‘In general, if any branch of trade, or any division of labour,

be advantageous to the public, the freer and more general

the competition, it will always be the more so.’

Adam Smith: ‘The wealth of nations’

In economic terms, a market is not a place, but a process which is a result of human actions. That is, all of us act on our own behalf, but everyone’s action aims at the satisfaction of other people’s needs as well as one’s own, and the responsibility of government is to create and preserve the environment in which the market can function.

The theory of perfect competition is often seen as the ideal; there is division of labour and private ownership of land and capital, where buyers and sellers are too numerous to have individual control over price and there are no barriers to market entry and exit. It assumes that government acts to preserve the system and does not intervene.

A natural monopoly exits when the cost of producing a product or service is lower for one producer than it would be if there were many producers. Industries such as the railways, water and electricity supply are often seen as natural monopolies because infrastructure costs prohibit easy entry into the market.

A monopoly is where one producer (or a group of producers acting together) controls the supply of a good or service and the entry of new producers is prevented or highly restricted through legislation, threatening lawsuits or even violence.

An oligopoly is where suppliers are few in number who do not necessarily act together, but can effectively control the supply and thus the price of a product. They often offer similar products differentiated by advertising and can anticipate the effect of one another’s marketing strategies. The automotive, banking and petroleum industries are often cited as examples of oligopolies.

Globalization is the worldwide movement towards economic, financial, trade and communications integration including the unhindered transfer of capital, goods and services across borders. It does not include the free movement of labour across borders, as this is more political and is termed economic migration.

Markets can change rapidly due to a number of factors within the business environment. These factors include the entry or exit of competitors, the availability of new technologies, natural phenomena such as floods and volcanic eruptions, human engineered events such as wars or terrorist attack, new government regulation such as changes in taxation legislation and changes in consumer needs and wants.


Unit 2 THEORY: STEEP analysis

‘To be successful, STEEP analysis needs to be linked

conceptually and practically to current planning operations.’

Benjamin Franklin

STEEPanalysis is a business tool that analyses the social, technological, economic, environmental and political/legal aspects of the general business environment that can affect the competitiveness of industries and companies. It is also known as PEST analysis, where PEST stands for political/legal, economic, social and technical factors.

STEEP sectors are not mutually exclusive and the analysis is often considered difficult to do effectively over time because of the range of environmental factors, which are considered to go beyond the direct influence of an individual company.

The social/socio-cultural category includes the cultural background of customers, percentage of the population in different income categories, value systems for the different social classes, birth and death rates.

The technological category includes patents, research and development budgets, the pace of technilogical change and bandwidth capacity.

The economic category includes the rate of economic growth, the inflation rate, the exchange rate, the interest rate, the availability of capital for small businesses and a country’s balance of payments.

The environmental category includes air and water quality, the level of environmental regulation and the source of energy.

The political/legal category includes factors such as the policies of political parties, activism of government agencies, ability to influence political decisions through lobbying, nature of the power and decision-making structures in countries, public opinion and acts of terrorism.



‘Insufficient monetary reward cannot be compensated

by good human relations.’

Employee reward encompasses how people are rewarded in accordance with their value to an organization. It is about both financial and non-financial rewards and includes the strategies, policies and processes used to develop reward systems.

The aim of employee reward systems and practices is to help attract, retain and motivate high-quality people. In return for their commitment, employees expect financial rewards such as salary, fringe benefits, bonuses or share options. They also look for other rewards such as recognition of competence, achievement, responsibility, influence or personal development. Getting employee reward strategies wrong can often have a significant impact on motivation, commitment and morale.

Performance-related pay was the big idea of the 1980s and reflected the wish to move away from service-related pay and collective bargaining. The early schemes were revised in the 1990s and new ideas such as skills-based pay were introduced. Today, linking pay to a wider definition of employees’ contribution in terms of input and output is popular and is also known as ‘merit pay’.

Variable pay is usually tied to the performance of the company or business, an individual’s contribution or a combination of the two. It usually takes the form of bonuses, share options and one-time awards for significant accomplishments.

Profit-sharing refers to the strategy of creating a pool of money that can be distributed to the employees according to a stated percentage of company profits.

Share options, once the preserve of senior management, are becoming increasingly popular and reward employees’ commitment. A share option gives long-term ‘vested’ employees the right to buy a specified number of the company’s shares at a fixed price for a specified period of time. After this period of time, employees can ‘exercise’ their share options and sell or retain the shares. The gain or loss lies in the difference between the fixed price and the market price.

Employee recognition strategies include luncheon vouchers, birthday parties, employee of the month/year, department/company recognition boards and privileges such as starting late and finishing early.



‘Creativity is the process of bringing into existence something which was not there before,

either as a product, process or thought.’

Creative thinking is the process which we use to come up with new ideas and it can be both accidental and deliberate occurrence. It can be used to solve problems, design ways forward, resolve conflicts, simplify procedures, make products and processes work much better, cut costs, improve motivation, adapt strategies and design new products and services.

Creative thinking techniques include: brainstorming, whereby two or more people’s ideas are brought together to create a new idea; lateral thinking, where participants are encouraged to take the opposite perspective; parallel thinking, where participants are encouraged to think about a topic from different perspectives (symbolized by Edward de Bono’s famous ‘six hats’*); random words, where participants are given a random word as an initial stimulus and encouraged to link it to the problem at hand; escapism, where participants propose the most ludicrous and ridiculous solutions to problems; role play.

Creative management is a response to the idea that large corporations prefer to run things as they stand and solve problems as they arise. Edward de Bono suggests that traditional creative thinking techniques such as brainstorming are not focused enough, arguing that if a person is inhibited they cannot be creative. He argues that creativity is becoming a commodity that can be learnt and used when needed, and that techniques like lateral and parallel thinking are much more constructive than putting people in a room and asking them to put forward opinions and defend them. This is because with these techniques every person in the room is using their thinking, knowledge and experience to the maximum rather than focusing on fighting their corner.

For Edward de Bono, the culture of creativity needs to be set by senior management, otherwise it can be seen as a risk rather than something to be expected.

*Six Thinking Hats is a book by Edward de Bono. The term Six Thinking Hats is used to describe the tool for group discussion and individual thinking. "Six Thinking Hats" and the associated idea parallel thinking provide a means for groups to plan thinking processes in a detailed and cohesive way, and in doing so to think together more effectively.

The White Hat calls for information known or needed. "The facts, just the facts."

The Yellow Hat symbolizes brightness and optimism. Under this hat you explore the positives and probe for value and benefit.

The Black Hat is judgment - the devil's advocate or why something may not work. Spot the difficulties and dangers; where things might go wrong. Probably the most powerful and useful of the Hats but a problem if overused.

The Red Hat signifies feelings, hunches and intuition. When using this hat you can express emotions and feelings and share fears, likes, dislikes, loves, and hates.

The Green Hat focuses on creativity; the possibilities, alternatives, and new ideas. It's an opportunity to express new concepts and new perceptions.

The Blue Hat is used to manage the thinking process. It's the control mechanism that ensures the Six Thinking Hats® guidelines are observed.



‘The way we do things around here gives a sense of identity:

who we are, what we stand for and what we do.’

Over time, organizations develop established and expected behavior patterns. A number of organizational culture types have been identified by various researchers.

· Task culture – a definite team culture develops because teams are formed to complete particular jobs and given the power to make decisions. This often produces a distinct level of creativity.

· Role culture – this is often found in large hierarchical organizations, where each individual has a clearly specified function to perform. Employees often work to their job description and they tend to follow the rules rather than be creative.

· Power culture – this is centred on the pre-eminence of one or a small number of individuals within an orgnisation and is more commonly found in small businesses or within constituent parts of a large business.

· Person culture – this is characterized by a loose form of organization where individuals are encouraged to express themselves fully and are allowed to make decisions. This can often be found in small start-up businesses.

These different types of organizational culture are more often found in the private sector. Some researchers have identified other cultures such as bureaucratic culture, where there is top-down decision-making, and collegial culture, where there are committee decision-making structures. These are more often in the public sector, especially in state-owned companies in the developing world and educational institutions worldwide.



‘Globalisation requires that organizations adopt a cross-cultural

perspective in accomplishing their goals in the context of a global economy.’

Rabi S. Bhagat

The quote refers to the fact that leading corporations are expanding their focus on diversity and inclusion in business worldwide. The aim is to attract and keep multicultural, multitalented workforces, who can connect and serve a lot of new customers in new emerging markets that will ensure continued success in the future.

Joel A. Baker in Wealth, Innovation and Diversity found evidence in history, science and business that roves beyond doubt that innovation is driven by diversity and creates wealth. He argues that diversity leads to efficient resource use, new thinking, lowered risks and increased productivity.

The opportunities for cultural clashes both inside and outside a company are increasing due to diverse recruitment policies, increased immigration, cross-national mergers and joint ventures. It is therefore important that managers become culturally competent and learn how to respond to such clashes so they can profit from the interplay of cultures.



‘The coordination of a structured period of a transition from

situation A to situation B in order to achieve lasting change within an organization.’

BNET Business Dictionary

The above definition is a comprehensive way of describing change management at both the individual and organizational level. Change management often refers to the task of managing change, an area of professional practice, a body of knowledge that consists of models and techniques such as DICE theory or a control mechanism consisting of requirements, processes and procedures.

DICE theory is a tool that has been developed to facilitate change through the use of a spreadsheet to predict the probability of success of an improvement effort and was first developed by Sirkin, Keenen and Jackson in the 1990s.

Within DICE, D=duration, i.e. how much time is between project reviews; I=integrity, i.e. the extent to which the organization can rely on the project team to execute the task successfully; C=commitment, i.e. making sure that the appropriate levels of senior management and stakeholder commitment are in place; E=effort, i.e. the estimated time those making the change will have to spend above the routine daily tasks of their job.

The four elements of DICE are combined into a project success prediction score, calculated using a spreadsheet, which has win, worry, woe and disaster zone outcomes. Win = a high probability of success; worry = a reasonable probability; woe = a 50/50 chance; disaster zone = a low probability of success.

Вопросы для промежуточного контроля

3 курс

  1. What is perfect competition?
  2. What factors can cause market changes?
  3. Why are monopolies and oligopolies considered uncompetitive and undesirable? How do they act in the competitive environment? (Ω)
  4. What connects the world of competitive sport to competitive business?
  5. What is STEEP analysis? How do companies plan for the future? (Ω)
  6. Define the Global consumer goods industry.
  7. What’s the aim and practice of employee reward system?
  8. What are benefits/limitations of different companies’ points of view?
  9. How big a factor is pay reward systems in motivating workers?
  10. Define creative thinking process techniques of creative management?
  11. What does the term ‘Six Thinking Hats’ by Edward de Bono stand for?
  12. What makes the development stage successful?
  13. What basic types of organizational cultures have been identified by researchers?
  14. Do dress code, attitudes, personalities, and energy level vary form organization to organization? Why?
  15. What are the goals of leading corporations intending to go worldwide?
  16. Define the key stages of building a team?
  17. Are team sports useful in building a team mentality?
  18. What role does DICE theory play in change management?
  19. Which are DICE theory’s 4 core elements?
  20. Define the 4 hard factors of Change Management.

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