Home > Articles > Business & Management

  • Print
  • + Share This
This chapter is from the book

New Business Environment

The global economy has increased the pace of change within factors external to each firm to the point that a new business environment has replaced/altered traditional dynamics present in the mid-1980s. The closeness of these elements defined a new balance in forces that govern the organizations.

The corporate governance structure responsible for delivering shareholder value on the one side and stakeholder expectations on the other includes some of the following mechanisms: the board of directors, board committees, the chief executive officer, executive committees, management committee, and independent auditors. The traditional business environment usually offer a clear imbalance between the relative influence of shareholders and stakeholders in favor of the stakeholders.

A dramatic change in these relative forces is one of the most perceivable effects of the creation of fluid and complex supply networks. This is a consequence of the deep business environment transformation that destroyed the fundamentals of the traditional value chain management and the very basic principles that supported previous strategic thinking. The resulting balance will be presented later in this section but before that some explanation is required.

Several academics and practitioners have debated the impact that technology inflicts on modern economy. The authors believe that technology omnipresence is the underlying mechanism that has enabled this transformation which has altered both the supply and demand sides of the economy. By transforming the dynamics of both supply-side economy and demand-side economy, it has altered the dynamism of the business environment and shrunk both the economic and industry cycles.

Figure 1.13

Figure 1.13 Governance relative forces

Barriers to entering new markets have reduced, new entrants have multiplied, and substitution of products and service is customers’ expectation in most industries. This has reduced the importance of the direct rivalry among existing competitors as these have developed external alliances in order to survive. Companies no longer compete; supply chains do. In fact, as will be presented to the readers of this book, the supply chains’ networks compete with each other. This scenario has distanced the Five Forces Model from applicability as it reduces the effects of each of the forces.

The network effect is a phenomenon, as explained in the economy, that has intensified as the proportion of technology has become accessible to families. The basic mechanism suggests that the more people one potential buyer perceives using a product or service, the more likely this potential buyer is to acquire that item. Although the network effect was presented in the early 1900s,10 new economy dynamics with the Internet and massification of social media interactions have enforced its importance and influence.

Figure 1.14

Figure 1.14 New business environment, supply side

The network effect has some significant influence on the supply side of the economy, providing technology enabled solutions for sharing R&D best practices and tools. Nonproprietary technologies made public in collective practitioners’ communities have speeded the pace of change and accelerated the new alternatives’ (products and services) introduction rates in different industries.

Technological expansion and diversification have reduced development costs and cycle times, which has enabled the multiplication of offers. Recent technological influence has also reduced product and service introduction cycle times, making them available almost immediately to clients without geographical barriers.

This phenomenon brings us back to the discussion about another economic approach which became very influential as the new business environment substituted the traditional value chain. The creative destruction concept “derived from Marxist economic theory, where it refers to the linked processes of the accumulation and annihilation of wealth under capitalism”11 but was popularized by Austrian-American economist Joseph Schumpeter who adapted the theory to economic innovation and the business cycle driven by technological innovation (Schumpeter 1994 [1942]).

This new environment faces numerous shorter industry cycles and creates an equally new economic order. Microeconomics models that observe market dynamics are under deep debate as the real side of the economy is under transformation. This affects the demand-supply balance, demand elasticity patterns, competition models, market structure theories, and cost and production theories.

Despite the effect on the supply side of the economy, the network effect has usually been assigned to influencing the demand side of the economy as it reflects the influence one individual can have on the purchasing behavior of other people.

From the demand side of the economy, the network effect alters people’s awareness about new offers (new products and new service). This transformation occurs in four complementary dimensions:

  1. The awareness is faster.
  2. The awareness is intense.
  3. The awareness is global.
  4. The awareness is supported by efficient responsiveness mechanisms.

It means that the cycle from new product or service launch to customer experience has shrunk, that too many people become aware, that there are very limited geographical barriers to this awareness, and that users can converse with each other about their experiences and provide feedback to the supplier almost instantaneously. Usually applied to the positive network effect, technology has now enabled an equally influential negative network effect.

Another significant change opportunity in the global economy is the impact of government regulations. Global organizations now influence markets on a multinational scale and national policies can leverage competitive differentiation to be applied overseas, impacting on competition in other countries.

Because external variables (see Figure 1.3) have now shortened the length of balanced business periods, the need to review a certain existing strategy has become more frequent and intense. The effort to move constantly from a strategy designed to last to a new allegedly long-lasting strategy is prohibitively costly to the organization.

The ability to design businesses capable of elasticity, resilience, and responsiveness requires an environment triggered by constantly updated market knowledge. The only asset that matters is people. The only strategy that delivers long-lasting shareholder value is the innovation-enabled knowledge leadership. The only business model that enables a truly innovative environment is the management of supply chains’ networks.

Figure 1.15

Figure 1.15 New business environment

These changes in the supply and demand sides of economy have destabilized the business environment. The definition of long-term business cycle has reduced and now strategies become obsolete much sooner. This eliminates the possibility of long-lasting strategies, as presented in Figure 1.9, due to the devastating impact of the disruption valleys. The alternative is to adapt strategic thinking to these shorter business cycles. Accumulated knowledge enables the ability to perceive market changes as driver to anticipate the new strategy. Therefore, the wise competitors—a conglomerate of complementary business that work together—can deliver value to shareholders and stakeholders.

Figure 1.16

Figure 1.16 Value network strategy lifecycle

The challenge is then to identify the mechanisms that enable market changes’ responsive strategies for fluid and complex supply networks. This new business environment has no longer the premises that sustained the arguments for the traditional value chain. A new paradigm exists. Previous dynamism and volatility has been intensified by market fluidity, complexity, and unpredictability. Forecasting as a single planning strategy is unacceptable as business resource planning must create a resilient environment capable of sensing every recently networked-market trend. The only relevant long-term strategy capable of creating and sustaining shareholder and stakeholder value is knowledge management.

Whereas the traditional value chain approach prepares for competitiveness, the value network prepares for innovation, as detailed in the previous section called “New Business Environment.” Innovativeness is the consequence of the wise application of knowledge accumulated over the time. The ability to change and simultaneously add value represents the ultimate competitive leadership dimension.

In addition, there is no room for choice. The organization must be able to concurrently deliver a ground-breaking cost-benefit environment to shareholders and stakeholders. Some firms that previously used to be ignored during strategic thinking are now influential stakeholders. The governance structures that balance shareholder value and stakeholder interest need to review their policies as their relative importance is now very similar.

Once the single firm no longer has the resources to compete in its industry sector and given that only through alliances will this firm shape high performance supply networks capable of beating other equally designed supply networks, it is possible to understand the power these elements external to the firm have.

Figure 1.17

Figure 1.17 From value chain to value network

Figure 1.18

Figure 1.18 Value network knowledge management

Figure 1.19

Figure 1.19 New governance balance

The quality of being able to sense is known as wisdom. Excellence in managing supply networks creates wise competitors; wise competitors are those companies that form a conglomerate of complementary business environments that work in a coordinated way and cooperatively to win in the market and deliver value to all their respective shareholders and stakeholders.

  • + Share This
  • 🔖 Save To Your Account

InformIT Promotional Mailings & Special Offers

I would like to receive exclusive offers and hear about products from InformIT and its family of brands. I can unsubscribe at any time.

Overview


Pearson Education, Inc., 221 River Street, Hoboken, New Jersey 07030, (Pearson) presents this site to provide information about products and services that can be purchased through this site.

This privacy notice provides an overview of our commitment to privacy and describes how we collect, protect, use and share personal information collected through this site. Please note that other Pearson websites and online products and services have their own separate privacy policies.

Collection and Use of Information


To conduct business and deliver products and services, Pearson collects and uses personal information in several ways in connection with this site, including:

Questions and Inquiries

For inquiries and questions, we collect the inquiry or question, together with name, contact details (email address, phone number and mailing address) and any other additional information voluntarily submitted to us through a Contact Us form or an email. We use this information to address the inquiry and respond to the question.

Online Store

For orders and purchases placed through our online store on this site, we collect order details, name, institution name and address (if applicable), email address, phone number, shipping and billing addresses, credit/debit card information, shipping options and any instructions. We use this information to complete transactions, fulfill orders, communicate with individuals placing orders or visiting the online store, and for related purposes.

Surveys

Pearson may offer opportunities to provide feedback or participate in surveys, including surveys evaluating Pearson products, services or sites. Participation is voluntary. Pearson collects information requested in the survey questions and uses the information to evaluate, support, maintain and improve products, services or sites, develop new products and services, conduct educational research and for other purposes specified in the survey.

Contests and Drawings

Occasionally, we may sponsor a contest or drawing. Participation is optional. Pearson collects name, contact information and other information specified on the entry form for the contest or drawing to conduct the contest or drawing. Pearson may collect additional personal information from the winners of a contest or drawing in order to award the prize and for tax reporting purposes, as required by law.

Newsletters

If you have elected to receive email newsletters or promotional mailings and special offers but want to unsubscribe, simply email information@informit.com.

Service Announcements

On rare occasions it is necessary to send out a strictly service related announcement. For instance, if our service is temporarily suspended for maintenance we might send users an email. Generally, users may not opt-out of these communications, though they can deactivate their account information. However, these communications are not promotional in nature.

Customer Service

We communicate with users on a regular basis to provide requested services and in regard to issues relating to their account we reply via email or phone in accordance with the users' wishes when a user submits their information through our Contact Us form.

Other Collection and Use of Information


Application and System Logs

Pearson automatically collects log data to help ensure the delivery, availability and security of this site. Log data may include technical information about how a user or visitor connected to this site, such as browser type, type of computer/device, operating system, internet service provider and IP address. We use this information for support purposes and to monitor the health of the site, identify problems, improve service, detect unauthorized access and fraudulent activity, prevent and respond to security incidents and appropriately scale computing resources.

Web Analytics

Pearson may use third party web trend analytical services, including Google Analytics, to collect visitor information, such as IP addresses, browser types, referring pages, pages visited and time spent on a particular site. While these analytical services collect and report information on an anonymous basis, they may use cookies to gather web trend information. The information gathered may enable Pearson (but not the third party web trend services) to link information with application and system log data. Pearson uses this information for system administration and to identify problems, improve service, detect unauthorized access and fraudulent activity, prevent and respond to security incidents, appropriately scale computing resources and otherwise support and deliver this site and its services.

Cookies and Related Technologies

This site uses cookies and similar technologies to personalize content, measure traffic patterns, control security, track use and access of information on this site, and provide interest-based messages and advertising. Users can manage and block the use of cookies through their browser. Disabling or blocking certain cookies may limit the functionality of this site.

Do Not Track

This site currently does not respond to Do Not Track signals.

Security


Pearson uses appropriate physical, administrative and technical security measures to protect personal information from unauthorized access, use and disclosure.

Children


This site is not directed to children under the age of 13.

Marketing


Pearson may send or direct marketing communications to users, provided that

  • Pearson will not use personal information collected or processed as a K-12 school service provider for the purpose of directed or targeted advertising.
  • Such marketing is consistent with applicable law and Pearson's legal obligations.
  • Pearson will not knowingly direct or send marketing communications to an individual who has expressed a preference not to receive marketing.
  • Where required by applicable law, express or implied consent to marketing exists and has not been withdrawn.

Pearson may provide personal information to a third party service provider on a restricted basis to provide marketing solely on behalf of Pearson or an affiliate or customer for whom Pearson is a service provider. Marketing preferences may be changed at any time.

Correcting/Updating Personal Information


If a user's personally identifiable information changes (such as your postal address or email address), we provide a way to correct or update that user's personal data provided to us. This can be done on the Account page. If a user no longer desires our service and desires to delete his or her account, please contact us at customer-service@informit.com and we will process the deletion of a user's account.

Choice/Opt-out


Users can always make an informed choice as to whether they should proceed with certain services offered by InformIT. If you choose to remove yourself from our mailing list(s) simply visit the following page and uncheck any communication you no longer want to receive: www.informit.com/u.aspx.

Sale of Personal Information


Pearson does not rent or sell personal information in exchange for any payment of money.

While Pearson does not sell personal information, as defined in Nevada law, Nevada residents may email a request for no sale of their personal information to NevadaDesignatedRequest@pearson.com.

Supplemental Privacy Statement for California Residents


California residents should read our Supplemental privacy statement for California residents in conjunction with this Privacy Notice. The Supplemental privacy statement for California residents explains Pearson's commitment to comply with California law and applies to personal information of California residents collected in connection with this site and the Services.

Sharing and Disclosure


Pearson may disclose personal information, as follows:

  • As required by law.
  • With the consent of the individual (or their parent, if the individual is a minor)
  • In response to a subpoena, court order or legal process, to the extent permitted or required by law
  • To protect the security and safety of individuals, data, assets and systems, consistent with applicable law
  • In connection the sale, joint venture or other transfer of some or all of its company or assets, subject to the provisions of this Privacy Notice
  • To investigate or address actual or suspected fraud or other illegal activities
  • To exercise its legal rights, including enforcement of the Terms of Use for this site or another contract
  • To affiliated Pearson companies and other companies and organizations who perform work for Pearson and are obligated to protect the privacy of personal information consistent with this Privacy Notice
  • To a school, organization, company or government agency, where Pearson collects or processes the personal information in a school setting or on behalf of such organization, company or government agency.

Links


This web site contains links to other sites. Please be aware that we are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of each and every web site that collects Personal Information. This privacy statement applies solely to information collected by this web site.

Requests and Contact


Please contact us about this Privacy Notice or if you have any requests or questions relating to the privacy of your personal information.

Changes to this Privacy Notice


We may revise this Privacy Notice through an updated posting. We will identify the effective date of the revision in the posting. Often, updates are made to provide greater clarity or to comply with changes in regulatory requirements. If the updates involve material changes to the collection, protection, use or disclosure of Personal Information, Pearson will provide notice of the change through a conspicuous notice on this site or other appropriate way. Continued use of the site after the effective date of a posted revision evidences acceptance. Please contact us if you have questions or concerns about the Privacy Notice or any objection to any revisions.

Last Update: November 17, 2020