Review of Book by Gary Fields


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Territories of Profit: Communications , Capitalist Development and the Innovative Enterprises of GF Swift and Dell Computer

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Review of Book by Gary Fields

  1. 1. Territories of Profit: Communications , Capitalist Development and the Innovative Enterprises of GF Swift and Dell Computer - Gary Fields
  2. 2. The Railroad and Telegraph as Commerce System and Market Space <ul><ul><ul><li>Communications and Commerce </li></ul></ul></ul><ul><ul><ul><li>Infrastructure Interconnection </li></ul></ul></ul><ul><ul><ul><ul><li>Connecting the Atlantic and Pacific Coasts with wire in 1861 and rails in 1869. </li></ul></ul></ul></ul><ul><ul><ul><ul><li>Single transport and communication medium. </li></ul></ul></ul></ul><ul><ul><ul><ul><li>Twins of the 19 th century commerce </li></ul></ul></ul></ul><ul><ul><ul><li>Markets before railroad and telegraph </li></ul></ul></ul><ul><ul><ul><li>Rail and telegraph based trade </li></ul></ul></ul><ul><ul><ul><ul><li>Completion of Galena and Chicago Union Railroad </li></ul></ul></ul></ul><ul><ul><ul><ul><li>East-West Railroad lines </li></ul></ul></ul></ul><ul><ul><ul><li>Advantages </li></ul></ul></ul><ul><ul><ul><ul><li>Speed </li></ul></ul></ul></ul><ul><ul><ul><ul><li>Reliability </li></ul></ul></ul></ul>
  3. 3. The Railroad and Telegraph as Commerce System and Market Space <ul><li>Increase in livestock shipping. </li></ul><ul><li>Institutionalization of Interregional trade. </li></ul><ul><ul><li>Standards and Futures </li></ul></ul><ul><li>Urban impacts </li></ul><ul><ul><li>Increase in urban population </li></ul></ul><ul><ul><li>Emergence of cities as manufacturing enters. </li></ul></ul><ul><ul><li>Mass Markets and manufacturing </li></ul></ul><ul><li>Govt. Policies </li></ul><ul><ul><li>Single National market </li></ul></ul>
  4. 4. The Business Enterprise of G.F.Swift & Company <ul><li>Organization of Swift </li></ul><ul><ul><li>Dispersed Branch distribution houses </li></ul></ul><ul><ul><li>Pull system </li></ul></ul><ul><ul><li>Vertically integrated, Large scale Enterprise </li></ul></ul><ul><ul><li>Territorial Spread and localized concentration </li></ul></ul><ul><li>Early Meatpacking </li></ul><ul><ul><li>Perishable Nature of Meat </li></ul></ul><ul><ul><li>Lack of refrigeration facilities </li></ul></ul><ul><ul><li>Long distance transport of cattle </li></ul></ul><ul><li>The Stockyards </li></ul><ul><li>Cattle commission houses </li></ul>
  5. 5. The Business Organization of G.F.Swift & Company <ul><li>Pooling arrangements between live-stock carrying railroads. </li></ul><ul><ul><li>Inedible portion of the animal was also charged. </li></ul></ul><ul><li>Integrated production and distribution strategy. </li></ul><ul><li>Refrigeration, transportation, communication and organization </li></ul><ul><li>Improvised refrigerated rail car </li></ul><ul><li>Consignment arrangements with the local butchers </li></ul>
  6. 6. The Business Organization of G.F.Swift & Company <ul><li>Butcher Aristocracy </li></ul><ul><ul><li>Butcher workman Industrial laborer </li></ul></ul><ul><li>Increase in no. of wage earners from 8000 to 70000 from 1870 to 1900. </li></ul><ul><li>By 1903, swift became the largest meat packing firm in the world. </li></ul><ul><li>Dressed beef trust </li></ul><ul><li>Investments by firms in the cattle stockyards. </li></ul><ul><li>Direct system of operations </li></ul><ul><ul><li>Relied on orders from retail butchers </li></ul></ul><ul><ul><li>High volume throughput </li></ul></ul><ul><ul><li>Customization </li></ul></ul><ul><ul><li>Balancing supply and demand – using telegraph </li></ul></ul>
  7. 8. <ul><li>Vertically Integrated Organization </li></ul><ul><li>Ancillary operations </li></ul><ul><ul><li>Swift refrigerator transportation company </li></ul></ul><ul><ul><li>Ice manufacturing and distribution </li></ul></ul><ul><ul><li>Swift fertilizer works </li></ul></ul>
  8. 9. Internet as commerce system and Market Space <ul><li>Revolution in communication as a platform fro reorganizing competitive activity. </li></ul><ul><li>Commercialization of Internet </li></ul><ul><ul><li>Invention of core infrastructure technology </li></ul></ul><ul><ul><li>Transformation into system for delivering profit </li></ul></ul><ul><ul><li>Exploitation of the built system </li></ul></ul><ul><li>Infrastructure Users </li></ul><ul><li>Users as innovators </li></ul><ul><li>Internet commercialization </li></ul><ul><ul><li>Splitting ARPANET into 2 pieces </li></ul></ul><ul><ul><li>Local Area networks(LANs) </li></ul></ul><ul><ul><li>World Wide Web and Internet Browser </li></ul></ul>
  9. 10. Internet as commerce system and Market Space <ul><li>Host Computers </li></ul><ul><ul><li>1984 – 1000+ 1986 – 313,000 </li></ul></ul><ul><li>The Web, the Browser and Web Commerce </li></ul><ul><li>Web commerce </li></ul><ul><ul><li>“ pulled” information channel </li></ul></ul><ul><ul><li>Goods Information , user buyer </li></ul></ul><ul><ul><li>Explosion of web portals, web hosting-services and search engines. </li></ul></ul><ul><li>Internet commerce and Govt. policy </li></ul><ul><ul><li>Telecommunications Act of 1996 </li></ul></ul><ul><ul><ul><li>Open competition for construction of internet infrastructure </li></ul></ul></ul><ul><ul><li>Framework for Global Electronic commerce </li></ul></ul><ul><ul><ul><li>Predictable legal environment for Internet commerce </li></ul></ul></ul>
  10. 11. Internet as commerce system and Market Space <ul><li>Internet retail space </li></ul><ul><ul><li> and Internet Market Space </li></ul></ul><ul><ul><li>Internet Efficiency and Internet Geography </li></ul></ul><ul><ul><ul><li>Interfirm sales </li></ul></ul></ul>
  11. 12. The Business Organization of Dell Computer <ul><li>“ build-to-order” </li></ul><ul><li>Dell’s process relies on </li></ul><ul><ul><li>Absent intermediaries </li></ul></ul><ul><ul><li>Customization </li></ul></ul><ul><ul><li>Use of internet for procurement and assembly operations </li></ul></ul><ul><li>Dell accumulates profit as a logistics firm </li></ul><ul><li>Levels of inventory </li></ul><ul><ul><li>1994 – 32 days of inventory </li></ul></ul><ul><ul><li>2002 – 4 days of inventory </li></ul></ul><ul><li>Collaborative relationship – between Dell and its Network partners </li></ul>
  12. 13. The Business Organization of Dell Computer <ul><li>Open standards and modularity </li></ul><ul><ul><li>Constant technological change, constant downward price pressure </li></ul></ul><ul><li>Indirect channel </li></ul><ul><li>Perishable quality of computers – price and time </li></ul><ul><li>Inventory problem </li></ul><ul><li>Genesis of DELL </li></ul><ul><ul><li>Custom Direct </li></ul></ul><ul><ul><ul><li>The company did not stock the retailer and reseller </li></ul></ul></ul><ul><ul><li>Target – corporate customers </li></ul></ul><ul><ul><li>Problems with component inventory </li></ul></ul><ul><ul><li>Shift in sales mechanism </li></ul></ul><ul><ul><ul><li>Using indirect channels for sale – Value added resellers(VAR) </li></ul></ul></ul>
  13. 14. The Business Organization of Dell Computer <ul><li>Online selling </li></ul><ul><ul><li>PCs configurable online </li></ul></ul><ul><ul><li>Reduction in transaction cost from $50 to $5 per order </li></ul></ul><ul><li>Internet-generated information and communication as substitute to inventory </li></ul><ul><ul><li>Central to this was an ERP system by SAP </li></ul></ul><ul><li>i2 business organization </li></ul><ul><ul><li>Business with “internet at its core” </li></ul></ul><ul><ul><li>All geographical regions use this web-based information system </li></ul></ul><ul><li>Burst Capacity </li></ul><ul><li>DSi2 – i2+Burst Capacity </li></ul><ul><ul><li>Global supply planning </li></ul></ul><ul><ul><ul><li>Master Production Plan </li></ul></ul></ul><ul><ul><li>Demand fulfillment </li></ul></ul>
  14. 15. The Business Organization of Dell Computer <ul><li>Virtually Integrated Firm </li></ul><ul><ul><li>Systems Compatible with dell’s i2 system </li></ul></ul><ul><ul><li>Organization built on nonmarket foundations </li></ul></ul><ul><li>Geography and the Dell Organization </li></ul><ul><ul><li>Centralized form of control </li></ul></ul><ul><ul><li>Spatial proximity between key nodes in Dell’s network </li></ul></ul><ul><ul><li>Influencing location of network partners </li></ul></ul><ul><li>Geography of Assembly </li></ul><ul><ul><li>Locations – Penang(Malaysia), Xiamen (Taiwan), Austin & Nashville (North America), Eldorado do Sul (Brazil), Limerick (Ireland) </li></ul></ul><ul><li>Geography of supply </li></ul><ul><ul><li>East Asia, Mexico, United States </li></ul></ul>
  15. 16. Structural Foundations for e-commerce Adoption : A comparative organization of retail trade between Japan and the United States - Yuko Aoyama
  16. 17. Characteristics of Retail Trade <ul><li>The characteristics of trade are historically determined </li></ul><ul><li>Sell products available at brick-and-mortar store online – US </li></ul><ul><li>Selling products available online at brick and mortar stores – Japan </li></ul><ul><li>Neighborhood stores – access points of e-commerce for Japanese customers </li></ul><ul><li>In Tokyo there are 16 convenience stores/mi2. </li></ul><ul><li>Preexisting practices, cultural preferences and Institutional environment - alter patterns of technology use in consumption. </li></ul>
  17. 18. <ul><li>Convenience, familiarity and social habits </li></ul><ul><li>E-commerce technological requirements </li></ul><ul><ul><li>Computer literacy </li></ul></ul><ul><ul><li>PC ownership </li></ul></ul><ul><ul><li>Availability of credit cards </li></ul></ul><ul><li>Organizational characteristics of retail trade </li></ul><ul><ul><li>Economic variables </li></ul></ul><ul><ul><li>Population growth and density </li></ul></ul><ul><li>55% of food and beverage sales were in small stores in Japan </li></ul>
  18. 19. Evolution of Nonstore Retailing in USA and Japan <ul><li>USA : </li></ul><ul><li>Direct marketing for import goods </li></ul><ul><ul><li>Horticulture </li></ul></ul><ul><li>Mail order trade </li></ul><ul><li>Mass-market based approach to niche markets </li></ul><ul><ul><li>Avg. Household income > $75000 per annum </li></ul></ul><ul><ul><li>Well versed with the procedures of receiving refunds, returns and exchanges. </li></ul></ul>
  19. 20. NonStore trade in Japan <ul><li>Japan: </li></ul><ul><li>Introduced in 1875 </li></ul><ul><li>They combined store-front sales with catalog businesses. </li></ul><ul><li>Problems faced </li></ul><ul><ul><li>Densely populated spatial structure </li></ul></ul><ul><ul><li>Mistrust of merchants </li></ul></ul><ul><ul><li>Undeveloped printing technologies and postal system </li></ul></ul><ul><ul><li>Limited market size for Japanese catalogs </li></ul></ul><ul><li>1973 Large Scale Retail Law </li></ul><ul><ul><li>For sustaining mom-and-pop stores </li></ul></ul><ul><li>Virtual stand still of Japanese economy and decline in consumer demand. </li></ul>
  20. 21. Convenience Stores in Japan <ul><li>Starting market from ground zero </li></ul><ul><li>Exchange of cash for goods </li></ul><ul><li>Seven eleven Japan </li></ul><ul><li>High energy cost – lack of refregiration </li></ul><ul><li>Advantages of Convenience store chains </li></ul><ul><ul><li>Assistance from the chain </li></ul></ul><ul><li>Innovation </li></ul><ul><ul><li>Locational Strategy </li></ul></ul><ul><ul><li>Marketing Strategy </li></ul></ul><ul><ul><li>Adoption of IT </li></ul></ul><ul><li>Heavy investment in IT – better supply routes </li></ul>
  21. 22. Convenience Stores in Japan <ul><li>Second stage of Informatization </li></ul><ul><li>Delivery of online based services </li></ul><ul><li>Alliances between convenience stores and e-commerce vendors </li></ul><ul><li>Easy access and legitimacy to online retailers </li></ul>