Business Behavior in a Changing World - Literature review Example

Business Behavior in a Changing World Introduction Alice Carroll wrote in Alice Through the looking Glass, “Now here, you see, it takes all the running you can do to keep you in the same place. If you want to get somewhere else, you must run at least twice as fast as that” (Crowther & Green, pp. 56-59). Without any doubts, over the past few decades or so, the business world has changed completely and has become a ruthless and competitive place where “survival of the fittest” has become the order of the day. Statistics reveal that only four of the companies that were a part of the Fortune 100 companies in 1900 have able to survive until the current date. Moreover, out of top 12 companies that appeared on Dow Jones index in 1900, only General Electric (GE) is the one that exists (Murray, Poole & Jones, pp. 18-23, 79-83). The bottom line here is that never in the history before these firms have felt need to maximize their profits. However, important here to note is that due to factors like revolution of information technology, globalization and faster communication have created a generation of well-informed customers and coupled with other factors, the bargaining power of customers has increased significantly. As Michael Porter identifies that, a firm can choose between differentiation and cost leadership as their strategy. The problem with differentiation is that now every industry has many competitors who are ready to imitate and imitate efficiently, thus eliminating the competitive advantage. Therefore, the only possible way to survive in the market is with cost leadership. Firms now constantly try to engage into actions that can provide them with cost advantages. In other words, managers are now working in light of the “rational choice theory” (Huczynski & Buchanan, pp. 124-126). This paper is an attempt to prove the point, with help of examples that almost all corporations today are working according to the rational choice theory and trying to act as “maximizing entrepreneurs”. Discussion It is important to understand that the rational choice theory argues that managers and organizations constantly engage themselves into actions that maximize their benefits and minimize their costs. However, in this process managers and corporations only consider extrinsic costs and not the intrinsic costs. Intrinsic factors such as guilt, social responsibility, sustainability, shame and others are of no value for these people. They put their own personal advantages over others (Zey, pp. 45-49). Let us consider the example of Levis in this regard. It was in 1995 when Levis found itself in turbulent situation operating in a 2 billion US dollars fashion industry as the market leader, especially in women jeans. However, with the changing times, fashion in jeans meant more styles, more colors and better fit and it became a nightmare for a push based manufacturing company like Strauss to survive in an industry were customer tastes were changing over night. More importantly, it was happening in an industry where it took around twelve months for an average from ordering the cotton fabric to selling the final pair of jeans. Despite the fact that the business was profitable but the ROI was shrinking with new customer’s demands and Levis had sensed improvement in the value chain has become imperative (Tidd, et.al., 1997). In the fall of 1994, Levis introduced a new, creative, and innovative concept of “Personal Pair” kiosks in four of Original Levis Stores. With the help of Custom Clothing Technology Corporation and specially trained sales clerks with touch screen PCs, Levis offered their customers the freedom to order their own type, design, and size of jeans that would be made available within three weeks time. Statistics showed that this was a phenomenal success for the company and unit sales went up by more in 49 percent by end of 1996. Starting from four, Levis by the end of 1994, it has expanded to create 60 personal pair kiosks. Moreover, it was charging 15 US dollars higher price than on others jeans. Important here to note is that through this process, Levis had cut their costs of inventory storage, factory warehousing, wastages, retail outlets, sales and promotions and others. The same is true for all other firms of today. All corporations are searching for ways that can help them maximize their profits (Zey, pp. 45-49). More importantly, the pressure of maximizing profits is so immense on the corporations that they are not ready to consider the societal or long-term costs that they incur in the same. For example, recently, there have been many campaigns regarding the safety and health issues arising by the use of various products and services. Despite knowing the fact that obesity has become a major problem in the US and the likeness of finding an obese person in a sample has quadrupled over the last few decades, yet Hardee came up with their Monster Thick burger. According to the official figures, this “monster” burger comes with 1410 calories and 107 grams of fat (Murray, Poole & Jones, pp. 18-23, 79-83). Important here to note is that these figures for one burger are much higher than the recommended fat intake for the whole day. For the past few years, many consumer magazines and media sources have highlighted issues like injurious design of automobiles, carbon monoxide poisoning by room heaters, electrical dangers in appliances, injury risks by lawn mowers and others (Crowther & Green, pp. 56-59). Deliberate designing of products in such a way that they go obsolete before the actual need of a new model or replacement arises is another example of companies putting their profits ahead of the concerns of their customers. The perfect for this could be the Refilled printer cartridge industry. Refilling the printer cartridges costs around half the price if the cartridge, around eight to ten times and it almost gives the same performance. However, these companies are trying to play it smart by introducing new models, tweaking inkjet cartridges and loser tone containers. In other words, companies now work on the idea of planned obsolescence. Owner of a small cartridge refilling company named Laser Logic said, “It’s kind of a Mission Impossible; at the end of this tape, the toner cartridge will self-destruct” (Huczynski & Buchanan, pp. 124-126). Furthermore, many companies and their managers keep on continually changing consumer concepts of acceptable styles so that earlier buying by the customers could be reinforced. Clothing and fashion industry is an example. Furthermore, many companies also deliberately try not to bring the new models in the market until and unless the current ones go obsolete. Microsoft and Intel have been facing these types of allegations where questions have been raised over the late launches of new generation of computer models, chips, and softwares until and unless all the market has been skimmed with the existing products. Nevertheless, managers are also charged guilty for selecting materials for their products that would rust, tear, break, or rot sooner than expected, especially for products where the demand is inelastic (Zey, pp. 45-49). Now, one may argue here that today many companies are increasingly understanding and applying the concepts of social marketing, sustainable business practices, environmental marketing, enlightened marketing, corporate social responsibility, and green marketing. Consider these examples. Despite incurring high R&D and manufacturing costs, Levis has come up with 100 percent organic jeans made organic and natural compounds with least possible artificial substances present in it. Viva publicly announced in 2007 that from onwards it would its ducks to swim. Moreover, it also promised to reduce the flock sizes and that it would pay more attention towards the health and environmental conditions of its ducks. Quite understandably, it appears not to be purely profit maximizing decision but it would definitely save the ducks from eye infections, blindness, filthy and disheveled feather and other diseases. Important here to note is that prior to this announced, almost all of the 19 million ducks sold in the United Kingdom every year did not get a chance to paddle their feet in water even once. Despite the fact that heavy metals like mercury, lead, aluminum, and cadmium were relatively the cheapest raw material for Sony, yet due to its harmful effects on consumers it has decided to reduce their amounts (Murray, Poole & Jones, pp. 18-23, 79-83). UPS has redirected its energies towards adding environmental friendly and cleaner trucks to its distribution chains replacing the traditional smoke belching diesel trucks. Under the banner of Xerox Corporation Equipment Remanufacture and Parts Reuse Program, Xerox is now able to prevent more than 120 million pounds of waste materials being left in the dumps. In this way, not it saves energy but it also has allowed Xerox to achieve a cost advantage. The idea here is to recycle the used products in such a way that either they could be used to make new products or can be given a new life. Every year, Timberlake allows its employees to take official leave of around 40 hours for pursuing volunteer or social work (Crowther & Green, pp. 56-59). However, a careful analysis would reveal that these actions are not being done in the sense of goodwill; however, in some way or the other, these investments are undertaken with consideration to the return on investment that the companies would be getting out of these. They understand that it is becoming harder and harder to reach customers through the traditional methods of marketing. Moreover, there is a growing trend of ethical consumerism in the European and American countries. Therefore, these actions are not nothing but merely stunts for capturing consumer attraction and having their goodwill (Huczynski & Buchanan, pp. 124-126). Works Cited Crowther, David, & Green, Miriam. Organizational theory. CIPD Publishing, 2004. Huczynski, Andrzej, & Buchanan, David A. Organizational behaviour: an introductory text. Pearson Education, 2007. Murray, Peter, Poole, David, & Jones, Grant. Contemporary issues in management and organizational behaviour. Cengage Learning Australia, 2006. Zey, Mary. Rational choice theory and organizational theory: a critique. Sage Publications, 1998. Read More