nm1127: my name's namex and [0.9] i'm [0.5] responsible for the International 
Business Environment course [0.4] for the next ten weeks [0.3] with my 
colleague namex [0.8] er namex isn't here this evening 'cause he's actually in 
Scotland but er [0.3] as you'll see from the the pack of information [0.4] i 
start [0.2] the course [0.6] namex comes on for three weeks of [0.2] economics 
particularly macroeconomic theory [0.5] then i continue then we sort of merge 
together in the end [0.4] and take a couple of of joint sessions [0.5] now [0.
6] the first thing i should perhaps say is [0.3] why am i wearing a radio mike 
and why is there a camera around [0.3] let me introduce namex to say why he's 
here 'cause i [0.3] i don't normally have my own personal cameraman not 
[laughter] for these type of events [0.3] namex [0.7] 
om1191: er [0.2] yeah er i hope you don't mind being filmed i'm actually 
involved in a project where i'm making a C-D-ROM [0.5] and i'm filming lectures 
from all departments of namex University [0.5] and er [1.2] namex very kindly 
agreed to be filmed for the Business School [0.4] so er [1.0] i hope you will 
just bear 
with me [0.2] 
sm1128: do we get paid for it [0.5] 
om1191: er [laughter] [0.2] nobody makes any money out of it 
nm1127: what a [0.2] typical 
om1191: but the university [0.4] er i think [0.2] 
nm1127: yeah [0.5] 
om1191: and not even me [0.4] 
sm1129: i think the whole standard of [laughter] [0.8] 
om1191: well maybe maybe yes [0.6] i'll have to put those 
nm1127: i was the only one who was prepared to do it without being paid [0.5] i 
did it for the reason purely that i see this as a way [0.3] of enhancing the 
brand [0.3] which of course you will all be intimately [0.5] er interested in 
[0.4] when you leave this place and so this is brand reinforcement cognitive 
dissonance [0.4] and all that jazz [0.2] 
sm1130: you're going to be a film star then [0.2] 
nm1127: [laughter] okay [0.6] let me just [0.2] say [0.3] basically i work in 
the the M-S-M group the Marketing and Strategic Management [1.0] i'm on the 
strategic management side [0.6] and my particular interests [0.4] are in [0.7] 
early stage [0.5] high-tech [0.5] businesses [0.9] and specifically within that 
context [0.3] i spend most of my life either researching those businesses [0.3] 
working in those businesses [0.3] or advising on government policy [0.4] in 
those areas [0.2] so [0.4] i'm not actually interested particularly [0.3] in 
large companies [0.5] i'm very very interested [0.4] in high technology start-
ups [0.3] i'm interested in large companies where [0.5] er we have say 
corporate venturing activity [0.4] i mean l-, er [0.2] couple of months ago [0.
4] er i chaired a session where we looked at er Daimler-Benz [0.2] er Douwe [0.
4] er Siemens [0.3] and we looked at where we could actually use [1.4] 
structures that would generate [0.2] innovative young companies both coming out 
[0.4] of Siemens [0.5] using Siemens technology which is non-core [0.4] but 
also going into Siemens [0.3] from other areas of activity [0.3] where we had 
er [0.3] companies which had interesting technologies for Siemens and [0.4] er 
a classic sort of structure now i talked [0.5] to er a Dane [0.4] er a guy 
called b-, er Bjørn [0.2] Andersson [0.6] who is in charge of their 
telecommunications [0.3] processes [0.5] er Bjørn is a Dane [0.7] working 
based in Stuttgart [0.2] but actually working out of San Cupertino [0.4] so 
it's the it's the internationalization and 
the linkages [0.3] i'm particularly interested [0.4] in that area so [0.3] at 
the moment i'm doing some work looking at the internationalization of high-tech 
companies [0.4] in Germany [0.3] and in the U-K [0.7] now whenever i [0.2] talk 
in this area people say yeah but if you [0.4] if you could do it you'll do it 
[0.4] so [0.3] i should also say [0.4] er i'm a er a recently retired er 
director of a high-tech start-up which went from nought [0.3] to thirty-million 
dollars [0.2] er in three years and i was the first chairman of it [0.4] it was 
a British company British ideas [0.3] British brains [0.3] British experience 
so the first thing we did of course [0.4] was to become American [0.6] er [0.3] 
the second thing we did was to ignore the City of London as the most powerful 
[0.4] financial er area in Europe [0.4] and take money out of California [0.6] 
and the third thing we did [0.5] was to set up [0.4] a small subsidiary [0.6] 
er in London [0.7] er our major base was in Boston [0.4] and still is [0.5] er 
the fourth thing was out of our control [0.3] which was the I-R-A [0.4] who 
actually blew [0.2] our London subsidiary to smithereens 'cause we 
were in the South Quay [0.3] in Docklands [0.4] if you want to liquidate assets 
in nanoseconds [0.3] er do that i mean it's it was [0.5] luckily no one was 
killed [0.4] techies work late at night but thank God [0.2] they had actually 
left as it was a Friday night [0.3] but it was er an interesting experience [0.
5] so i will look [0.7] in terms of these set of lectures [1.6] particularly at 
the environment and we'll talk about in detail later [0.8] but i will tend to 
skew it to my area [0.9] for two reasons one [0.5] that interests me [0.7] and 
if i am interested hopefully it will be more interesting to you [1.1] and two 
[0.7] if you're not interested in technology [0.4] if you're not interested in 
in start-up companies [0.3] if you're not interested in rapidly growing 
companies that are international at [0.2] at conception [0.4] then you bloody 
well should be [0.4] so i will play [0.3] to my strengths [0.2] and to my 
prejudices you may challenge this [0.6] at any time and i hope we will have a a 
debate [0.4] on a whole range of areas and a whole range of sectors [0.5] er i 
started off [0.4] in the 
agribusiness sector [0.4] so i have actually worked for large companies 
Unilever Imperial Group [0.4] as well as working for small companies as well [0.
9] okay so that's my background and hopefully [0.4] as we go through the course 
[0.9] you will enjoy it more [1.0] if you can actually contribute your [0.5] 
unique experiences your skills [0.3] your experiences [0.2] i may not agree 
with you others may not agree with you [0.3] but it will make the whole 
dialogue [0.2] er [0.3] much more interesting [0.3] er because these type of 
lectures certainly by [0.4] myself and my colleagues is not us talking to you 
[0.3] it's much more er a debate er [0.2] that we will engage in [0.5] and 
hopefully for some of you you might be interested [0.4] in say the the venture 
capital course [0.2] er i run [0.5] in the summer where we bring in the sort of 
great and good [0.5] of the industry internationally for er a week [0.4] just 
talking about the nature [0.6] of [0.3] innovation the nature of new businesses 
the nature of financing [0.4] growing businesses [0.4] and how the hell do you 
get a company like er Amazon which is now capitalized at 
twenty-five-billion dollars [0.5] and hasn't yet made a profit [0.4] so [0.7] 
some b-, but last year what happened was a number of [0.4] the the part-timers 
and indeed other [0.2] programmes came [0.3] onto the full-time course for er 
an intensive week [0.3] er [0.3] but talk to the guys who did it last last year 
[0.3] er Phil i know is here [0.6] er and he did that course [0.8] okay [1.0] 
let's just briefly go through some of the sort of [0.4] er [0.4] hygiene 
factors i suppose [0.5] er [1.0] what you will have from me [0.6] is and from 
namex is a timetable [0.8] with [0.2] er a set of readings [0.5] er with a set 
of lecture notes [0.4] with a set of case studies [0.5] with the allocation of 
of case studies to individual groups [0.2] er [0.4] can i [0.7] check that [0.
2] you're all in agreement with that [0.5] okay [0.6] so you will [0.3] you 
will have everything from us except [0.5] answers to case studies or an 
interpretation of case studies which we [0.4] will give you after the lectures 
[0.8] i have [0.3] from namex [1.4] a set [0.7] of [0.8] economic models 
macroeconomic models [1.0] er on a set of disks [0.4] now namex has prepared 
two disks [0.6] for each [0.2] syndicate group [0.6] he said he was not 
prepared to sit there and knock out about [0.2] eighty or s-, er sixty-odd 
disks [0.3] so basically each group [0.3] will get two disks [0.3] and it will 
be up to you to [0.3] share and interchange those [0.2] er with the other [0.2] 
members of the group [0.4] i've also got er a single sheet of of observations 
from namex [0.7] on the model that's i-, contained in the disks [0.4] now [0.2] 
his [0.2] comment to me was [0.4] one apologize that he wasn't here [0.5] today 
but also [0.4] to suggest [0.4] that you might look [1.1] in addition to the 
primer which you've got [0.5] you might look at the model [1.2] prior to the 
week [0.2] b-, week two [0.7] because the model actually is an input-output 
analysis [1.4] is based on a set of assumptions about relationships [0.5] er [0.
4] and you may wish to look [0.8] to test some of those assumptions by just 
playing with the model [0.5] as a spreadsheet model [0.3] and changing some of 
the variables to see what actually happens [0.2] er and that will for 
particularly for those [0.4] who have less experience or no experience in 
economics [0.4] er that might be quite a good idea to to [0.2] do with [0.4] er 
reading 
er the primer [0.8] okay [1.3] any sort of [0.2] questions or issues or 
uncertainties at this stage [0.9] they will probably come thick and fast later 
[2.3] right let me just mention er assessments [1.2] now [0.7] the assessment 
is based [0.6] on [0.7] a term paper [0.8] that's eighty per cent [0.2] of the 
assessment [1.1] now i will talk in detail about that next week 'cause i don't 
want to spend [0.4] the whole of this sort of introduction talking about just 
the the [0.5] er [0.9] the admin [0.3] but [0.3] essentially [0.3] you [0.4] 
have been given [0.7] in groups [0.6] er an industry sector [1.1] er it maybe 
pharmaceuticals [1.1] within that sector and within the group i have allocated 
individually [0.7] a company [0.5] to each one of you [1.3] and what you are 
asked to do [0.8] is to look [0.4] at the nature of [0.2] the past [0.2] 
present and future environment [0.6] you needn't write this down because it's 
all in the the the [0.2] the document i've given you [0.8] and look at how it 
has changed [0.5] what are the key changes in that environment what are the key 
drivers [0.7] and then to take a view on how well or badly [0.8] the company [0.
5] has 
recognized [0.2] adapted and responded [0.4] to those environmental changes [1.
2] now what i have said [0.7] is that [0.4] as a group [1.5] we would like you 
to analyse [0.5] the nature of that industry [0.2] that sector [0.9] i don't i 
think it's stupid for me particularly gi-, given that you have [0.2] limited 
time [0.4] and i i did a a three year part-time degree at London Business 
School [0.4] so i know how difficult it is to sort of match the trinity of life 
[0.7] you know and everything else [0.4] er [0.3] and also to sort of switch 
out of M-B-A [0.3] mode when you go back and meet [0.2] human beings [0.4] so i 
have some considerable sympathy to that [0.5] but that sympathy doesn't extend 
[0.4] to the [0.3] the the extent of saying well [0.7] i don't expect them to 
exercise intelligence effort [0.2] or creativity [0.4] so [0.3] i have some 
leeway but only just [0.5] but in that case what i have said [0.6] is [0.3] 
that [0.6] it is just stupid [0.6] for a group [0.5] each [0.2] to go and use 
exactly the same resources [0.9] so [0.3] as a group [0.6] you may wish [0.2] 
to share [1.5] the analysis of the industry [0.9] someone el-, may get the 
keynote er reports [0.4] someone else 
may look at data stream [0.4] someone else may do a literature view you come 
together you share the data say we think this is material [0.4] and work that 
way i survived an M-B-A [0.3] a family and a job [0.2] purely by by working 
with er a group of mates [0.3] where we sorted out [0.4] er the competences of 
each of us the time of each of us and sort of divvied up the work [0.7] in 
terms of the presentation of the final paper that [0.2] is an individual [0.6] 
piece of work [0.3] and must be handed in [0.3] as such [0.7] so and that you 
know you [0.8] you can commit serial murder at Warwick [0.5] but plagiarism [0.
5] is beyond limits [0.6] so [0.3] in terms of the final piece of work it's 
your own [0.2] okay [0.7] twenty per cent [0.5] of the marks [1.0] is allocated 
[0.4] to group performance [1.5] now [0.7] i hate that because what the hell do 
you mean by group performance some of you [0.3] will give stunning 
presentations [1.3] completely content free [1.1] other people will stutter 
through [0.3] an inarticulate [0.2] but well thought out [0.4] analysis [0.3] 
and most of you will be in the middle [1.2] the only reason [0.7] we allocate 
that twenty 
per cent [0.9] is [0.2] so that you don't take a game theory response and say 
[0.3] if it isn't marked then we won't do it [0.5] or [0.3] we'll do it but 
we'll only do it sufficiently to say well you know we did look at the case 
study [0.4] like three minutes in the car park before we came in [0.6] now 
that's horrendously boring for me and no one else learns from that either [0.3] 
so we give you twenty per cent of the marks [0.2] so there is a weighting [0.7] 
er on that but the major weighting is is the term paper [0.3] okay [0.8] er [0.
3] now if there are any queries on that i i'd rather [0.5] deal with them next 
week particularly as er half of you have been to the library and half have 
still to go is that right [1.1] is that [0.3] yeah [0.5] so [0.4] i think it'd 
be better once you've actually all [0.2] er been through the library system [1.
1] okay [0.5] in terms of readings [0.5] er [0.2] namex has given you [0.2] a 
reading Nellis and Parker [0.6] he has also given you er er er a standard er 
economics book [0.5] if you wish to delve into it [1.4] but it's not er a core 
book [0.5] er [0.3] i've used er this [2.2] document here Grant [1.1] er [0.4] 
Grant [0.2] is [0.2] 
certainly from the sort of economics tradition [0.4] but i should stress [0.2] 
that i don't [0.5] lecture out of Grant that will become [0.3] quite clear i 
suspect [0.4] er in about [0.2] twenty minutes [0.4] but [0.7] it it's no use 
saying what chapter [0.8] are we on [1.1] i mean i only will response will be 
how the hell should i know [0.7] er [0.3] so you know [0.3] it is a useful book 
it is well written [0.4] er and it's it's it's very timely [0.5] and so it's 
the sort of [0.5] it's the c-, it's a foundation [1.1] of this course in one 
sense [0.3] er [0.3] it's also sort of you know [0.3] if you want a worry 
object here's a worry object [0.2] in another sense [0.4] if you prefer [0.3] a 
less economics text [1.0] er [0.2] Johnson and Scholes Exploring Corporate 
Strategy [0.6] er is extremely good [0.5] er [0.2] but i wasn't going to 
suggest otherwise half of you feel you must rush out and buy it [0.4] but it i-,
it is more from an O-B organizational behaviour side [0.5] er than this text 
[0.3] but thi-, this is this is fairly [0.6] or i think very accessible [0.4] 
er as as a [0.6] er for those that that aren't er economists [1.5] okay [0.2] 
er [0.7] style assessment oh yeah f-, 
just [0.2] just finally [1.4] er [0.7] if you want to contact me [0.9] i 
invariably [0.5] er [0.2] check [0.2] my e-mail about six or eight times a day 
[0.6] er [0.2] and will come back to you [0.3] by e-mail [0.6] or you can take 
pot luck and phone me [0.5] er [0.5] my e-mail [0.3] er i don't think i've put 
it there [0.2] so let me put that down [24.4] okay [0.3] namex-dot- namex- 
namex- [0.3] A-C-U-K [0.5] er i will do my best to come back if er [1.4] i'm 
here [0.5] and i'm here most o-, of this er term [1.2] but please if you have a 
query [1.1] ask me but [0.3] but do read the notes first [0.4] okay or do read 
the introductions first [0.4] i will may be sort of [0.4] more terse [0.5] er 
if you ask me you know what er [0.6] what subject's being studied in week three 
[0.2] so ju-, just have a [0.2] sort of look at the stuff first but if there's 
a er any queries [0.3] or any genuine er [0.4] well [0.7] any misunderstandings 
'cause obviously if you think it's a misunderstanding it's genuine [0.5] so if 
there are any queries and i'm sure [0.4] namex will extend the same sort of 
invitation to you [0.4] er but i'll l-, and i'll remind him but 
er [0.5] i'll leave him to do that next week [0.6] okay [1.0] right [0.8] any 
other any sort of issues or anything at the moment [2.4] fine [1.6] okay [1.5] 
let's [0.3] start [0.7] the lecture now i would hope to [0.7] finish [0.3] er 
[0.9] can someone remind me [1.2] at ten to eight [0.3] so just [0.2] wa-, just 
wave at me i forgot to set my [0.2] alarm [0.2] okay [0.7] er [8.1] let's sta-, 
[7.4] well [0.3] i should yes my wife's in teaching she comes from the sort of 
democratic end [0.5] of er the spectrum [0.7] er [0.5] so let me ask you [0.2] 
er [0.2] normally i [0.4] wouldn't have done but er she tends to know more on 
these things than i do [1.1] if i do all the talking [1.0] my voice goes more 
quickly [1.1] and i don't learn anything [1.5] if you do more talking i learn 
[0.4] and you also gain more confidence [0.7] now [0.5] i can either sort of 
pause [0.3] and let [1.1] you come back to me with various questions or queries 
[0.3] or observations or illustrations [1.3] or i can actually say [0.6] what 
do you think [1.1] now if i pause [0.9] i suspect what will happen [1.2] is 
that [0.4] a white [0.6] Anglo-Saxon male [0.8] will be the first one the 
second one the third one the fourth one to respond [0.8] it tends to th-, there 
tend 
to be a small group [0.5] in any class that do most of the responding sort of 
eighty-twenty rule [0.8] now that often gets very tedious for everyone else [0.
3] 'cause [0.3] you can see that look of oh God why doesn't he shut up [0.3] 
[laughter] you know [0.4] so [0.8] you can play it either way i can sort of 
leave you to respond [0.6] or i can sort of [0.2] try and introduce people [0.
3] to respond and er i should look immediately the [0.3] the people in the top 
row get nervous 'cause i will be quite random but [0.3] i do tend to sort of 
not [0.2] go to the first row first [0.4] so what would you prefer what would 
be equitable or reasonable or enjoyable [2.2] 
sf1131: 
nm1127: sorry 
sf1131: [1.6] 
sm1132: victimization 
nm1127: what victimization 
sm1132: [laughter] 
nm1127: [laugh] who said victimization 
sf1133: no [0.7] 
nm1127: guess who's going to be first [laughter] [0.3] okay [0.4] well but [0.
3] it's victimization on one who er what else eh 
sf1134: combination of both 
nm1127: combination of both [0.2] okay [0.2] yeah [1.4] right [1.3] let's start 
[4.0] okay now [0.5] because we've actually got someone using a [1.9] is it 
eight 
millimetre camcorder whatever it is [0.6] er [1.5] i will [0.5] i i'll keep the 
lights on if that's that's clear f-, [0.2] for you [0.3] okay [1.0] er [1.3] 
i'll talk later about er [0.3] er does any-, has anyone seen these i think it's 
called er they're produced by Diamond Corp [0.5] these hot-wired walkmen where 
you can download [0.5] er music off the the net [0.6] on an hour's music [0.5] 
er on integrated circuitry [0.6] er [0.6] and you it's [0.2] there's no moving 
parts whatsoever [0.2] and then [0.4] you go back to a jukebox on your P-C [0.
4] take another lot down from the net [0.5] and and then run with that anyone 
seen those [0.7] well the the guy who was showing me was a guy from H-M-V [0.5] 
who was a was a student here last year [0.5] er and he was particularly 
interested in [0.2] some of the the work i was doing on technology and new 
start-ups [0.5] and [0.7] H-M-V calculate that there are eighty- [0.3] thousand 
[0.8] pirate [0.3] Internet sites [0.4] at the moment [0.6] you know playing 
their music [0.9] er [0.4] and that this stuff [0.2] can be downloaded [0.4] 
totally seamlessly [0.8] and [0.3] repeated ad nauseam [0.6] so 
we we were having a very sort of interesting discussion about [0.4] how 
technology [0.6] will actually change [0.6] his business and his job because 
the outcome of the thing of course is Amazon [0.5] is going into er [0.8] 
records in a much bigger way than it has in the past and C-D Now [0.5] er is 
one of the biggest record stores in the world and is again is a virtual record 
[0.3] store but [0.3] it's it's one of the areas we'll be talking in i think in 
week four about the the disruptive nature [0.3] of technology but it's nice to 
actually [0.3] teach it to one group [0.4] and then actually have one of your 
your past students coming back and [0.3] then at the end with a sort of 
quivering lip say [0.4] but what the hell do we do [laughter] [0.6] anyway [0.
5] that's a complete aside [0.7] er [1.2] on to the real world [0.9] i thought 
i would start [0.5] the [0.4] the [0.4] session by [1.1] a quote by by Charles 
Handy because what we're we're looking at here [0.9] as Grant says we're 
looking at that link [0.8] between [0.4] the environment [0.8] and the firm [1.
1] and that link [0.7] in Grant's terms [0.3] is 
what he calls strategy now there's hundreds of definitions [0.6] but [0.2] what 
[1.6] Charles said was essentially [2.2] what [0.2] people don't look at [0.5] 
is the nature [0.2] of the prevailing [0.5] environment the outside of the 
organization [0.5] now i've seen this ce-, certainly talking to [0.4] a number 
of organizations [0.4] and you would ask them to explain what they're doing [1.
0] and you will get [0.4] you will get the politics you will get the internal 
rivalries you'll get the [0.4] the products sometimes you get customers you 
will rarely get an analysis [0.4] of the constext of the competitive [0.3] 
environment [0.4] in which they operate [0.4] and it seems to me in many cases 
that is the first thing that you actually talk about [0.4] before you talk 
about the firm [0.7] now it's interesting i mean [0.2] this i-, this is Charles 
Handy talking about this [0.5] this is a guy [0.8] who is an O-B man [1.3] you 
know he's he the the whole stuff of Charles' reputation [0.8] is that he looks 
at the sort of [0.3] the dynamics of firms how people relate within those 
firms [0.4] the natures of tensions the nature of resolutions [0.5] but what 
he's saying is that [0.3] that may be my professional métier [0.8] but what is 
really really important [0.3] is how the outside [0.4] how the the environment 
is changing [0.3] now [0.2] this i-, this is this is [0.3] Charles on the road 
to Damascus i mean [0.4] this guy [0.7] i always think has a enormous advantage 
because if you listen to Thought for the Day [0.7] he sounds like God [1.1] and 
then when you meet him [0.2] you know [0.4] elderly white hair [0.3] white 
Anglo-Saxon WASP [0.4] he looks like God so at least in Michelangelo's sense so 
he's got a lot going for him [0.4] you can see from the charge up rates [3.3] 
what i'm going to be looking at [1.1] in the simplest form [0.8] is [0.7] 
really [1.0] the levels of the environment [1.3] that we need to understand 
that we need to analyse [0.4] because it's rather like [0.4] like an onion you 
know you [0.3] you sort of peel this thing through various layers [0.4] in 
order to understand the macroenvironment [0.4] er [0.4] the why the the 
operating environment and in the internal 
environment so we'll talk about those in a in a wee while [0.3] we'll look at 
competitive forces and i presume you've done this in the the marketing courses 
looked at things like er [0.4] Porter's five forces is that right 
ss: mm 
nm1127: who did you do it with [0.6] 
sm1135: with namex 
nm1127: namex right [0.2] okay [0.6] i might put a spin on that and see how we 
go 'cause [0.2] as a strategist i tend to see it differently from from the 
marketing guys [0.3] in some cases but if i don't then i won't waste your time 
[0.3] or my my my time [0.3] reiterating [1.0] we'll look briefly at value 
chains [0.4] and then finally er [0.3] at what i call a sort of an anti-panic 
[0.2] acronym [0.6] er MACOCOTREES and MACOCOTREES was something that [0.4] er 
my group er at London Business School developed [0.7] in order to survive this 
damned thing we called an M-B-A [0.2] so it was [0.3] it was a heuristic to try 
and actually [0.4] encapsulate [0.4] some of the issues we needed to look at 
when we were looking at a case study so i'll i'll explore that [0.4] and we we 
might well use that in some of 
the case studies [3.5] i think one of the [0.2] the [0.6] the [0.2] things i 
most enjoy [1.7] when [1.4] looking at companies [1.8] is when things go wrong 
[0.2] now it's not enjoyable for you if you're in the company [0.5] but as a 
researcher [0.5] it is much more interesting looking at failure [0.9] than it 
is at success [0.6] and there is also a rather pleasant schadenfreude [0.3] at 
looking at the sort of pillars of industry [0.3] when they fall flat on their 
faces [0.3] and so i've put up er a number [0.6] of [0.5] areas [1.3] where [1.
0] there have been concerns discontinuities [0.3] cock-ups whatever you want to 
call them [0.6] i mean in terms of health and safety issues [0.3] the agrifood 
industry [0.5] the the B-S-E crisis [0.4] was abysmally [0.4] handled [0.8] as 
a crisis [0.6] it was abysmally handled in terms of [0.7] an understanding of 
the outcome [0.5] and implications [0.9] of [0.4] er [0.4] having basically an 
adulteration in the in the food chain i mean i i started my life as a food 
scientist so i'm [0.4] quite interested in this area [0.3] and it's not fair to 
say well we didn't know how [0.4] important it was [0.7] at that stage [0.2] 
any understanding any 
stepping back [0.7] and looking at the probabilities and the outcomes [0.7] and 
the [0.2] politi-, the prow-, profound political costs of say an outlier [0.2] 
that this thing could be [0.4] er contaminate the food chain [0.7] might have 
taken [0.5] you to to take a very different view to that taken by [0.4] er the 
Conservative government at that particular time [1.1] an area which perhaps is 
is more near to home in [0.2] in terms of [1.1] ethical issues but also [0.4] 
within the food industry [0.4] is someone like monsan-, Monsanto [1.3] now [0.
5] Monsanto is a company that's sort of [0.4] from a er an American tradition 
[0.6] there is not the hassle in America about genetically modified food [1.5] 
but there is a profound concern [0.9] within Europe [0.8] and [laugh] [0.6] 
unlike [0.2] either Labour or the Conservative Party i do consider [0.6] 
Britain to be part of Europe [0.3] most of the time [1.2] and you have a 
situation there [1.2] where [1.6] quite literally [1.6] a major [0.3] 
pharmaceutical company [1.6] and the distributing food chain [1.1] er through 
the multiples [0.2] said [0.5] we are putting [1.1] er [0.5] modified soya [0.
9] within food products [1.4] and it is 
not [0.5] possible [0.6] to determine [0.5] which products have it in [0.5] so 
basically [0.3] that's it lads [0.3] that's you know it's there [0.4] and 
you've got it [1.0] now [0.6] while that may have been accepted in America [0.
6] if you look at that and then become surprised [0.6] that there was [0.4] a 
campaign of almost sort of hate [0.3] against Monsanto [0.9] i mean i'm not at 
all surprised and i was all i found [0.3] was at that time the stunning [0.7] 
the absolutely stunning arrogance [0.4] for someone to say we can adulterate 
your food [0.5] er but no we can't tell you [0.7] where or how [0.6] and so 
don't be surprised [0.3] when Monsanto has to publicly and very visibly [0.5] 
retract [0.5] from an untenable position [0.5] now again the question is [0.4] 
was that completely out of the blue [0.8] could no one have actually envisaged 
[0.4] anything like that outcome [0.3] happening were they just [0.2] jolly 
unlucky [0.4] or was this some kind of hubris [0.5] built i-, brought on 
because [0.3] basically we're technologists technocrats [0.3] and we know 
what's better for you guys [0.5] you know the Americans enjoy it [0.3] so why 
don't you [0.4] er [0.2] i mean [0.6] i'm not 
trying to make sort of cheap political points but it's it's really very [0.5] 
interesting [0.6] that they got to that stage i mean [1.5] we had er a friend 
of mine [1.3] er is the the head of Greenpeace [0.7] er [0.4] and Peter 
Melchett has come here on two or three occasions [0.4] to actually talk to to 
the students [0.3] er [0.3] that's [0.4] it's quite an interesting reaction 
when you say he's a mate because [0.4] i was in Iceland er advising [0.2] er 
the government [0.3] small but perfectly formed country and it's got some great 
glaciers [0.5] er [0.3] and i said you know i Peter's a friend of mine and and 
[0.5] they didn't say anything they just [0.6] we were in a restaurant and 
someone said something in Icelandic [0.2] which is [0.5] you know [0.2] a 
language shared by two-hundred-and-seventy-thousand people [0.3] and the next 
thing i had er a plate of raw whale meat [0.5] er in front of me [laughter] [0.
6] which i thought was a fairly loaded response to to that er [0.3] beha-, to 
my comment [0.5] er [1.8] the li-, in this actual room two two Norwegians and 
said the wonderful classic phrase [0.4] what is so wrong about 
killing minky whales and and to see the sort of head of Greenpeace virtually go 
through the ceiling before coming down [0.4] and sort of killing all in his 
path [0.3] er [1.1] the interesting thing there [0.6] is actually the Shell [0.
4] Brent Spar [0.4] episode [0.8] because again you've got a situation [0.2] 
where it really went horribly wrong [0.4] in terms of how people reacted [0.4] 
in that environment vis-à-vis [0.3] how [0.2] people thought the system was 
going to be managed [0.6] and there were actually errors on both sides and you 
may well say hang on [0.4] but Greenpeace got it completely wrong on the 
technology [0.5] and that is almost irrelevant [0.4] in terms of the nature of 
the issues [0.4] er at large in that particular case [0.2] whether or not Brent 
Spar [0.3] could have safely been er dumped was not the issue the issue was [0.
5] if Brent Spar [0.2] was dumped [0.4] then there was something of the order 
of two-hundred other installations [0.3] that could be dumped because there was 
a precedent [0.4] and that was the nature of the fight [0.3] and that was not 
the nature of the 
battle [0.4] that [0.2] er that Shell thought it was fighting [1.2] Shell 
actually thought it was fighting [0.4] a technical set of issues [0.2] a cost 
benefit [0.6] and in that sense [0.6] because they're techs-, i my my twin 
brother is [0.2] chief hydrogra-, graphic [0.3] [whistle] [0.2] chief 
hydrographic surveyor in B-P [0.3] i mean [0.4] you know these guys talk in 
technology [0.6] that's that's their métier it's a bit like [0.3] if you go 
into a high-tech company like a high-tech software company [0.4] these guys 
converse [0.5] you know in digits [0.4] you know [0.4] they speak binary most 
of the time and probably machine code when they're being intimate so [0.3] you 
know [0.3] their their culture their language their their metaphors [0.3] are 
all centred round [0.3] their business [0.6] and what they've done is get 
really very far away [0.6] from the nature of the environment that is actually 
pertaining [0.3] so what i'm saying in all of these [0.3] is that [1.7] 
essentially [0.6] one has to say [1.9] in all of these cases [0.3] be it 
Japanese banks [0.5] er be it Peter Mandelson or whatever [0.7] you know were 
they 
just jolly unlucky [0.7] you know [0.4] could it reasonably say [0.4] that they 
couldn't have expect-, they couldn't have expected [0.2] to see these coming 
out of the blue [0.9] or conversely [0.9] is there an argument to say the 
problem with organizations [0.5] is that they become terribly incestuous [0.8] 
that they become [0.5] introvert [0.4] by nature universities are no different 
departments M-S-M groups are no different [0.5] and by being introvert [0.6] 
they actually cease to see [0.4] what's happening in their environment [0.7] 
they cease to actually be cognisant of how that environment will change [0.8] 
and [0.3] the question i-, because [1.0] if you don't believe if you think 
they've just been unlucky [0.6] well then we we can end the set of lectures now 
[0.3] because [0.4] it's you know er [0.3] i worked in Africa for a time [0.3] 
in Kiswahili mu-, Kiswahili Mungu kipenda [0.5] you know it's the will of God 
[0.5] er it's exogenous [0.3] you know [0.2] like the the er [0.3] you know er 
lottery it could be you [0.9] er and in these cases it cou-, it was them [0.9] 
or you could actually take an alternative view [0.9] and 
say that [0.3] the environment [1.1] can be monitored [0.6] it can be appraised 
[0.4] however imperfectly [0.8] that there are signs there are straws in the 
wind [0.4] and one of the situations is [0.2] how do we structure our 
environment [1.0] so that we are open [0.6] to those stimuli that we are open 
[0.3] to those signals [0.4] er [0.4] i was with er [1.0] the board of Volvo a 
couple of years ago [1.0] and we're talking about corporate venturing [0.4] and 
how they actually utilized [0.4] very interesting innovations that weren't core 
to the business couldn't be used in a car or a truck [0.4] but still had been 
created by their research departments and [0.3] we talked about the the nature 
of entrepreneurs [0.4] where entrepreneurs come and they they said well how do 
we find [0.2] our entrepreneurs [0.8] and i said well it [0.3] it's actually 
quite simple [0.4] they're almost invariably the guys who are troublemakers [0.
6] within your organization [0.3] and your organization [0.4] will spend most 
of its life [0.2] trying to get rid of them in one form of castrating them 
gagging them [0.4] sending them off to you 
know Reykjavik er as their key respondent or whatever [0.9] but ironically it 
is those guys that are most likely [0.6] to [0.8] be aware [1.0] of fundamental 
changes within the organization [0.7] because there's a whole literature [0.7] 
on industry recipes [0.7] er it comes out of Gerry Johnson or it's now called 
[0.3] industry paradigms he's got more posh [0.9] and what that says is that [0.
4] very often [0.8] the nature [0.2] of threat [0.7] the nature of external 
environmental change [0.5] is actually recognized [0.3] within the organization 
[1.1] the problem is that there are not systems [1.1] that actually can 
incorporate that [0.6] and work on it [0.8] 'cause what you tend to have [0.2] 
is [0.9] say for example [1.9] your your model [0.3] has worked for several 
years [2.0] and then [0.5] starts [0.2] not to work [1.2] what do you do [2.0] 
so what do you do [2.7] 
sm1136: change the model [0.6] 
nm1127: change the model [0.8] is that what most of you would do [0.6] 
sm1137: find out why the why the model's wrong [1.3] 
nm1127: find out why the model's wrong [1.6] or what you might do [1.2] i mean 
both are right [0.6] but probably the first reaction [0.8] remember that 
most firms [0.3] run on pretty [0.3] profound orthodoxies [0.9] you know most 
firms don't like change out of habit certainly not universities [0.4] er you 
know we are the most conservative [0.5] of all institutions i've ever worked in 
[0.9] but normally when something goes wrong [1.7] it's not the model that's 
challenged [0.7] but the way that you've applied it [1.0] it's worked for 
thirty years [0.6] there's no reason why it should change [0.4] we're not 
applying it properly we're not actually understanding the orthodoxy or what 
have you [0.7] so what tends to happen [0.9] if you take that view is what [1.
7] 
sm1138: denial [0.6] 
nm1127: denial [0.2] followed by [2.0] 
sm1140: rejection 
sm1141: inaction [0.4] 
nm1127: sorry [0.2] 
sm1140: rejection [0.3] 
nm1127: not re-, no no normally [0.4] rejection takes in large organizations 
you'll see this at Marks and Sparks at the moment i mean that Marks and Sparks 
haven't sort of thrown out completely [0.3] the whole logic of their existence 
their buying patterns [0.4] er their merchandising their marketing strategy et 
cetera [0.3] they're questioning it like hell 
at the moment [0.8] but normally what happens [0.5] is [0.2] you apply it 
harder [2.0] you know [0.3] if we're wrong if we're not interpret it properly 
[0.6] then [0.6] you know [0.4] the model's there [0.2] let's really sort of [0.
3] you know s-, [0.4] screw it down let's really apply the model rigorously [0.
7] so what you tend to get are recipes or industry recipes [0.3] it may be [0.
8] you know it took a long time for Tesco's not to pile it high and sell it 
cheap [0.8] even when the whole industry was moving towards [0.3] enhanced 
value because [0.3] the value was in our scarce time [0.9] er [0.8] so what 
happens generally and what the literature tends to show [0.4] is that the model 
is applied more and more rigorously [0.3] until it is patently obvious that it 
doesn't work any more [0.9] and then what happens [3.3] 
sm1142: panic [1.2] 
nm1127: panic [0.3] followed by [2.7] 
sf1143: the theory isn't right [1.5] 
nm1127: no it [0.3] u-, [0.2] usually 
sm1144: 
nm1127: that sorry 
sm1144: change 
sm1144: 
nm1127: yeah [0.2] usually that [0.4] i mean [0.7] if i th-, i er anyone 
watched the the troj-, or watched [0.4] listened to the Trojan wars on Radio 
Three over the over [0.2] Christmas time [0.3] g-, er [0.3] if you want blood 
lust sort of i mean you know it's it's all there i mean you s-, you don't [0.2] 
need to read Charles Handy [0.3] but [0.4] essentially there is bloodletting [0.
3] because [0.3] if you change the model [0.4] you actually need to change not 
just the model but but its champions [0.5] you know [0.3] you [0.4] so what you 
e-, normally get is there is a clean sweep and you're you're seeing some of 
that actually happen [0.3] even in the august chambers of Marks and Spencer's 
because [0.5] the old guard [0.2] cannot then [0.4] be the new guard they 
cannot say well [0.2] actually [0.5] what we said for the last three years was 
a complete [0.3] utter load of bollocks you know so [0.4] but [0.2] we've got a 
really good model now [0.3] so it tends to be bloodletting [0.3] er 
resignations you change your non-execs might change your auditors or various 
other things but [0.3] there's usually very big signals [0.3] that you're 
actually going to change and one of the issues [0.5] is [0.9] how well [0.5] do 
people react to the unpleasant the unexpected 
the unavoidable [0.6] and what pressures work [0.2] within the i mean 
organizations are like sort of er you know have [0.3] huge buffering power [0.
4] to actually stop any change just look at I-B-M for years [1.0] perpetuating 
a model that most people in the organization knew [0.5] couldn't continue in 
that particular form [1.0] so [0.5] the er one of the issues about the 
environment of being aware of the environment [0.3] is actually how do you sort 
of signal [3.1] necessary and legitimate change [2.9] as i say what we're going 
to do is [0.2] is really recognize three levels of environment [1.1] because [2.
2] when i look at your reports you will tend usually to to analyse the the 
environment first [0.4] i'm much more interested [1.1] if you're going to look 
at say er a retail company [1.3] knowing what [0.8] the the [0.2] what the 
position of say [0.2] Britain is [0.2] within a business cycle [1.6] what the 
situation is in terms of whether er [0.8] the rate of growth of G-D-P is 
increasing or declining [0.3] are we in recession so [0.4] initially i need to 
actually understand the wider [0.4] economic and indeed often social and 
political environment [0.7] before i actually look at the firm [1.0] i mean if 
i'm looking at say high-tech firms [2.0] it's really important that i 
understand [0.3] how Europe [0.8] understands those firms [0.5] how America 
understands those firms [0.3] and how the British government understands those 
firms [0.3] if you're looking at [0.4] new technology based firms [0.5] without 
say understanding [0.2] the new competitive White Paper [0.2] which is a huge 
great document [0.5] you really are not properly informed because there's a 
whole debate there about the financing of these firms [0.4] there's a whole 
debate [0.3] with the Bank of England and the Treasury [0.4] about [0.3] how we 
actually look [0.4] at say options [1.1] now options [0.3] in the U-K is a 
dirty word it's what those [0.2] bloody fat cats [0.4] in public utilities have 
been privatized [0.3] walk away with with doing damn all and taking your money 
and my money and so on [0.5] in America options are a legitimate way [0.6] 
particularly for young companies [0.6] of [0.4] rewarding [0.2] key staff [0.4] 
who they can't afford to pay their going rate [0.3] you know [0.2] i'm only 
going to pay you sixty-thousand dollars [0.4] but you're going to have a 
hundred-thousand options and i've sat in board meetings where we have gone 
through [0.2] every member [0.4] of staff down to the receptionists [0.4] er 
not down but you know [0.2] every grade of staff [0.5] er from the the founders 
downwards [0.4] and allocated options [0.3] according to the subjective value 
[0.6] of them to the business [0.4] or a value of them m-, not being in the 
business [0.5] and that seems to be an entirely legit-, legitimate [0.4] and 
valuable way of rewarding [0.3] people who are taking risk [0.4] and it's a way 
that has been completely adulterated within the U-K now there's quite a lot of 
[0.4] er work being done by er the Treasury [0.5] to actually [0.5] retrench 
from that position [0.6] so [0.3] if you're actually understanding how say [0.
3] high-tech young firms are working [0.4] that's actually quite important to 
know [0.4] so what i'm saying is [0.9] look at the general environment [0.5] 
then the operate-, the general environment is 
the environment [0.3] of [0.4] basically the the wider economic [0.3] er socio-
economic environment [0.4] the operating environment to me is looking at the 
industry and the sector [0.7] and then the internal environment is the internal 
environment of the firm [0.7] now what you would expect [1.2] is to use [0.9] a 
range of different instruments [0.6] to analyse [0.3] those particular areas [0.
6] er [0.8] the Treasury model [1.3] a macroeconomic model [0.4] to understand 
[0.6] the dynamics [0.5] er of a business cycle [0.2] to understand [0.4] some 
of the issues [0.2] of [0.2] er you know the the [0.9] harmonization of 
European currencies [0.4] er the birth of eu-, euro [0.3] inci-, has anyone 
actually er [0.8] negotiated or charged in euros [2.0] anyone has anyone you 
you have in what area [0.7] 
sm1145: buying engines from Germany [0.3] 
nm1127: yeah [0.7] yeah [1.1] and [1.5] i mean you know i [0.3] i was surprised 
just how [0.2] natural it [0.6] was you know i mean you know s-, [0.4] 'cause 
quite often people have used ECUs [0.2] er rather than deutschmarks [0.6] er [0.
5] er anyone else p-, ha-, [0.6] has it affect-, [0.2] er anyone else ha-, 
actually had it mentioned 
to them [1.3] 
sm1146: 
nm1127: in wha-, [0.6] 
sf1147: er [0.7] 
nm1127: sor-, [0.3] 
sf1147: 
nm1127: 
nm1127: yeah 
sf1147: 
nm1127: yeah 
sf1147: and [0.7] it's a matter of routine with dealing in finance when you 
look at [0.6] currency such as dollar or deutschmark [0.3] euro whatever it's 
interchangeable with sterling 
nm1127: yep 
sf1147: 
nm1127: yep [0.4] yep [0.9] i mean one er when you're actually doing your 
assessments one of the the [3.2] it's i mean people have done it quite well i 
think i mean in in the in the past you used to get [0.7] interest rates are 
important being the sort of macroeconomic contribution which is a bit like 
saying eating babies is wrong [0.3] er [0.3] so [0.2] it [0.2] you don't get 
any brownie points for that but [0.3] you know actually understanding say in an 
area like pharmaceuticals or in retail [0.3] what is what is the the er [0.9] 
the harmonization of currencies and our [0.2] our [0.7] er being outside it as 
you're going to do [0.3] in terms of er profitability purchasing and so on [0.
4] o-, of major companies [0.2] so [0.4] you know the macroeconomic dimension 
which namex will be talking about in great detail over the next three er [0.3] 
three weeks [0.4] er is critically important [1.0] in [0.5] i said you might 
use something like the the er Treasury model [0.4] er [1.3] you could use 
things like scenario planning [0.2] er beloved [0.2] er again of Shell [0.3] 
now the whole issue of scenario planning is not to get it right but part of 
scenario planning [0.8] is to think the unthinkable [0.6] or think outside the 
frame [0.6] to actually say [0.4] look we do this [0.6] but let's [0.2] 
actually conceive [0.8] doing something different [0.7] i mean [0.3] i remember 
you know j-, [0.2] j-, when Jobs i mean when er Jobs er can be a fairly sort of 
noxious character by all accounts [0.4] but the idea that you would actually 
have a computer [1.1] on a desk [1.9] managed by a manager [1.3] which is so 
obvious to you guys [0.5] but is was so stunning when that happened [1.6] i 
mean you know [0.4] you'd [0.9] w-, the way data was managed was [0.3] how many 
of you work with central processing departments [0.2] data processing 
departments [0.3] yeah [0.2] i mean you go in there and say this is an urgent 
job and they [0.5] 
you know [0.3] and some kid half your age is telling you that you can't get it 
for two months [0.4] and all you want is a i don't know histogram of sales by 
region or something you know and some bloody great machine is chugging in the 
background there [0.5] and [0.3] the the i mean the the [0.4] the liberation [0.
7] er of Jobs and particularly the the the Macintosh at the time [0.5] was 
absolutely seminal [0.6] but it that was completely thinking outside the box [0.
6] er [0.3] now that's [0.2] you know scenario planning in in a different sense 
is [0.3] is what if [1.5] what if Microsoft [0.8] is actually broken up like 
like the into the Baby Bells from A-T-and-T [0.7] what if it completely loses 
[0.5] er that er [0.6] session [0.3] er sorry that er [0.6] er case [1.2] in 
their Delphi techniques er forecasting models simulation [0.9] pest analysis [0.
4] each of these may be one way [0.3] an appropriate way or not [0.2] of 
looking [0.5] at the situation the Delphi technique very much looking at [0.4] 
industry leaders industry specialists [0.4] the the government's er [2.1] er s-,
w-, exercise 
now what the hell's it called [0.5] er [0.2] not forecasting [0.7] foresight [0.
6] exercise [0.3] is actually based on the Delphi technique going along to a 
number of people in key sectors and saying [0.4] how do you think it's going to 
change in the next five years [0.4] and then reiterating that view [0.3] to the 
other members of the panel [0.3] and then coming back and the C-B-I is doing 
something similar on that [0.4] in terms of corporate venturing where [0.3] i'm 
involved Sue Byrne is involved the Bank of England's involved Treasury [0.3] 
and [0.2] they're just saying look we've got this data [0.3] we've just 
generated [0.3] these are what we think it means what do you think it means and 
then there's a debate and you you reiterate and so on [0.5] er they're they're 
[0.7] they're scientific in a sense but [0.2] you're not talking about 
precision because it's not meaningful within the context [0.5] in an operating 
environment you can use Porter value chain [0.4] five forces strategic groups 
[0.4] actually looking [0.2] at [0.4] the similarities [0.2] and the 
differences between strategic 
sets [0.4] of firms [0.7] you know [0.3] Unilever and Procter and Gamble will 
be in the same strategic group for fats and oils they will be in the same 
strategic group for many [0.4] er consumer [0.2] fast moving consumer goods [0.
5] er [0.3] and finally portfolio analysis you know your Boston boxes G-E 
matrix and that kind of thing [0.4] they may or may not be appropriate there 
there is no rigid [0.5] you must use a G-E matrix [1.2] there is no [0.4] you 
know Porter [0.3] is de rigueur [0.2] it tends to be [0.5] unfortunately [0.5] 
you may or may not use it depending [0.3] whether or not [0.4] it gives 
enlightenment [0.9] and internally SWOT [0.4] and then [0.5] human resource 
management systems analysis er type [0.2] er analyses [0.4] which is certainly 
not my area [0.4] but [0.6] horses for courses different types of techniques [0.
4] used in different types of of area [2.2] now just looking at [0.6] Porter i 
mean one of the [0.2] the [0.3] the important things [1.1] about the Porter [1.
4] is [5.2] Porter [0.4] in some ways [0.6] repackaged in a superb sense and 
it's not to to to 
diminish [0.2] er [0.4] his role [1.3] but he repackaged a lot of the [0.5] er 
industrial economics of the nineteen-sixties [0.6] in a form which was 
manageable [0.7] and understood [0.4] by [0.2] by [0.2] by business people like 
you essentially [0.8] because [1.3] surprisingly you don't tend to read the 
Journal of Economics [1.0] er and surprisingly economists don't tend to write 
for you guys anyway so you [0.3] so the economists saw [0.4] really the firm as 
a black box and what Porter did was [0.4] was actually interpret in a way which 
was meaningful [0.7] but also highly accessible [0.8] now one of the things 
i've learned here i came to a business school late in er about [0.2] about i 
changed career at forty-two [0.7] er and became a youth in a business school 
which is er a seminal experience [0.3] for me at least [0.5] er starting off 
you know knowing nothing at forty-two like saying [0.3] who's Porter [0.2] and 
everyone sort of crosses themselves [laughter] and looks at you [0.6] but [0.5] 
there's an [0.3] interesting thing to me is [0.9] is just [0.8] how powerful [0.
3] symbols are like that five forces i mean i i advised [0.6] the Australian 
government a couple of years ago on a new technology policy thing called 
Industry Investment Fund [0.8] and which was a [0.2] it w-, w-, which was a 
spin out out of going there and and on a sabbatical [0.7] and [0.2] in order to 
get the government to sort of understand [0.8] i [0.2] drew [0.6] a [0.3] an 
hourglass [1.0] and i put in the demand for I-T [0.2] based services at the 
bottom in Australia [0.8] and i put in the the [0.3] the research [0.3] 
expenditure in Australia which is about six-billion Australian dollars a year 
[0.7] and in the middle the constraint [0.6] i put the amount [0.4] of money 
spent on commercialization of R and D [0.2] by [0.3] turning these really 
clever ideas in terms of say [0.3] er energy er er solar energy [0.4] into [0.
5] products services and businesses [0.3] so six-billion dollars [0.6] got [0.
4] about twenty-million bucks [0.4] to commercialize [0.9] and the net result 
of that [0.5] was there was some really and still is some really [0.2] good 
technology [0.4] in Australia [1.1] and in terms of new businesses [0.3] 
technically there is bugger all [0.4] i mean you know they they just punch way 
below their 
weight [0.5] er the beaches are just too nice [0.5] and i put it in in terms of 
this hourglass [0.6] and [0.5] i actually had the sort of Minister of Industry 
saying [0.3] you invented the hourglass [0.3] you know [0.4] and it i was [0.6] 
i was amazed just how powerful [0.6] cheap [0.7] metaphors are be tha-, be they 
graphic metaphors or or or verbal [0.3] metaphors [0.3] but [0.5] that's what 
Porter did he with that five forces model [0.5] he made people understand [0.4] 
and what he made them understand [1.0] was essentially [0.7] some questions 
that were pretty [0.5] persistent [0.9] and pretty damn important to you as 
managers [1.5] like [0.4] why do some industries consistently [0.6] return [0.
9] better profits [0.5] better returns under all the indices you can name [0.2] 
than other industries [0.7] you know [0.7] put another way why is tanning 
always so bloody awful on any criteria leather [0.3] leather goods just about 
hits the bottom of just about every [0.3] index you know return on capital 
profitability et cetera et cetera et cetera [1.5] why do some industries why 
why [0.4] why is the structure [1.3] of supermarkets [0.3] 
like it is [0.2] why have we only got four or five major supermarkets three or 
four major supermarkets [0.2] but why have we got thousands and thousands of 
corner sh-, corner shops [0.4] you know what are the what are the [0.4] what 
are the [0.4] causal factors that determine the structure [0.4] and what effect 
does that structure have [0.5] and how does it change [0.7] why does it change 
[1.2] and y-, you can see y-, i mean this is just as relevant now when we talk 
about Internet [0.9] and its effect [0.3] on businesses or pulling [0.4] er 
stuff off the web [1.7] what [0.3] given this structure what does it do [0.3] 
how does it influences the choices that we have [0.4] as managers [0.4] the 
choices [0.2] in [0.4] the allocation of scarce resource [0.2] scarce resource 
capital labour [0.4] but more than ever now [0.4] knowledge [0.5] sometimes 
articulated as competencies [1.2] and finally [0.6] what the hell do we mean 
when we talk about industry [1.5] i mean as an example [2.6] autos cars [1.4] 
would you say cars [0.4] was now a global market [4.6] yes no who s-, [0.3] 
you're very quiet [1.0] who says yes [1.8] stick 
your hands up no [0.3] right [1.2] who says no [2.7] yeah [0.5] two [0.3] why 
do you say why why [0.4] 
sm1148: i think it's getting there but not quite [0.5] 
nm1127: dah it's [laughter] 
sm1148: i-, i-, i-, it's becoming a 
nm1127: on the one hand on the other [0.3] 
sm1148: becoming a global market 
nm1127: right [0.3] why why do you disagree 
sm1149: er [0.3] too many barriers between countries [0.6] 
nm1127: yeah [0.4] 
sm1149: so it's going to be to one country can't sell [0.5] with equal [0.2] er 
[0.8] er er er on an equal basis with 
nm1127: yeah 
sm1149: somebody in [0.2] in the 
nm1127: no one loves a smart-arse but you're absolutely right [1.2] do you we 
[0.4] it is a global [0.4] industry [0.4] virtually [0.3] though [0.4] i don't 
think [0.2] you know Kathmandu doesn't have many much production facilities [0.
3] it's certainly a supranational industry [0.4] and it's reasonably you can 
say global [0.7] but that is industry industry is about the nature of 
production [1.1] there are very few [1.6] products [0.5] that are g-, are in 
global markets there's quite a lot of commodities [1.1] capital above all [0.4] 
in global markets [0.2] and even 
there there are [0.5] er [0.4] imperfections which allow traders to trade on a 
margin [1.3] but [1.0] global [0.2] markets [0.6] are the minority [1.0] most 
markets are actually [0.4] subnational [1.0] and the car industry [0.5] is 
actually a multi [0.7] national [0.5] marketplace [0.9] you know a mar-, [0.4] 
like several [0.2] domestic [0.2] marketplaces [0.3] and even here the market 
throughout [0.2] the U-K [0.9] is not perfect [0.2] that you will have [0.3] a 
different price [0.2] in Coventry [0.5] as to Penzance because there are 
transaction costs [0.4] er related to geography related to volume and er r-, 
various other things [0.6] but [1.8] you must not confuse [0.3] the two [1.6] 
and when we're talking about industries we're talking about supply [0.6] so [0.
4] er [0.4] you know as John John Kay has got a er a very useful paper [0.2] in 
this if you're interested [1.0] er [1.0] which i pulled out just before i came 
here [0.7] where he says you know basically [0.5] the term global market is 
becoming a cliché [0.2] and he's right [0.4] identifying the strategic market 
the strategic market being the minimum [0.4] scale of market [0.4] in order to 
compete 
successfully [0.8] now arguably i think within [0.5] the car market you're 
talking about [1.2] continental [0.7] being [0.7] i-, a region [0.3] a 
supranational region [0.3] being the minimal scale to compete successfully [0.
5] but we certainly haven't got anything like [0.6] a natio-, er er a global 
market otherwise [0.3] i would pay the same price [0.5] for er a Ford [0.4] 
saloon [0.4] in er [0.2] Ho Chi Minh City [0.4] er as i would in Godalming [0.
4] er [0.2] and i think that's unlikely [1.1] Godalming is much more 
reactionary of course [1.0] er [0.5] right that's the John Kay's Business 
Strategy Review [0.4] spring [0.2] nineteen-ninety [0.4] er [2.5] if the [0.4] 
i can't [0.8] photocopy it for whole reasons of copyright so [0.3] if you take 
that and and s-, in some cases [0.3] er i'll try and [0.3] er get some 
photocopied for the groups [1.3] okay [3.0] so these are a set of questions [0.
5] that Porter is really trying to [0.4] to articulate [0.7] now i've put down 
here [1.3] not out of laziness i haven't taken more more [0.2] current figures 
[0.4] but i've taken figures [0.4] on return on capital [1.0] in Britain [0.6] 
coming out of the recession and i've taken 
manufacturing [0.3] sectors [0.3] and i've taken service sectors [0.4] and 
what's the first thing you see at that [1.7] you know if you eyeball those 
figures what er what immediately sort of comes [0.5] 
sm1150: larger diversity 
nm1127: yeah [0.8] it's huge diversity there [0.6] now why [0.3] i i mean [0.4] 
do you have name tags here [0.7] 
sm1151: they've all 
nm1127: mm 
sm1151: disappeared [0.5] 
nm1127: they've all disappeared [0.5] i'll see if we can get some more because 
er [0.3] i'm terrible at remembering names and and sort of saying you er [0.3] 
thingy you know [0.5] the guy with the fat nose piggy eyes and dah-dah-dah is 
er difficult so [0.4] i'll see if we can get some 'cause it's easier but why do 
you think that you have that er diversity [1.6] i'm not suggesting you've got 
[0.2] fat nose and piggy eyes [laughter] it was just a [0.2] illustration [0.7] 
sm1150: er [0.7] because s-, some some industries are invariably more 
attractive than others due to supply and demand [0.7] 
nm1127: that [1.4] that's that's a very elegant way of saying some er 
industries are attractive because they're 
attractive [0.4] er what [0.2] so 
sm1150: well there's different 
nm1127: yeah but but what what what is actually driving that difference [0.2] 
sm1150: competition [1.1] 
nm1127: com-, wha-, so are you saying that the [0.3] the record industry has 
less competition than than Windows [0.7] 
sm1150: it's not it's it's the whole range 
nm1127: well the the the gentleman behind you [0.7] 
sm1154: technologically i would think yeah [0.7] 
nm1127: yeah i i wouldn't disagree with you [0.8] the k-, the question is why 
[1.1] 
sm1155: multiple barriers 
sm1154: yeah [0.5] 
nm1127: why [1.0] 
sm1155: because 
nm1127: i'm not disagre-, but but this this is the the this is the whole thing 
that Porter's trying to get at [0.5] why is records more attractive [3.1] 
sm1156: there's a lot of added value [2.2] 
nm1127: er listening to my son's record i might debate that but er [0.3] what 
in what s-, [0.2] yes there is but how and why 
sm1157: demand [0.9] it's demand [0.4] 
nm1127: it's not demand with there's more demand for Windows i expect than 
there are of records 
sm1157: [2.3] 
nm1127: well that's [0.8] 
sm1158: barriers barriers it must be 
because there's the amount of er of [0.4] advertising strategies [0.3] and 
marketing 
nm1127: it's er it's it's actually going it's back to my high-tech in some ways 
[0.4] it's I-P-R it's Intellectual Property Rights [0.4] you can't clone Cliff 
Richards [0.3] thank God [laughter] is the my immediate response [0.5] but what 
you've got there in one form or another [0.5] is very strong branding [0.6] or 
alternatives [0.6] that are barriers to entry into that market [0.6] er [0.3] 
if you take the sort of the er pharmaceuticals [0.5] it is [0.4] pure [0.5] you 
know active agent plus enormously [0.3] focused and professional [0.3] 
marketing branding promotion [0.4] er control of distribution channels et 
cetera [0.3] if you take the the sports equipment [0.4] er [0.6] what you have 
there is a classic branded industry [0.2] er [0.3] i mean y-, [0.2] you know my 
son's my youngest son's twenty-three now [1.4] i remember whe-, about thirteen 
years ago he said to me Dad [0.2] it's impossible to buy a pair of trainers [0.
3] for under seventy pounds [0.5] [laughter] i mean [0.3] the immediate 
reaction is j-, [0.2] just watch me son [0.2] but [0.3] you know 
within his ter-, i mean he's a perfect sort of [0.3] material for [0.6] you 
know these are and it must be hell for you people you know with with sort of [0.
3] younger children [0.5] but enormous power in branding in Nike Adidas and so 
on [0.6] so [0.5] what you're seeing there is i-, elements it will be 
intellectual property rights it may be that the scientific basis [0.3] er it 
may be legislation [0.3] but [0.5] the industries are not that they are not 
perfect markets [1.0] and the products [0.3] are differentiated by [0.3] 
characteristics [0.5] either [0.3] psychic or real or what have you [0.4] 
whereas as you go down whether it's er hotels [0.4] some differentiation there 
but not much for a lot of hotels [0.5] er leather goods [0.7] er always seems 
to me j-, and these categorizations are [0.2] are difficult these days and 
they're getting more difficult [0.5] er [0.3] footwear road hauliers [0.5] 
there are lots and lots of substitutes [0.9] there is lots of supply 
particularly [0.3] in times of recession [1.9] and the other thing with this [0.
4] is often [0.4] when you take er return on capital [0.7] it's a completely 
meaningless [0.6] er [0.9] 
calculation [0.5] if you talk about say P-R consultants or advertising agencies 
'cause they don't really use capital [0.6] human capital [0.7] they're 
knowledge workers [0.2] if i was incredibly generous [0.7] but you know [0.4] 
it's so the cr-, the the index you use has to be appropriate to the means [0.5] 
but what this shows quite clearly [0.4] is why Porter [0.3] and the industrial 
economists are interested [0.4] because [0.3] those diversities [0.4] continue 
for an incredible length of time [0.4] and one of the things that Grant brings 
out [0.6] is that industries and firms [1.1] adapt [0.6] very very slowly [0.7] 
very very slowly and the bigger they are the slower they tend to be [0.4] it's 
only in my neck of the woods where [0.4] you you know you can be er a b-, half-
billion dollar company in six weeks and then be a no billion dollar company in 
another six weeks and we're [0.4] you know that the the er [0.4] i look at 
areas where [1.4] we're looki-, what we're th-, in the study we're doing in 
internationalization and looking at some of the logic of internationalization 
[0.2] er one of the reasons 
that [0.3] you know [0.2] er i went to a meeting with Mandelson and his cohorts 
and [0.5] and someone said there that [0.2] you know small firms don't 
internationalize [0.4] and i said well that's that's complete [0.3] utter 
nonsense 
nm1127: this simple diagram [0.7] is actually so powerful [0.7] and in some 
ways so misleading [2.1] the first thing i would say [0.4] if you're going to 
use it [0.7] then do something with it [1.3] don't just describe [0.8] various 
elements [0.4] without [0.2] following through to a conclusion [0.5] because in 
most cases when i see this diagram [0.7] what it tells me [0.4] is that [0.2] 
the student [0.6] however eminent [0.3] has mastered the basics of the drawing 
package [0.3] on Word ninety-seven [1.3] [laughter] er and often not [0.6] er 
you know 'cause he's [0.2] just out [0.2] you know [0.6] but [0.9] very often 
it's used purely as description [1.8] but it can be an extremely powerful [0.5] 
er [0.3] techni-, or or or model [0.4] if it's used properly [1.6] but what you 
have to do is actually [0.2] go on as as this case study today [0.9] and say 
okay [0.5] we have a lot [0.5] 
of competitors [1.0] ergo [1.1] the following kind of outcomes [0.2] or 
behaviours are likely [0.3] or reasonable [0.3] or plausible [1.1] except [0.4] 
when you're involving say I-P-R or w-, [0.3] you know [0.3] so you need to make 
a story and a a set of sort of logical constructs that lead on [0.3] from what 
that structure means so let's have a actually have a look at that [0.4] er 
initially [1.5] i mean just as er an illustration i used [0.3] this diagram i 
gave a [0.9] a talk to the er [0.4] the the venture capital industry in the U-K 
[0.4] er in nineteen-ninety-one when i first started looking at this com-, this 
this area that was growing like Topsy [0.6] and i just said you know sort of 
smart-arsed comment [0.6] who are your customers [1.7] and that [0.3] debate 
lasted about two years [1.6] 'cause there and we s-, [0.2] there's still a 
debate i mean er i w-, w-, [0.2] might [0.8] might go on l-, but [0.9] who are 
their customers [1.4] this is a financial service industry [0.4] providing 
money [0.3] for young firms to grow rapidly or for large firms to do buy-outs 
[0.3] buy-ins and restructure [0.6] so who are the 
customers [0.5] this is an industry [0.4] that currently has [0.5] er an 
overhang as of about Christmas [0.4] er [0.4] according to a guy who was here 
last year [0.3] of fifteen-billion pounds unspent [1.0] er [0.7] and [1.4] 
depending who you see see the customers [1.0] in that diagram [0.8] everything 
changes [1.5] because [0.4] if you see [0.3] in this case and sor-, [0.5] well 
i y-, you will be bored rigid or or love venture capital by the end o-, of my 
course but [0.6] depending [0.3] but it's a very exciting industry 'cause it's 
changing rapidly [2.0] depending [0.5] how you analyse this [0.5] if you see 
the entrepreneurs [0.4] as the customers [1.1] okay [1.5] then [0.4] 
substitutes [0.5] become substitutes to the entrepreneurs [0.2] for for the 
entepreneurs [0.4] and the substitutes might be Aunt Agatha's money [0.4] it 
might mean bank money [0.5] it might mean going and robbing a bank it you know 
[0.2] alternative sets of finance [0.8] from the perspective [0.3] of the 
entrepreneur [1.8] however [0.4] if you say [0.5] but only about one in twenty 
entrepreneurs are ever financed [0.5] you name me an industry [0.3] which [0.2] 
refuses ninety-five per cent of its 
customers [2.2] but accepts [0.2] a hundred per cent of its suppliers [0.6] and 
its suppliers are Guardian Royal Exchange [0.4] er [0.9] er Swiss Re [0.6] they 
are financial institutions [0.5] that wish to invest [0.6] in a particular 
asset class called private equity [1.1] now if you see the customer [0.7] as 
some damn great financial institution [0.3] on Wall Street [1.1] then [0.2] the 
[0.4] substitute products [1.2] are very very different they sure as hell 
aren't bank debt [0.4] you know Swiss Re [0.3] does not put you know [1.2] two-
billion dollars [0.4] into Barclays sort of current account [0.8] you know the 
alternatives are going to be possibly gilts [0.8] equities certainly equities 
[0.3] and a whole range of other instruments [0.3] so depending who you see the 
customer [0.6] in this analysis you profoundly alter [0.5] the nature [0.9] of 
the analysis [0.8] and it's not often it's not always [0.5] a trivial question 
[0.8] okay [1.1] so [0.4] in this [1.1] what we really need to do is actually 
look at elements [0.2] and say [0.3] well what what do they really mean i mean 
the the [0.5] intensity of er rivalry [1.3] that's a good one to start with [0.
5] yeah [0.7] number 
of [1.2] 'cause w-, what i mean to [0.3] intenstu-, [0.6] intensity of rivalry 
is about where you're at at the moment not what it's like in the past or the 
future but how it what's the dynamic of it at the moment [0.9] 'cause one of 
the criticisms [0.3] of Porter [1.0] is its timin-, is timeliness [0.2] i it is 
atemporal [0.4] it's there sort of set in aspic [0.4] but you don't need to use 
it that way you can actually [0.3] i on one paper i i did three Porters 
nineteen-eighty-one to eighty-five eighty-five to nineteen-ninety ninety-five 
whatever it was [0.4] and you then look at the different power and it's quite a 
good way of analysing [0.3] the dynamics of change over time [0.7] but if 
you're looking at say [1.0] na-, [0.2] you know the the elements of rivalry [0.
4] there's a whole set of things that i would wish to look at [0.4] in order to 
understand [0.4] and you can actually start using i mean [0.4] er my la-, my 
last sort of reference to to venture capital and buy-outs and all this sort of 
bit [0.4] but at the moment [0.6] ba-, there 
is as i said fifteen-billion pounds [0.2] unspent [0.4] but invested by 
institutions in venture capitalists [0.6] who have got to spend it [0.4] 
profitably [0.4] returning with a premium for risk illiquidity and so on [0.3] 
back to these guys within ten years [0.7] so they've got ten years to spend [0.
3] this fifteen-billion surplus [0.8] and the most [0.3] prof-, er this is for 
buy-outs [0.2] only for buy-outs [0.4] now there are six-hundreds buyouts a 
year in the U-K [0.5] biggest buy-out market in the world [0.6] after America 
[0.8] and there's been six-hundred buy-outs last year [0.8] the year before [0.
6] and the year before that [0.9] so we have [0.2] really a constant supply [0.
7] and we have [0.5] this huge [1.2] volume of money [0.5] allocated [0.4] to 
about thirty institutions [0.9] in the U-K [1.0] now what do you think that's 
going to do [0.2] to competition [2.0] 
sm1159: [1.2] suppress it [1.2] 
nm1127: suppress it [0.6] 
sm1159: 
sm1160: you wouldn't [1.2] you wouldn't think the number of buy-outs will 
increase if venture capitalists shoot up [1.7] 
nm1127: yeah but the m-, [0.2] th-, [0.2] but [0.4] but increasingly the the er 
[1.1] the quest-, [0.2] yeah 
they could increase because [0.5] who provides the buy-outs [3.7] the 
corporates from which they come [0.9] you know they decide that this is non-
core therefore we'll spin it off [0.3] and this is one way of spinning it off 
[0.7] now you say this will suppress competition [0.2] why [1.3] 
sm1159: maybe i misunderstood you i thought you said [0.4] there's only thirty 
large organizations who can get this money and they're going to buy and sell 
nm1127: well they've got the money already 
sm1159: okay 
nm1127: they're they're it's been allocated to them 
sm1159: it's going to be [0.2] less and less [0.2] businesses [0.2] in their 
industry sectors [0.4] 
nm1127: yeah [0.2] so that would suppress competition [1.4] 
sm1159: i would have thought so [0.9] 
nm1127: well [0.9] you've just been given you're you're Schroders you've just 
got a new one-and-a-half-billion dollar fund [0.8] and you're going to say [0.
6] well [0.7] can't spend that [0.9] so you're going to go back and say er well 
[0.2] actually er Californian pension fund [0.5] er sorry we shouldn't have 
asked we er we you know [0.2] will you take a cheque [0.5] you know [0.3] you 
have you're 
you have just raised one-and-a-half-billion [0.2] and you're going to spend 
that in ten years [0.3] and there is a constant supply [0.7] of [0.4] valuable 
propositions [0.9] you know the competition is going to [0.3] k-, hit the 
ceiling [0.5] 
sm1159: okay [0.4] 
nm1127: becau-, [0.3] becau-, no because [0.2] you know they have got to spend 
the money it is in the market [0.5] they won't need to spend all of it but 
they've got to spend most of it [0.3] otherwise why the hell did you ask us for 
it i mean [0.3] you know there there would be so much egg on so many faces and 
so many [0.4] you know careers lost [0.2] 
sm1161: can you not take a limited risk [0.5] 
nm1127: yeah [0.2] i mean the the risk [0.7] goes up in no-, the people who are 
going to really win from this [0.4] are large corporates that need to slough 
off [0.5] er [0.2] non-core divisions [0.5] because if you have got er er an 
attractive division that you could do a buy-out or a buy-in or a [0.4] buy-in 
buy-out with [0.4] you know the world's going to beat at your door there'll be 
Schroders there'll be Morgan Grenfell [0.4] er there'll be Nomura there'll be 
Lloyds 
there'll be Three-I everyone will be beating on your door [0.3] and you will 
say well [0.5] you start the bidding [1.0] would you like to up that [0.3] you 
know i mean it's it's [0.2] it's going to be [0.3] but you know [0.4] what i'm 
saying is [0.6] look at the nature [1.0] because if we take this w-, things 
like okay nature entry and exit barriers [0.4] well [0.7] one of the [0.2] you 
[0.3] you quite rightly said or who s-, who said something like well perhaps 
the supply will increase [0.8] i mean it may force the barriers down but it's 
not likely to happen in the short run [0.4] now you need to see competition in 
short run and longer term measures [0.3] and in the short run may be very 
different from the longer run [0.4] now you can sort of surmise what's likely 
to [0.3] to happen [2.4] in that particular market [0.6] is there really any 
diversity [1.1] in [0.6] the the competitors [3.0] you know i mentioned Morgan 
Grenfell it could be er [0.8] a whole range of [0.3] British American European 
banks venture capitalists or 
sm1162: then an interest rate and repayment 
sf1163: i [0.5] 
i'd say the diversity [0.2] is [0.2] on the severity of things like covenants 
so if i was looking for someone to finance my buy-out [0.4] 
nm1127: yeah 
sf1163: i'd look for someone who'd give me the most goods [1.1] 
nm1127: yep [0.4] but but i-, [0.4] but [0.4] you're clearly from the financial 
covenants [laugh] and heavy words like that [0.5] but in the final analysis [1.
4] they're [0.2] usually overweight men [0.5] with a bag of money [0.4] i mean 
the differentiation [0.7] is actually quite limited [0.4] in this market [0.8] 
what's that going to do to competition [1.7] 
sm1164: [0.4] 
nm1127: it [0.2] it's going to drive up competition [0.5] 'cause 
differentiation is one way you don't compete [1.0] you know when i worked for 
Unilever [0.5] we'd never [0.2] i mean fats and oils we competed [0.4] but we 
never competed on anything so vulgar as price if we could help it [0.5] because 
it's a mug's game to compete on price [0.6] you know [0.3] one of the worst 
examples of competing on price [0.5] was Sainsbury and Tesco's getting into a 
price war [0.2] you know [0.4] so [0.2] Sainsbury's goes down threepence [0.4] 
on er baked beans you 
bastard [0.2] fourpence on ravioli you swine frozen peas down [0.4] [laughter] 
and who the hell wins [0.9] 
sm1165: we do 
sm1166: [0.3] 
nm1127: you do well you what have you got to do with it you're not shareholders 
[0.2] you know [0.3] i mean it is completely shooting yourself in both feet and 
then trying to run a hundred yards [0.5] and you know they learn i mean no one 
well [0.6] actually Tesco's actually have got a marginal advantage in that they 
did actually buy share in the first [0.5] price war [0.4] but they they've 
avoided it studiously for another [0.2] you know twen-, fifteen years since 
then [0.9] now [0.3] you have price wars when there is nothing else you can 
offer [1.4] that's why the competition i-, in the car industry [0.3] you are 
desperate to differentiate [0.6] if you can [0.9] because who the hell wants to 
compete [0.3] against Far Eastern producers on price [1.1] but when [0.2] in 
the final analysis [0.4] is a bag of money from you or you [0.6] then [0.3] 
when there is pressure when there is limited opportunity [0.6] then [0.6] you 
know [0.4] it becomes bare knuckle fighting it becomes price [0.3] it becomes 
very intense competition [0.4] now you can [0.3] you can surmise this without 
sm1167: 
nm1127: sorry [0.2] 
sm1167: there's ways of combating that [0.2] 
nm1127: sure 
sm1167: focusing on the issue but then there wasn't 
nm1127: absolutely [0.2] 
sm1167: 
nm1127: yeah 
sm1167: [0.6] 
nm1127: i agree entirely but they they won't be in that market anyway i'm just 
talking about buy-out funds but [0.2] i mean [0.4] what i'm saying here and and 
i i don't disagree with you at all [0.3] is in the short run it's difficult to 
to avoid it [1.0] in the longer run yes [0.6] but you without knowing anything 
about [0.3] venture capital private equity [0.3] and i can't conceive of people 
not [0.6] er you could actually [0.7] you could actually give a plausible 
analysis of how you would see this industry developing [0.4] over three or four 
years [0.6] buy-outs you're just looking at these kind of things [0.4] the 
diversity well there isn't i [0.3] the product differentiation [0.8] it's 
coming [0.4] but product differentiation [0.2] in [0.9] in financial services 
[1.9] it [0.3] it ten-, in this area it who's 
it bought by i mean [0.4] who actually makes the choice [0.7] of [0.8] which 
which provider to use which financial provider [1.7] who what type of people 
make the choice 
sm1168: finance 
nm1127: yeah [0.3] it's accountant shall talk unto accountant [0.9] and it's a 
very instrumental [0.7] negotiation [1.0] and in the final analysis [0.3] it 
comes down to informed people professionals [0.7] negotiating broadly speaking 
on price [0.5] in in oversupplied markets [0.4] so [0.4] you haven't [1.1] you 
haven't got much opportunity [0.4] to product er to differentiate the product 
in this particular case [0.6] the nature of exit entry barriers slow real 
negative er [0.3] all of these things [0.7] are actually likely to profoundly 
influence [0.5] how you can compete [1.0] let's just look at er [0.5] barriers 
to entry and barriers to exit because one of the things [2.0] i want to get 
across [0.7] is [2.8] you should really look [1.6] at barriers to entry i mean 
that's one of the first things i i would look at [0.8] i mean [0.5] just just 
quickly 'cause [0.7] 
one thing i should say and i should have said at the start [0.7] i always give 
you more notes than i will ever get through [1.1] er so the notes are a sort of 
resource [0.6] er [0.4] and you can say later look i really wish that you would 
go through [0.3] er [0.4] slides twenty-one to twenty-four 'cause i don't 
understand them or what have you [0.3] but invariably [0.4] i will give you 
more notes than i will ever get through [0.2] each each term so each [0.2] 
lecture [0.3] er which is indiscipline but [0.8] er [0.3] let me apologize [1.
1] after the fact [0.3] but if we look at barriers to entry [0.3] just give me 
some [0.3] you know give me some examples [2.1] 
sm1169: cost of capital 
sm1170: capital 
sm1171: capital [0.2] 
nm1127: cost of capital [0.7] who's that a barrier to [2.0] 
sm1172: er new entrants [0.5] 
nm1127: new entrants [0.4] also small businesses [0.6] small businesses will 
always pay [0.3] and in some some cases it is er a major [1.0] power for 
incumbents that actually [0.3] have it [0.5] economies of scale and scope [1.0] 
where would you s-, find huge economies [1.2] 
sm1173: 
nm1127: well no not larger it's it's [0.6] not per se [0.2] but but what [0.4] 
where 
would you where [0.5] the very nature of scale will keep you out [0.4] unless 
you're you're very large yourself [0.4] 
sm1174: er if you needed [0.2] crucially the number of of customers [0.5] to 
actually make 
nm1127: yeah 
sm1174: like in the 
nm1127: i 
sm1174: car industry 
nm1127: car industry yeah [0.3] 
sm1175: and you've got high development of 
nm1127: absolutely [0.5] fabrication plant now and integrated chip how much to 
to [0.2] put one from scratch [0.4] 
sf1176: [0.4] 
nm1127: sorry [0.5] 
sf1176: one-point-nine-billion 
nm1127: yeah [0.3] yeah [0.6] s-, [0.4] just [0.4] probably you'll get get it 
[0.3] you'd even get the car park for two-billion [0.5] so once you've got that 
scale [0.8] you or the scale you need related to that is absolutely enormous [0.
3] so that dictates that okay if you're a Mitsubishi if you're an I-B-M [0.4] 
er if you're an Oracle perhaps [0.4] but if you're not of that scale [0.3] then 
[0.2] you're out you're not in that game any more [0.4] er [0.3] and some 
countries have even seen you know not being able to be in the game [0.6] 
government policy and legislation [0.5] where are you going to see that as a 
classical 
barrier to to er [1.0] entry [1.4] 
sm1177: state monopolies [0.6] 
nm1127: state monopolies yeah where you're protecting your own [0.3] 
increasingly difficult under W-T-O World Trade Organization [0.2] where would 
it be legitimate [1.4] 
sm1178: Royal Mail [0.5] 
nm1127: Royal Mail er [1.0] 
sm1179: 
nm1127: well well the government says it is so it must be legitimate by 
definition 
sm1180: well Sweden is [0.2] 
nm1127: sorry [0.2] 
sm1180: in Sweden [0.9] competition [0.6] 
nm1127: yeah Sweden is interesting because er one of the things that i've found 
there is that [0.7] you find it very difficult to have a large differential in 
in er incomes [0.7] er [0.3] say compared to the U-K or America [0.6] er and 
that that's quite difficult as labour markets become more international [0.5] 
er [0.3] but that's that's an er aside [0.4] things like f-, er [0.3] medicine 
[0.4] the health industry [0.6] you have huge [0.3] regulatory barriers [0.3] 
er [0.3] the classic one of course is is food and drug administration [0.4] in 
America [0.3] er [0.4] which can determine which has a profound effect on the 
viability of of of new drugs new systems 
and so on [0.6] er [0.2] so each of those you need to actually understand 
because [0.5] what i [0.3] also the barriers to exit [1.0] the other side of 
this coin [0.6] is okay [0.4] you may be able to get in [1.0] but can you get 
out [1.3] and you really need to look at them [0.4] in conjunction [0.8] 
because [1.3] that is the kind of thing which gives you some indication [1.0] 
of how people might react now [0.4] it would be very wrong of me to say [1.8] 
people with [0.4] in situations with low barriers to entry and low barriers to 
exit you will get low stable profits all the time [0.3] yeah [0.2] 
sm1181: it's ten to eight [0.4] 
nm1127: sorry [0.2] ten to eight oh right thanks [0.6] er [0.7] [laughter] [0.
6] right [0.3] speed up [0.5] er [0.8] low barriers to entry low barriers to 
exit [0.5] you're likely to get low stable profits now [0.6] there will be 
exceptions to that [0.5] but the reason why you probably would [1.4] is that 
when the situation [0.3] is too competitive [1.0] people can leave [1.4] and 
you want [0.8] the ideal situation for a-, any of you or or me [0.2] is [0.3] 
really high barriers to entry [0.5] you know they've really got [0.2] 
to to to [0.2] to squeeze all the resources to get into this industry [1.3] but 
very low barriers to exit [1.2] when the going gets tough [0.5] you want people 
to be able to leave very easily [0.6] very quickly [0.6] because the 
alternative if the barriers to exit are high [0.7] what do you do [1.1] 
sm1152: [0.5] 
nm1127: yeah you can't get out [0.5] so what do you do if you stay in [0.6] 
sm1153: 
nm1127: you've [0.7] you either die or you fight like hell [1.0] and no one 
wants a competitor whose only other choice [0.3] to competing with you is dying 
[0.7] you know kamikaze competitors [0.3] are not very attractive in any sort 
of strategic environment [0.5] so [0.2] you know the the nature of the barriers 
to exit and entry [0.3] and if [0.4] i mean th-, one of the things about say er 
mature industries [0.4] i mean people sort of equate maturity with low profits 
very often mature industries [0.3] can be actually highly profitable [0.2] why 
[1.1] 
sf1182: 'cause everyone else has left [0.4] 
nm1127: everyone else has left [0.9] and no one's coming in [1.3] so those that 
are there [1.2] have usually come to some modus operandi [0.2] you know [0.8] 
we've been old friends for a long time 
you know there's there's plenty for both of us you know [0.2] in our twilight 
years [0.7] er secondly you're probably at the the bottom of the long run cost 
curve [0.6] you know you [0.3] you know it chapter and verse you know [0.3] you 
know every [0.5] wrinkle of the process [0.3] and so [0.3] in those 
circumstances it can actually no one's going to go into it [0.3] but it's 
actually still profitable for those in there [0.5] so look in your industries 
or your sectors [0.3] and actually determine the nature of the barriers to 
entry [0.4] and the nature of the barriers to exit [0.3] but also think outside 
the frame [0.4] not just existing competitors [0.5] but also often new 
competitors [0.4] because you may say the barriers to entry are high [1.4] and 
then one turns around and says [0.4] what [0.2] to General Electric [1.2] you 
know [0.3] so it depends on the context and it depends on [0.4] on the the 
market you're looking at [0.7] er [1.3] let's who's doing the the case study 
this evening [2.3] 
sm1183: A and B 
sm1184: [0.4] 
nm1127: A and B [0.5] has A and B met [1.2] 
sm1185: no [0.6] 
sm1186: no [1.3] 
nm1127: er right [0.7] this is always a 
problem on the first one [0.4] well tell you what and it's nine th-, let's [0.
6] let's have [0.3] have A and B met [1.2] 
sm1187: no [0.4] 
nm1127: no 
sf1188: suggest we do it next week [laughter] [1.4] 
sm1189: [0.5] 
nm1127: what's who's read the case study [2.8] thank God for the film that you 
all stuck your hands up [0.6] [laughter] er 
sm1190: [0.2] 
nm1127: sorry 
sm1190: it wasn't particularly clear that we had to read [0.8] 
nm1127: right [0.2] okay [0.4] o-, on that er [0.2] fulsome and well well 
thought out argument [0.4] [laughter] may i suggest [0.9] 
sm1190: desperate 
nm1127: [laughter] [0.3] can i suggest that we actually do it as er a general 
[0.7] case study [0.5] er [0.9] so [0.4] it means i'll have to read it [0.4] er 
[0.2] so [0.8] we're d-, [0.2] we're doing it yeah [0.5] so [0.6] so we'll 
continue and then we'll bring in that er in a rather more shortened fashion 
'cause there's a couple of other things i want to cover [0.3] so let's break 
for say till a quarter past [0.3] but can we be here at a quarter past