it - laborers in china working on a communal plot of land and giving forth x amount of effort (amount of effort they thought was expected), but when the chinese government turned over land ownership to the laborers themselves, they knew they could leverage that land for their own benefit and they became more productive and were able to use the land more effectively iv. Role of government: has to protect those rights, provide a structure in which a company can get a patent and make a claim about a particular type of intellectual property, create regulations around property ownership and enforce those regulations to make sure they are not violated and when they are they take action 1. Ex: USAID worked with governments to make sure that land ownership/ the transfer of land was really clear so people had a clear title to their land and use it as an asset to borrow money bc land ownership rights are not very clear in every country 2. Ex: truck drivers in Vietnam - none of the trucks were working until the gov gave them all to the truck drivers then suddenly all the trucks worked again relationship between property rights and productivity 3. Ex: divorce - depending on the way a gov structures ownership of assets in a marriage - diff distribution of assets in a marriage for diff countries/states 3. People can be trusted to keep their word i. Role of trust in markets: 1. Ebay and open auctions - buyer would be willing to pay more money for something with better reviews ii. How do you know if you can trust someone in a transaction: 1. Reviews, reputation of the brand, your friend trusts them iii. Consequences of breaking trust: 1. lose business 2. people have other choices and can take their business elsewhere 3. breaking trust is even more punitive with social media - stakes are higher now for companies that break trust bc they would face the wrath from social media 4. financial consequences are severe because they count on that repeat business 4. Side effects on third parties are curtailed i. When we have a market transaction, we may inadvertently or purposely do something that causes someone else harm - externality - something that happens as a result of our transaction that is not directly related to us but impacts others not involved in the transaction ii. How can action in the market negatively impact others? 1. Environmental effects - factory giving off pollutants into a stream that goes into the town's water, air pollution impacts everyone 2. as a result of apple having a factory nearby, maybe real estate prices go up beyond what people can afford iii. How can a transaction positively impact others? 1. Vaccinations - if you buy them other people wont get sick 2. If you get a degree - positive effects for society 3. Corporate philanthropy 1. Buy their products able to use that money for charity 4. Duke university opens up the library and the gardens to the larger durham community - people outside of duke can use those facilities 5. Competition is fostered i. Benefits of competition: 1. Drives innovation 2. Better prices 3. Research and development - someone always coming up with a better product than you - can lead to innovation 4. More variety of products 5. More players in the market - more economic impact ii. How is competition prevented? 1. intellectual property 2. Monopolies 3. Government interventions can push business towards a particular organization 4. Time controlled patents 5. High barriers to entry to industry - it costs too much to build airplanes - wont be able to participate in that market 6. Technology - sometimes its difficult to understand or replicate a particular technology so you cant make the same thing iii. How is competition fostered/promoted? 1. Silicon valley promoted the sharing of ideas between firms - positively impacted competition 1. Industry cluster working together and sharing ideas pays off 2. Role of government: 1. can either shut people down, being the monopoly itself or helping to foster a monopoly, make it so that it's difficult for companies to enter a particular industry because of regulations or other high barriers to entry 2. gov can foster competition by giving grants for entrepreneurs, innovation prizes, pushing industries together in clusters and encouraging them to collaborate,
Why does McMillan call the market the "only natural economy"?
1. It evolves spontaneously and grows holistically, driven by its participants 2. It can operate with little or no formal structure - but only up to a point. To reach a degree of sophistication, its procedures need to be clarified and an authority given the power to enforce them. 3. Only when the informal rules are supplemented by some formal rules can a market reach its full potential, with transactions being conducted efficiently and complex dealings being feasible 4. Prisoner of War (POW) camps - Markets still arose - doesn't necessarily need a structure, can spring up naturally 5. *Participation is voluntary, you cant do everything yourself, need to work with others to get your needs met - something that happens naturally 6. Grows holistically based on who is involved in the market
Why do we have markets at all according to Reinventing the Bazaar?
1. McMillan argues that the economic function of markets is largely to aggregate the dispersed information of thousands of traders into a signal, in the form of prices, of value and scarcity. 2. Markets are powerful, imperfect tools (the best we've found for improving our living standards) 3. Markets improve lives: - Most reliable path away from poverty in poor countries - Needed to sustain in affluent countries 4. There is a demand for markets to exist from consumers: - Fulfills societal needs - Self-actualization needs (self-development and realization) - Self-esteem, recognition, status, - Social needs: sense of belonging - Safety needs (security and protection) - Psychological needs 5. Turn to the market to create transactions that they want met → buyers and sellers come out happy 6. This creates an incentive to keep a market going rather than just having the government own and operate everything
How does ownership of property influence one's participation in markets? Give examples.
1. Ownership is the strongest source of incentives in markets. 2. It motivates you to learn about the asset's best uses, to maintain it and not run it down. 3. Things that are owned in common often are not well kept. 4. Secure property rights are the surest motivation for productive effort and risk-taking in the market. 5. if you own something, you're more likely to work for it - 6. Ex: laborers in china working on a communal plot of land and giving forth x amount of effort (amount of effort they thought was expected), but when the chinese government turned over land ownership to the laborers themselves, they knew they could leverage that land for their own benefit and they became more productive and were able to use the land more effectively. The amount of land planted in rice nearly doubled in one year, and the village began producing a rice surplus.
How does corruption affect markets? Give examples.
1. Reduces the trust to the central banks and the banking system and the gov 2. Reduces foreign investment because of instabilities 3. Prices increase because there are more middle people 4. adds perhaps 5 to 15% to the price of goods and services 5. Less investment and less growth 6. Given that corruption exists, it does less harm to markets if it is monopolized than if it is free for all. 7. Ex: Corruption is one of Russia's most prevalent crimes; each year prosecutors uncover around three thousand cases of bribery of government officials → less foreign investment
What is shock therapy? Why was it needed in New Zealand and Russia?
1. Shock therapy: more sudden change instead of implementing gradually, moving to an open market system, making really rapid radical changes in policies or the economy 2. New Zealand: the magnitude of new zealand's problems justified the radicalness of shock therapy - inflation, unemployment, government deficit, trade deficit, foreign exchange crisis i. The main argument against using shock therapy in general - that it hinders the development of needed economic and political institutions - did not apply to New Zealand, for all the institutions were already in place. 3. Russia: centrally planned market to a free market due to inflation and corruption. Political and economic institutions were imploding. i. Abolished price controls (immediate decontrol of prices) ii. Learned how to balance the government's budget iii. Rapid privatization of former gov industries - free for all and the rapid privatization of firms. iv. Shock therapy was important here but didn't work as well as it did in other places
How can the market be used to protect the environment? Give examples.
1. The government can use the market to help it reach its policy goals. 2. Ex: The Clean Air Act of 1990 brought in emissions allowances - licenses that allow the holder to emit one ton of sulfur dioxide in one year. - They were introduced to help the government control pollution more efficiently. - The amount of pollutants emitted fell 30% below the ceiling the government had set. - Environment groups sometimes buy emissions allowances and hold them inactive to further protect the environment 3. The market can use incentives to create regulations to protect the environment - Purchase and sale of pollution permits - Used to reduce overall pollution - Clean Air Act of 1990 --Created right to pollute --Allowed to emit 1 ton of sulfur dioxide / year --Allowances were tradable -Protecting environment should not be left up to market alone
How should we determine what should be for sale in the world according to Satz? Defend your answer.
1. Two lenses: - Corruption argument: looks at the intrinsic character of certain goods and claims that when we put certain things up for sale we're valuing them in the wrong way. According to corruption lens, it's a moral mistake to treat some items, like body parts, as commodities because it degrades who you are. --Issues: ---There is often a gap between the way we value things and their price in the market ---We may be able to buy and sell things without expressing a degraded view of them - Her scale --Weak agency: Information gap, ex. Mother surrogate can't give up her baby, parents giving their kids to child labor, etc. --Vulnerability: inequality... when people come to market with varying levels of information. Ex. recent disaster area where people charge $100 for bottles of water --Extreme outcomes: render a person destitute, etc --Extreme harm to society: Some markets may condition people to be docile servers or passively acceptive of a status quo
Why are social networks critical for marketing in the future?
1. What was once seen as a communications channel between friends now consists of multi-billion dollar platforms that have incredible influence on people's lives. (Everyone is spending their time on it; marketers would be foolish not to take advantage of the highly-utilized platforms.) 2. If you reach an influencer, it is more efficient than marketing to more people, as you are immediately reaching the influencer network (Murray Newlands reading)... tap into new audience through the influence and accessibility of social media 3. Can serve as bridge for learning and innovation
Illegal content (music and otherwise) and pirated videos could be considered products in a noxious market. Why do so many people who consider themselves to be ethical participate in this market? What should be done about it?
1. With so many otherwise-lawful citizens breaking the law, legislators must examine the motives behind this situation and act carefully. Ultimately it should be the government that decides the best way to educate, "scare," and/or punish the millions who have downloaded music illegally. 2. People who download copyrighted music claim that had they purchased the music, the money would not have gone to the artists, but to the record companies. 3. Those who are victimized are distant and unknown to us as individuals. When a backup musician loses their job because record sales have dropped due to piracy, it doesn't really make anyone feel guilty. 4. Consumers have become accustomed to the portability and transferability of music, partly because of successful marketing by the industry. 5. Unlike familiar forms of copying a recording, as in the case of "bootleg" audio tapes, the copy never needs to be a physical object but can remain in electronic form. Physical associations with theft are completely absent. 6. The very term "file-sharing" sounds altruistic. This term doesn't have the connotation of anything wrong or illegal like perhaps terms like "file-stealing" or "file-piracy" might. 7. These factors do not justify theft, but file-sharing is not simply an attack by consumers on the concept of private property. It is a demand for access to a highly valued social commodity, a demand triggered and facilitated by technology. 8. What should be done: Tell them the activity is illegal, and warn them that they may be monitored if they continue to do it.
How do you think cultural dynamics and political inefficiencies can lead to the creation of noxious markets and our perception of them?
1. weaknesses in gov. Regulation/action in the wake of trafficking issues i. gov no effectively regulating or checking their labor markets, noxious markets thrive 2. cultural factors (capitalism, sexism) can lead to offshoring labor abuses, prostitution i. capitalism - offshore labor get things manufactured in countries that have cheap labor, bad working conditions, products aren't as good ii.sexism - prostitution
How do markets positively and negatively affect the lives of the poor in the world? Give examples from Reinventing the Bazaar, Robert Neurwirth's TED Talk: The Power of the Informal Economy, or Noy Thrupkaew's TED Talk: Human Trafficking is All Around You. This is How It Works.
Trafficking: can be labor or sex → job opportunity for many people but very poor treatment and terrible condition, have to work illegally and endure cruel treatment System D: below answer for pros and cons
How does human trafficking show up in our daily lives in the US as explained by Noy Thrupkaew's TED Talk: Human Trafficking is All Around You. This is How It Works.? Give examples. What should be done about it? Defend your answer.
a. 68% of human trafficking is for the purpose of creating the goods and delivering the services that most of us rely on every day, in sectors like agricultural work, domestic work and construction. That is food and care and shelter. b. these most essential workers are also among the world's most underpaid and exploited today. c. Human trafficking is the use of force, fraud or coercion to compel another person's labor d. it's found in: i. cotton fields ii. coltan mines iii. car washes in Norway and England iv. U.S. military bases in Iraq and Afghanistan v. Thailand's fishing industry 1. Thailand has become the largest exporter of shrimp in the world 2. Thai military were caught selling Burmese and Cambodian migrants onto fishing boats. 3. Those fishing boats were taken out, the men put to work, and they were thrown overboard if they made the mistake of falling sick, or trying to resist their treatment. 4. Those fish were used to feed shrimp, and the shrimp were then sold to four major global retailers: Costco, Tesco, Walmart and Carrefour. e. Traffickers have forced young people to drive ice cream trucks, or to sing in touring boys' choirs. f. Trafficking has even been found in a hair braiding salon in New Jersey. i. The traffickers found young families from Ghana and Togo, and told these families that "your daughters are going to get a fine education in the United States." ii. They then located winners of the green card lottery, and they told them, "We'll help you out. We'll get you a plane ticket. We'll pay your fees. All you have to do is take this young girl with you, say that she's your sister or your spouse." iii. Once everyone arrived in New Jersey, the young girls were taken away, and put to work for 14-hour days, seven days a week, for five years. iv. They made their traffickers nearly four million dollars. g. What we should do about it: i. It is up to all of us to learn everything we can about the labor and supply chains of the products that we support. ii. no longer support companies if they don't eliminate exploitation from their labor and supply chains and demand laws calling for the same iii. CEOs should decide to go through their businesses and say, "no more"? iv. end recruitment fees for migrant workers v. decide that guest workers should have the right to organize without fear of retaliation vi. These survivors need solidarity
How does a market society differ from a market economy as described by Michael Sandal in Why We Shouldn't Trust Markets with Our Civic Life? Should we want to move toward a market society in the world? Why or why not?
a. A market economy is a valuable and effective tool for organizing productive activity b. A market society is a way of life where market relations and market incentives and market values come to dominate all aspects of life - it's a place where almost everything is up for sale c. We should not want to move toward a market society because: i. Inequality - money governs access to the essentials of the good life like decent healthcare, access to quality education, political voice or influence. The more things money can buy, the more affluence matters in the world. 1. The marketization of everything sharpens the sting of inequality and its social and civic consequences 2. Market mechanisms and cash incentives may undermine or crowd out nonmarket values and attitudes worth caring about 3. "Marketizing every aspect of life leads to a condition where those who are affluent and those who are of modest means increasingly live separate lives. We live and work and shop in different places... This isn't good for democracy." ii. Market values and thinking may change the meaning of some social goods and practices - kills intrinsic motivation 1. Ex: teaching and learning a. Cash incentive to read books kills intrinsic motivation i. Giving $2 for each book read - students read more but not because they wanted to learn. Only led to shorter books. This type of thing may undermine non-market values and attitudes worth caring about iii. Market society is not good for democracy 1. Democracy does not require perfect equality but it requires that citizens share a common life how we come to care for the common good
Explain how affirmative action increases representation from minorities in the workforce, according to Mark Granovetter in Economic Action and Social Structure: The Problem of Embeddedness and Social Networks and Getting a Job.
a. Affirmative action can prime the pump by putting a small number of people into that segment of the labor market who are in this underrepresented group b. Once these people are there, they can do what comes naturally and bring the people they know into the company in the way that everyone else does c. If a certain industry is populated by only one type of person, theres already a huge disparity in who has the opportunity to get into that field affirmative action is a small step into decreasing that inequality perpetuated by that hiring practice d. We tend to hang out with people who are like us and like a lot of the same things we do - when we are hiring we are looking to those close ties who are a lot like us e. Diversity is critical for innovation and important in social justice and increasing access f. Affirmative action laws make people look outside their networks
Why are understanding the concepts of exclusivity and status so critical to marketing? Give examples (Seth Godin or others).
a. Exclusivity is a human trigger - when they have access to something not many people have access to, it can motivate people to take certain actions that might be used in certain markets and campaigns b. People can be motivated to take action using marketing campaigns or some certain phrases that might convince customers that "everyone has this and you should also get in on this" c. Phenomenon prevalent in rich and poor i. In neighborhoods where people might not have as much access to money or meat Idea of buying chicken to feed their kids is not as convincing as the idea that " all of your neighbors have chicken and in order for you to not fall behind or be frowned upon, you should also buy the chicken" d. Exclusivity can influence human behavior i. 94% of Americans said they would take advantage of an exclusive offer provided by a brand that the brand does not offer to the public
Why has the food supply during corona virus stayed fairly resilient?
a. For perishable agricultural commodities: i. Harvest at steady state - multiple major growing regions all over the US to allow for seasonality - each in season at different points in time and they overlap so that any one could fail due to weather or some other shock a lot of slack built into the system ii. Inventory management at steady state - build up inventory - large reserves in system to help with culturally driven consumption iii. Lots of sources and inventory iv. Efficient commodity markets
Using the theory from "A Market for Lemons" why are used cars often sold for less than their real value?
a. It is hard to judge the quality of a used car and you are probably not willing to pay what it's really worth consumers will naturally discount the value of a used car. b. Bad cars drive out the good cars c. If you can't see the quality of what you're buying, you're less apt to pay a high price for it - you're not going to have the confidence
By many estimates, the revenue from pornography sales in the US rivals that of Netflix. Yet, getting real data on this market is very difficult. Explain how this market can be so influential and yet so difficult to track.
a. It is so influential because Porn holds a large portion of the estimated US entertainment-industry revenue, so it holds a lot of power in the economy and the market. b. This economic power is "hidden" because having sexual content is a taboo, so there are few players that monopolize the industry. Also, customer segmentation is niche, and there are many target audiences, so people don't really know the exact dynamics in the industry. c. Certain phone carriers, satellite TV providers, hotel chains, and internet sites (including Yahoo!) profit indirectly off of this industry. d. Porn industry has political influence cities that don't play by porn's rules risk losing lucrative tax revenue i. In LA, they instituted a law requiring adult performers to wear condoms on set, and subsequently saw a 95% drop in permit requests for adult productions ii. In Las Vegas, who did not institute this law, saw a 50% jump in demand
List the five psychological points of "liking" according to Neil Patel and give examples of each.
a. Liking is a form of human acknowledgement i. When you click that "like" button, you're communicating with another human being and acknowledging them in some way b. Liking is a form of trying to earn social capital i. Liking helps humans to generate social capital in their online interactions. 1. Social capital = the network of social connections that exist between people, and their shared values and norms of behavior, which enable and encourage mutually advantageous social cooperation c. To like is to assert who we are i. If you like a status that you agree with, you are publicly admitting and expressing that agreement through the simple click of the button. It is a message to ourselves that this is who we are, this is what we agree with, this is what we're all about. d. Liking is an effort to gain psychological feedback i. We like to be liked, and the numerical quantity of those likes is just as important as quality. We like because we want to be liked. ii. We like for the same reason we go to parties, go out for drinks and hang out with friends. It's about the psychological feedback. We want to be appreciated, acknowledged, recognized and affirmed for who we are. e. Liking is often a substitute for deeper levels of interaction i. The like is a risk-free form of social engagement and obligation. It's connection without the commitment.
In the article entitled, "How Leaders Create and Use Networks, the author discusses 3 forms of networks. Explain each and give examples.
a. Operational i. Helps manage current internal responsibilities ii. Ensures coordination and cooperation between people in the company that trust one another to accomplish their tasks iii. Straightforward because it focuses on technical issues and clear tasks iv. Most powerful when quality of relationships are good and trust formed between the people v. Problem on just relying on operational networking: only geared towards accomplishing tasks that are assigned doesn't ask strategic questions that makes leaders distinct vi. Ex: Alistar (accounting manager at entrepreneurial firm) 1. Promoted to financial director and given a board seat 2. Youngest and least experienced board member 3. Reorganized accounting department to enable books to withstand close scrutiny bc of a hint that the company may go public 4. Upgraded his team's capabilities, but missed the fact that only a minority of the board wanted to go public and they didn't go public 5. He wasted all this time cleaning up the accounting books when he could've been talking with his co-directors and learn more about their visions and strategic plans for their business b. Personal i. When leaders become aware of their excessive internal focus, they seek personal connections outside of their organization and in domains beyond their area of expertise ii. Sometimes difficult for leaders because they tend to lack the knowledge and connections outside of their organizations iii. By taking part in various social groups, leaders are able to meet a diverse group of like-minded individuals - allows leaders to widen their personal and professional perspectives iv. Contacts can provide referrals, offer advice on business solutions or just overall career advice and potentially help with future career moves v. Boosts personal and professional development vi. To find contacts, leaders should engage in professional associations, alumni groups, clubs, and personal interest communities vii. Problems - leaders often abandon personal networks because: 1. Lack of common interests 2. Intimidated by higher-level individuals 3. Struggle to find contacts relevant to business goals 4. Many leaders feel like they wasted their time and energy on personal networking 5. Demonstrates the importance of finding relevant contacts that can assist with business matters viii. Ex: Timothy (principal at a midsize software company) 1. Stuttering hindered job performance 2. Started to attend social gatherings multiple times a week outside of his company - diminished his stutter 3. Gained confidence to participate in company networking outside of his technical division 4. Demonstrates how personal networks are a safe approach to seeking advice and guidance for personal and professional problems c. Strategic i. Figure out future priorities and challenges in the company ii. Acquire stakeholder support for those priorities and challenges iii. Focusing on broad strategic issues is crucial for those who want to transition from functional manager to business leader 1. Network with people with diverse affiliations, backgrounds, objectives, and incentives iv. Successful leaders know the people/groups they need to reach out to and network with - separates leaders from managers v. Rewarding but difficult to master vi. Problems: not accounting for the wider market and how those changes affect companies internally vii. Ex: Sophie (manager) 1. Career going well, getting raises 2. Found out her CEO was planning a big reorganization that would take away many of her responsibilities 3. While she was doing well at her job and had strong relationships with her team, Sophie didn't realize that the priorities of the wider market were shifting, leading to the internal reorganization 4. She tried to argue her way out of it but was unsuccessful because her boss didn't think she knew enough about the broader longer term perspectives of the company because she hadn't networked externally / strategically
Discuss the pros and cons of using AI headsets to increase student concentration in Chinese classrooms. How is the adoption of this technology likely to influence markets outside China? Give specific examples.
a. Pros i. Boost concentration in the classroom, help instill discipline, boost grades ii. For country's research and development iii. Helped teachers to analyze class effectiveness and improve efficiency iv. Teachers say that "students now pay better attention during class that has made them study harder and achieve higher scores" b. Cons i. Less separation between school and home ii. Narrowing intelligence into a box if you can focus you are smart, iii. kids could have a more negative view of themselves if they don't get a good score from the headband mental health concerns iv. privacy concerns, ethical concerns v. children are weak agents vi. students receive punishment for not focusing in class vii. potential false readings c. technology influence markets outside of china: i. other countries may adopt this use of AI in classrooms ii. increased AI jobs being replaced by robots, less employment opportunities
Describe how China is using social status to influence behavior through the social credit system.
a. Public shame included in the system - if people are caught jaywalking, they show videos of them on the nightly news and zoom in on their face for everyone to see - make it a deterrent for them to commit crimes b. App that shows who around you is currently in debt - creates a toxic atmosphere when they are using your neighbors and their feelings towards you to fear you into acting correctly c. People don't want to decrease their status motivation for them to have good behavior through the social credit system d. Local governments have asked social media companies to help orchestrate public shaming initiatives app that shows you who around you is blacklisted and another social media app partnered with a local court to broadcast photos of blacklisted people between videos (like digital advertisements) e. If you have a low rating children can be barred from attending certain schools
What are the 4 parameters of noxious markets as described by Debra Satz in Why Some Things Should Not Be For Sale and 2010 Class Day: The Moral Limits of Markets? Give examples of each.
a. Relate to the source of the market i. Weak agency: poor info and restrict your ability to make decisions in the market 1. You don't necessarily have all the info you need in order to make a good decision about what to buy or do or sell 2. often more of a permanent condition - like if you were a child, just because of your age you don't have agency to make a lot of decisions a. or if youre cognitively impaired in some way b. elderly people suffering from dementia ii. Vulnerability: large inequalities in bargaining power between market participants 1. After a natural disaster (hurricane in NC and corona), price gauge - really need something and supply is limited im vulnerable 2. More circumstantial - storm that wipes out home, financial crisis that leaves you vulnerable, etc. b. Effects of the market i. Extreme harm to individuals: outcomes that leave basic individual needs unsatisfied 1. Child labor - kids not being taken care of they're taken away from their families ii. Extreme harm to society: markets undermine the ability of individuals to interact as equals 1. Long term permanent damage c. Ex: Child labor has all 4 i. Weak agency - children have weak agency, put to work against their will ii. Vulnerability - may come from poor families, vulnerable situation iii. Harm to individuals - many documented cases of children not given breaks, working long hours iv. Harm to society - gateway to other abuses, if we see this a lot it makes it more acceptable d. Ex: Carri Smith i. Sold permanent space on her forehead to get $10,000 to send her son to private school ii. Vulnerability - shes doing it so she can send her son to school, her only choice iii. Weak agency - to make this decision, carri doesn't necessarily have all the info about how this will impact her long term 1. Wont necessarily be taken seriously at a Job interview e. Ex: Dwarf Tossing i. Bar game in Australia in which contestants compete to throw dwarfs at a velcroid wall ii. Harm to individuals - people can get hurt, embarrassing, demeaning iii. Harm to society - set a precedent that its ok to treat people this way, disrespecting individuals what does this say about us f. Ex: blood diamonds i. Weak agency - people mining them ii. Harm to individuals - dangerous occupation iii. Harm to society - distorts the market, doesn't make things a fair playing field in the economy iv. Possible vulnerability g. Ex: boarding school i. Weak agency - young children sent away very young by their parents ii. Harm to individuals iii. Possible harm to society h. Ex: Addictive drugs i. Weak agency ii. Harm to individuals iii. Possible vulnerability iv. Possible harm to society i. Ex: Cryptocurrency i. Harm to society - extreme amount of electricity that it uses 1. In places where electricity is supported by the gov, it could be pulling resources away from education, food, law and order, democracy, etc. j. Ex: commercial surrogacy i. Weak agency - sometimes people are placed into surrogate positions to have a child and they don't have a choice ii. Possible vulnerability iii. Harm to individuals - they can be very young so their bodies can be harmed k. Ex: prostitution i. Possible weak agency - if someone is forced into prostitution ii. Vulnerability - sometimes people don't want to prostitute themselves but have to for financial reasons iii. Possible harm to individuals - depending on type of prostitution, it can make someone vulnerable to violence iv. Possible harm to society
Should we encourage the use of cryptocurrencies in the world? Why/why not?
a. So many are trying to do these computations to validate these transactions around the world so that they an get bitcoin - bitcoin mining takes as much electricity as Ireland or Switzerland uses in a year - Huge drain on planet's resources i. A lot of bitcoin farms are in countries where the gov has subsidized the cost of electricity so its low b. Many people try to hide their money in bitcoin so they don't have to pay as many taxes c. Bitcoin is permissionless and irreversible - gov cant stop you from using/buying bitcoin and cant undo a transaction i. As money with a limited control of supply taking some of the power of central banks away ii. Governments lost control
What is system D and why is it important according to Robert Neurwirth's TED Talk: The Power of the Informal Economy?
a. System D is traditionally called the "informal economy", the "underground economy", the "black market", b. System D from French word "debrouillardise", meaning "self-reliant" - System D is the "economy for self-reliance" or the "DIY economy" c. It is important because 1.8 billion people (2/3 of the workers of the world) work in the informal economy huge number d. If it were united in a single political system, one country, it would be worth 10 trillion dollars every year, which would make it the 2nd largest economy in the world, after the US e. Given that projections are that the bulk of economic growth over the next 15 years will come from emerging economies in the developing world, it could easily overtake the US and become the largest economy in the world implications of that are vast because it means that this is where employment is and this is where we can create a more egalitarian world because people are actually able to earn money and live and thrive f. P&G's largest market segment is something that they call "high frequency stores" (all the businesses that exist in System D) - P&G makes 20% of its money from that market segment, the only market segment that's growing g. this economy is a tremendous force for global development
How do Central Banks like the Federal Reserve support markets and help influence the "speed" of the economy as outlined in Reinventing the Bazaar and The Federal Reserve: Why that Dollar in Your Pocket is More than Just a Piece of Paper? Give examples.
a. The fed controls interest rates so as they go up, it encourages people to save money because people can put disposable money into the market and make more money b. Slows down consumption and help control inflation - too much money chasing too few goods i. In Venezuela, a gallon of milk costs $7.46 - the price of goods and services are changing daily and there is rapid inflation makes the currency a currency that other countries don't want to invest in c. As interest rates go down, people borrow more - spurs the economy because people have more money to spend i. Everyone now wants to buy homes because the interest rate is lower than it has been for a long time. Being able to borrow money at only 2.3% is pretty attractive ii. If you are a farmer and have to buy a tractor or grain silo, it's a good time to borrow money to invest in your business d. How the stimulus is paid for: Federal reserve and banks buy bonds from the US treasury treasury now has money to invest in infrastructure (building more bridges or investing in health care, etc.) and loans to business people who really needed it got $600 cash
Why are Instagram and some other social media sites piloting the removal of public likes on their sites? What is likely to happen to the use of their site as a result? Defend your answer.
a. They wanted to shift their focus away from feedback and validation to content. b. This change has made it a challenge for new influencers and brands to gain market traction organically c. Like numbers for many countries who have stopped showing likes have gone down between 3 and 15 % d. Many companies and brands are arguing that it has been really detrimental for influencers and brands who rely on this platform e. Likes are such a big form of validation for some people when it shouldn't be that much of a validation → mental health of people f. Negatively impact consumers and businesses - since there's no form of validation for that business, its like getting rid of their form of reviews -you don't really know if it is a good or established company if the likes are gone
In the Adidas vs. Payless lawsuit, what arguments did Adidas use to win the case? Describe two. Why do you think they were effective?
a. To prove Adidas' charges of infringement i. Payless's use of designs similar to adidas's three-stripe trademark or Superstar trade dress caused consumers to be confused about who had manufactured the shoes ii. Adidas charged that confusion of two other types occurred in the marketplace as a result of Payless's actions 1. Initial-interest confusion: occurs before consumers purchase the product a. Payless's imitation of the three-stripes trademark and Superstar trade dress allowed Payless to capture the interest of consumers b. Ex: shoes that appeared to be adidases that were displayed in the windows of payless stores would draw consumers inside those stores 2. Post-sale confusion: occurs after the product has been purchased and is consumed or used in the marketplace a. consumers who saw other people wearing payless shoes that appeared to be adidas would be confused about which brand the shoes were, which could influence their own purchasing decisions b. these arguments were effective because of the Ford study that adidas submitted, which showed significant levels of confusion between adidas and Payless shoes i. more than 35% of consumers were confused about the source of the payless shoe, which is legally significant. c. Other: d. Payless's shoes were likely to cause consumer confusion and as a result payless diluted the adidas brand e. Adidas asserted that payless had about 30 million adidas knockoff shoes manufactured in China, selling them for about $370 million in Payless stores and generating profits of at least $120 million - adidas claimed that payless had committed, among other offenses, trademark and trade dress infringement and dilution
How does one's social networks enhance or limit one's chance of getting a new job according to Mark Granovetter in Social Networks and Getting a Job? Defend your answer/give examples.
a. Weak social ties are important in networking - expanding outside of your core group of friends gives you access to resources and opportunities that you otherwise would not have heard of, leveraging relationships to get jobs is of greater importance for higher status jobs - upper level or managerial b. 56% found new jobs through personal contacts, including more than 75% of high income workers c. Social networks are particularly important in channeling people into the best jobs that the economy had to offer d. He found that it was difficult for people to change jobs after they had been there for more than 5 years because they didn't know people in other companies e. People whose average job tenures were 2-5 years were more likely to find new jobs through weak ties than people whose average job tenure was very long or very short f. Employers prefer to hire through social networks - they trust the info better about the people who they are going to hire - that's why they go though current employers g. People will still continue to trust people they know better to find out about places they might work and employers they might hire than some impersonal source online h. If there is a group that has very poor representation in an occupation or in some sector of the labor market, then its going to be hard for that group to break in i. If white males can use social networks to bring more white males into their industries/professions, then they have an unfair advantage. j. If there are no people of different ethnicities or races already in the company, then there is a disadvantage that has nothing to do with qualifications and just has to do with the history of why those people weren't there in the first place
How does cryptocurrency work? Why does Facebook want to invest in it through Libra and why are governments and others concerned about this?
a. When someone requests a transaction, that transaction has to be validated/verified. The request is sent out to a peer to peer network who is involved in bitcoin b. Digital signature (hash) - mathematical formula/ algorithm that has to be solved in order to get that next hash number c. Several transactions validated as a block - using the numbers of the transactions and the keys that people have, the algorithm produces a new hash number d. All these computers around the world get the request for the transaction and they're trying to compute and solve the algorithm e. Once they get a new hash number, all the transactions used in that computation are verified/validated and put down in a block chain, cannot be undone i. Added a block to satoshi's original block f. People who have done the work to do the validation are rewarded by getting bitcoins g. We're supposed to run out of bitcoins eventually - limited supply h. People get them by doing the work to validate these transactions i. Mining activity is providing the security and trust needed on the network for all of us to believe in a cryptocurrency j. You know theres not corruption k. If you try to sell something twice or try to change the hash number, it would be a red flag and everyone would know about it hard to do things against the system l. Slow limited system m. Cryptocurrency has no intrinsic value itself - no physical form - exists only in the network n. Supply determined by how many people want to transact and how many miners there are and how fast they can go o. Purchases cant be tracked or taxed p. Why does facebook want its own currency? i. Users exchange money on the platform and they can use their currency - Gives them a lot more control ii. A way to unite themselves iii. Transaction costs - opportunity for new income stream iv. Why are other companies investing? 1. Immediate access to all facebook users v. Why are companies backing out? 1. Facebook is being met with a lot of backlash on the political spectrum - companies that joined first may feel like they don't want to be involved with that backlash 2. Facebook got summoned into court to speak about privacy concerns vi. People's concerns 1. US would be upset because many countries trade with dollars - taking gov out of the picture would hurt the power the US holds within the world 2. Threatening to the dollar and many currencies that are traded on and considered to be stable 3. Further confidence in digital currencies 4. Privacy concerns - brings more data into their hands to influence buyers 5. Poor are left behind because of gap in infrastructure Gateway to entry would be high - don't have access to the resources that the rich do 6. Rich often more educated will take the time and have more opportunity to understand it affects who uses it 7. People put money in bitcoin pay less taxes roads don't get paid etc cant develop or repair 8. Toll on energy systems of the world to support
List and explain ways that productivity can be increased in a developed economy according to The Federal Reserve: Why that Dollar in Your Pocket is More than Just a Piece of Paper?
a. Work longer hours - boost productivity b. Add new workers i. Decrease unemployment - generate more money in peoples pockets so they spend more -> more growth ii. Import more workers - hard now with visa restrictions c. Add more machines - automation or AI d. Improve productivity through innovation/technological change
Do markets have limits according to Debra Satz in Why Some Things Should Not Be For Sale and 2010 Class Day: The Moral Limits of Markets? Are they fair? Defend your answer.
a. while markets can make a positive contribution to society, they need limits, and some goods need to be guaranteed to all b. According to Satz, a market is noxious if it scores high on one or more of four parameters: weak agency, vulnerability, extreme harm to individuals, and extreme harm to society. While any market can potentially exhibit these parameters, certain markets are much more likely to do so. c. Not all market preferences matter for moral purposes. Some preferences are formed in ways that should prompt us to discount their importance. We may reject, for example, a market role for preferences when they express contempt for others. d. We have reasons, independent of the market, to maintain fair background conditions that prevent people from being dependent on or dominated by others in certain ways. e. the main problem with noxious markets is that they undermine the capacity of people to relate to each other as equals.
Explain the concepts in PESTEL. Give examples.
i. Asks What are the Political, Economic, Social, Technological, Environmental, and legal factors that are influencing competitiveness? ii. Ex: Tesla 1. Political a. Election coming up that could impact policy and tax incentives for electric vehicles b. Global trade agreements provide opportunities 2. Economic a. Many industries affected by corona b. Unemployment high c. Harder for potential customers to purchase new vehicles d. Costs for some of the materials like Battery and renewable energy costs are decreasing 3. Social a. Social distancing - may make it harder for people to go out and test drive cars and engage b. Increased focus on renewable energy including in developing countries provide opportunities for tesla 4. Technological a. Lots of innovation going on b. Increase of AI can decrease production costs - technological boost 5. Environmental a. Climate change b. Focus on environment somewhat overshadowed by covid c. Electric vehicles gaining popularity 6. Legal a. Nationwide framework for electrical vehicle use/charging still unclear - right now there are charging stations but what happens if we switch to 50% usage? b. Expanding international patent protection iii. Given these factors, what do I need to do to remain competitive?
According to Michael Porter, "National prosperity is created, not inherited. It does not grow out of a country's natural endowments, its labor pool, its interest rates, or its currency's values, as classical economics insists." Do you agree or disagree? Defend your answer.
i. Disagree - national prosperity can grow out of a country's natural endowments - for example: oil in the ground is a natural endowment, waterways, ports, singapore's natural endowment is its location - port city ii. AGREE → "A nation's competitiveness depends on the capacity of its industry to innovate and upgrade. Companies gain advantage against the world's best competitors because of pressure and challenge. They benefit from having strong domestic rivals, aggressive home-based suppliers, and demanding local customers."
Explain the four factors that Michael Porter considers to be determinants of national advantage in. Give specific examples.
i. Factor conditions: the nation's position in factors of production, such as skilled labor or infrastructure, necessary to compete in a given industry 1. Basic conditions: country has oil in the ground, great soil for agriculture 2. Advanced conditions: skilled labor force, sophisticated telecommunications network ii. Demand conditions: The nature of home-market demand for the industry's product or service 1. Who is buying the product? 2. How many customers in the market? 3. Better to have sophisticated demand - having customers that push firms to do better, put pressure on firms to innovate iii. Related and supporting industries: The presence or absence in the nation of supplier industries and other related industries that are internationally competitive 1. Industries that support the overall competitive advantage industry 2. Cluster around companies bc they support them 3. Ex: for an automobile industry - tire companies near it 4. Wine industry - industry that makes corks or caps iv. Firm strategy, structure, and rivalry: The conditions in the nation governing how companies are created, organized, and managed, as well as the nature of domestic rivalry 1. Conditions in the nation that govern how corporations are created, organized, managed 2. Rivalry is good - the more companies that flock to a nation the better because it improves business for everybody v. Ex: Italian Ski Boot Industry 1. Factor conditions a. Italy is in the Alps, geography that made ski boots make sense b. Skilled labor force c. Mature leather industry - plenty of cows in Italy 2. Demand a. thousands of skiers would flock to Italy because it's a good place to ski 3. supporting industries a. resorts, hotels, restaurants 4. Firm strategy - structure of Italian business, lots of companies a. successful international competitors are often small or medium-sized companies that are privately owned and operated like extended families 5. Advantages don't last forever, they can be overtaken by innovation vi. Ex: Silicon Valley and Tech industry 1. Factor conditions a. Skilled labor (nearby colleges) 2. Related and supporting industries a. University system - fuels the skilled labor i. Stanford, UC schools b. Power and electricity c. Storage facilities d. Real estate industry 3. Demand - technology is becoming more popular, more people want new technologies 4. Firm strategy: advertise innovation, newness, avant-garde (this is what Apple does)
