OPEC CARTEL Essay Example for Free

OPEC CARTEL Essay â€Å"OPEC As a CARTEL† There are two kinds of extreme market structure and they are perfect competition and imperfect competition. In a perfectly competitive market there are many numbers of sellers and many numbers of buyers selling and buying homogeneous products, therefore there is very little impact of a single buyer or seller changing the price of his/her product. In an imperfect competitive market there are few sellers and these sellers have some control over the prices and output of the product. Here, in this kind of market the whole market is affected by an individual changing his/her product price. In USA most of the industries fall between these two extreme market structures. But in this essay we’ll talk about oligopoly. It is imperfect competitive market state therefore here there are few no. of sellers. Oligopoly covers many kinds of industrial behaviours and structures because of its broad nature. Oligopoly is a market condition where few numbers of sellers (oligopolists) come together and form a market or an industry. An oligopoly may have 2 firms or 20 firms, selling and producing differentiated or undifferentiated products and services. There are few participants in this market structure therefore each participant is aware about the activities of other participants. The decisions are influenced by one another. As this market is operated by few firms, the price of the product and the quantity of production is fixed by the firms itself keeping in mind their self-interest and self-respect. Sellers (oligopolists) are acting and cooperating like a monopolist – producing a small amount of quantity of goods and selling these goods at a price higher than the marginal cost. These are some of the powerful incentives at work which hinder a group of firms from maintaining the monopoly outcome. An oligopoly is operated under imperfect competition; they follow a kinked  demand curve which shows that inelasticity below the market price and elasticity above the market price, offering differentiated services and products they have strong barriers to entry. Kinked demand curve is downward sloping curve. There is a discontinuity at the bend – the â€Å"kink†. Due to this there is a discontinuity in the marginal revenue curve. The demand above the kink is relatively elastic, therefore all other firms’ prices remains unchanged and demand curve after the kink the demand will be inelastic, therefore all the firms will have similar price cut, eventually leading to a price war. The best way to overcome this problem is to produce at the point E that is the equilibrium point and, coincidently the kink point. There are many industries in oligopoly conditions are automobile, cigarette, malt beverages (beer), small arms ammunition, oil and petroleum, etc. There are many kinds of oligopolies, a number of different oligopoly models have been structured. But we are going to further discuss about the structure of CARTEL. But before that if u examine all oligopoly models have a similar thing i.e. ‘The behaviour of any given oligopolistic firm depends on the behaviour of other firms in the industry comprising oligopoly’. According to the traditional economic theory the producer who is at the stage of profit maximizing and also has some market power (either due to oligopoly or monopolistic competition) would have set marginal cost equal to marginal revenue i.e. MC=MR. A cartel is an organisation of independent firms coming together, to control and limit the production and increase and decrease of price and profit. Cartels can be formed in an informal or formal manner with the agreement of every member. Cartels usually occur in an oligopolistic industry. The main aim of cartel is to increase individual profits by reducing competition. There are two kinds of cartels: Private cartels and Public cartels. In a public cartel there is involvement of government and such cartels are legally formed. Private cartels are formed by few industries and are subject to legal liability under antitrust laws now found in every country of the world. Private cartels have to often face competition laws. Private cartels are recognized and fragmented by the competition policy by most of the countries in the world. But finding out cartels and further proving them is very difficult because firms are not so careless to put such agreements on papers. Antitrust authorities have found that in last 200 years price increase achieved by cartels is almost 25%. There was a 28% price hike in private international cartels (cartels formed by one or more nations). Domestic cartels where at 18%, less than 10% domestic cartels failed to raise the market price. This study was possible after several economic studies and legal decisions. There are some differences in public and private cartels. It is said that public cartels are less harmful than private cartels because they are operated in the presence of government private cartels are more effective and, hence, possibly harmful, though there is no proof to prove this right. Government has all the authorities to establish and enforce the rules relating to prices, output and other such matters; this is in the case of public cartels. Examples of public cartels are export cartels and shipping conferences. There are also depression cartels permitted in some countries this type of cartel helps in stabilising the required price and production. For example, in Japan such type of cartel is allowed in steel, aluminium smelting, ship building and various chemical industries. In United States during the time of great depression of 1930, in industries such as coal mining and oil production public cartels were allowed by United States and they also remained after the World War-II. Germany’s economy was also affected by these cartels during the inter–war period. There were international cartels formed between governments of some nations by signing an agreement it was called as international commodity agreement which covered products such as coffee, sugar, tin, and oil (OPEC). Private Cartels are having huge different than public cartels, an agreement is signed on terms and conditions that provide mutual advantages, these terms and conditions should not be detected by outside parties. Private cartels are responsible for violating the antitrust Laws. Game theory means studying the oligopolistic behaviour of a series of strategic actions of a firm and reaction of the rival firm. According to this theory cartels are unstable, due to the behaviour of members of a cartel is like the behaviour of a player who has a dominant strategy in a game. If a member does not abide by the rules in the agreement that member will make more profit than by following the agreement. The situation would be worse if all the partners break the agreement. Cartels do not sustain for a long run because members have cheating incentives. A Cartel can exist for only 5 to 10 years this was found by deep study of cartel. If the members intend to cheat on the agreement in order to earn short term profit so that they could cover the long term losses this depends on the situation if they have short term profits through break down of cartel than they’ll possibly break it down. How difficult it would be for a firm to, find out that other firms are following the agreement or not. If the other firms are not following than they are cheating and therefore the cartel becomes unstable. There are few ways to keep watch on a cartel: 1) Number of firms in the industry, 2) Characteristics of the products sold by the firms, 3) Production cost of each member, 4) Behaviour of demand, and 5) frequency of sales and their characteristics. The Organization of Petroleum Exporting Countries (OPEC) was initially created with efforts of 5 countries and then later on joined by 9 other countries. It is an intergovernmental organization which was formed by Iran, Iraq, Kuwait, Saudi Arabia and Venezuela, on September 10 – 14, 1960, in Baghdad. These five founding members were later on joined by nine other members: Qatar (1961), Indonesia (1962-2009), Libya (1962), United Arab Emirate (1967), Algeria (1969), Nigeria (1971), Ecuador (1973), Angola (2007), Gabon (1975-1994). Ecuador suspended its membership from December 1992 – October 2007. Initially headquarter of OPEC was in Geneva, Switzerland, and after 5 years it was moved to Vienna, Austria, on September 1, 1965. OPEC was found with some objectives. The objective of OPEC is to manage and unify petroleum polices among member countries and thereby secure the stability in the prices for petroleum producers. It was necessary that flow  is maintained in supplying petroleum at an economical rate, to the consuming countries, provided that the members investing in this industry get a fair return of capital. They also have a unique strategy that is allotting the production quota to a member country. This system helps in maintaining and stabilizing the price to a certain level. Developing its collective vision with some objectives and creating its secretariat, in Geneva and then in 1965, in Vienna, OPEC adopted a ‘Declaratory Statement of Petroleum Policy in Member countries’ in 1968. This policy stated that it is absolute right of the member nations to have a permanent rule over their natural resources and use them in order to increase the rate of national development. During 1970s OPEC became an international importance in the world market of petroleum and crude oil, it had a full control over the pricing. During this period there was a steep price rise in petroleum products. In 1980s the prices began to fall down as people started shifting from petroleum products. OPEC’s market share fell heavily to the third of the early rise. At this time member countries had to bare a heavy loss, but soon they regained their position with a little price hike almost half the early rise. OPEC started recovering its market share slowly. During the period of 1990s OPEC had a fall in prices same as it had in 1980s, but it had a solid recovery this time. During this period the prices were stable at some extent than in 1970s and 1980s. One of the member nation left OPEC and one suspended its membership. In 21st century OPEC had an innovative plan which helped in stabilising the prices of petroleum products in early years. The prices began to rise from 2004 and still it’s rising. During this decade one member activated its membership and another member suspended it. OPEC has not proved to be a successful cartel because it was unable to control the prices of petroleum products. Though OPEC had few members and that helped in reducing the conflicts. It was easy for the members to monitor one another’s activities and thereby adhering to the agreement. It was also easy to coordinate the price policy and the output policy according the agreement. It is simpler to form a cartel with few members. OPEC as a cartel is working effectively because 3/4th of its oil reserve is regulated by four countries they are: Venezuela, Saudi Arabia, Kuwait and Iran. There is only one threat to OPEC as a cartel, and that is increased production by  non-members. In the short run the price elasticity of demand for oil is quite low, according to this statement if enough production restrictions are implied than it will give a price hike this is a favourable environment for a cartel. Following this in 1973 OPEC contributed to two third of the total oil production of the world. Today if we compare the prices of crude oil than they are much higher than the early stages. To survive for such long period of 50 years OPEC had to face many challenges to fulfil its objective. The first challenge in front of OPEC is how to overcome the problem of supply of crude oil in all the countries keeping in mind the interest of the member countries of OPEC. Initially OPEC used to supply its crude oil to all type of countries like developing countries, under developed countries and developed countries but later on it was not able to fulfil the demand as it kept on increasing. Therefore, OPEC decided to first fulfil the demand of those countries with greater need and who provided with a fair deal and then look forward to those countries that had less demand for crude oil and offered a cheap deal. This decision was taken keeping in mind its own profit. The second challenge for OPEC is the NON-OPEC countries i.e. countries which are not members of OPEC. If these countries started production at high rate then these countries would take the major market share of OPEC and that was not good for member countries. NON-OPEC countries had no restrictions in production and pricing of crude oil. These NON-OPEC countries would take the short run profits because they can vary their prices. The third problem faced by OPEC is that United Nations (UN) was constantly pressuring OPEC in order to stop the wastage of gas which is emitted in high amount due to the usage of old technology. Technological issue is the fourth challenge for OPEC because they used old technology and to install new one it would take time and the market demand would not be fulfilled. Updating the technology was a big issue. The fifth issue was about maintaining large reserves of crude oil in order to sustain the sudden shift in demand. The sixth that is the last challenge is in the form of question that how OPEC can overcome the financial problems occurring during the production of oil because producing oil needs heavy capital investment? There is a big risk taking and uncertainties involved in this process and these uncertainties can be overcome with the help of proper  planning. If OPEC is unable to fulfil the challenge than there, is a fear of losing the whole market share against the NON-OPEC countries. Analysis of OPEC’s behaviour can be done through certain aspects. First, relying on a structural model is better than relying on the estimation approach. According to the analysis done in first step, in last 25 years all the theoretical models constructed for OPEC should be taken and then they should be properly tested. After this we compare and contrast it with equilibrium model of dynamic oligopoly. In the second step we consider organization as a whole and not considering the supply functions of individual countries. By doing this we would be able to estimate the collusiveness of OPEC. This helps us in identifying the switching periods between collusive and non-cooperative behaviour. OPEC has its own collusive behaviour and in many cases there was break down and price war between member countries. Price of crude oil depends on the demand and supply of it. There can be different variations maybe low or high, in price of crude oil, due to the imbalance in demand and supply – maybe little demand and more supply or more demand and little supply. The price of crude oil will be high if demand is more and supply is less and price will be low if supply is more and demand is less. Sometimes the prices fall down due to the non-cooperative act of members of OPEC or due to going against the agreement and cheating. Sometimes the reason for high price of crude oil may be other factors like taxation, governments of the countries of the world, natural disasters, etc. Factors like transportation, climate, capital, machinery, cost of production, etc. affect the prices of crude oil. As other cartels, OPEC also tries to raise the prices of crude oil by reducing the quantity of production of crude oil. When the price raises each member of cartel wants to increase the production by going against the agreement, so that they can get large amount of profit. OPEC member countries frequently agree to the reduction of production but then they cheat on the agreement. During the period of 1973-1985 OPEC was successful in maintaining the high-prices of crude oil, with the help of cooperation of  member countries. The price of crude oil per barrel rose steeply from $3 per barrel in 1972 to $11 per barrel in 1974 and then to $35 in 1981. After that there was absence in maintaining cooperation between member countries due to the argument on the topic of increasing production. Due to this the prices of barrel fell down by $13 per barrel in 1986. In this case OPEC has failed to work effectively because it was lacking in coordination and cooperation between member countries and this resulted in the instability of price of crude oil. According to the study there are approximately 1.5 trillion barrels of oil reserve in world. Out of which 81.33% i.e. 1193 billion barrels, is with the member countries of OPEC. In 2010, OPEC member countries produced 29.2 million barrels per day of crude oil that is about 41.8% of the world total output; this has increased to 69.7 million barrels per day. According to OPEC they have sufficient crude oil reserves that can last for 112 years. According to OPEC’s World Energy Model (OWEM) the demand for crude oil in 2006 was 84.7 million barrels per day. Due to the continuous growth in world’s economy the demand for crude oil in 2015 will rise to 96.1 million barrels per day, 102.2 million barrels per day in 2020 and 113.3 million barrels per day in 2030. OPEC as a cartel was unsuccessful to a certain extent and successful to a certain extent. There was high variation observed in prices of crude oil due to the instability of the Organisation of Petroleum Exporting Countries (OPEC). Lack of cooperation and coordination amongst the members of OPEC was seen because each individual member was tempted to earn high amount of profits and therefore he/she would cheat with the agreement. There was one thing observed that, when the price of crude oil rise than the members of OPEC intend to go against the agreement and they try to increase their production in order to earn short-run high profits. During any crisis in the world OPEC was not able to keep itself steady. There were some technological related issues with the members of OPEC. They used the old machinery to produce the crude oil and to overcome that they started updating their machineries, but during this period they were unable to handle the market demand for crude oil and therefore t hey failed to provide it to other  countries which resulted in price hike. If innovation is carried out properly than the cost of production will reduce to certain point and this will react in high rise in demand in international market, which will directly affect the profits of members of OPEC. In conclusion I would like to say that OPEC is a best form of oligopoly and both suit to each other because of the continuous development of OPEC as a cartel. In past 50 years OPEC has faced many heavy tasks; it failed to fulfil some tasks but still tried to recover the losses. OPEC has the largest oil reserve in the world. Amongst the NON-OPEC countries main competitor of OPEC is U.S.A because it has one of the largest reserves of crude oil. If we see in today’s market than OPEC as a cartel has a higher market share and it is the longest and largest living oil producing organization. OPEC is one of the longest survived cartels in the world. REFRENCE 1) http://en.wikipedia.org/wiki/Cartel 2) http://www.opec.org/opec_web/en/about_us/24.htm 3) http://www.scribd.com/doc/55875469/Oligopoly-OPEC 4) http://www.opec.org/opec_web/en/press_room/179.htm 5) Principles of Microeconomics (Indian edition) 4th edition, by N. Gregory Mankiw, published by Cengage learning India Pvt. Ltd., 356-357 6) Principles of Economics 8th edition, by Karl E. Case and Ray C. Fair, published by Dorling Kindersley India Pvt. Ltd., 310-311

Physics of Black Holes :: physics science space

What are Black Holes? A black hole is theorized to be a collection of collapsed matter of whose gravitational pull is so strong that not even light can escape its force. The matter is is forced in a very, very tiny area and therefore the matter is very dense. Since light cannot escape, they are considered to be truly black. This, obviously, makes it hard to detect an actual black hole, and therefore, have only been theorizd to exist. These theories are slowly turning into "conclusive evidence." This evidence includes the particle dust given off from matter entering the black hole, as well as observations of orbits of bodies near the black hole. Black holes are usually formed after supernova explosions, in which the remnants of this explosion implodes within itself. It will continue to condense to a volume of zero and infinite density. This is known as a singularity. How do we know? History Karl Swarzschild first came up with the concept of black holes in 1916. This was based upon Einstein's theory of relativity. The Swarzschild radius is the radius where the escape velocity equals the speed of light. The Swarzschild radius can be calculated using the escape velocity equation: vesc = (2GM/R)^1/2 Substituting the speed of light for the v: R = 2GM/c^2 If you notice, the Swarzschild radius is only dependent upon the mass of the body. Anything that enters this radius will not exit, due to the tremendous amount of gravitational pull. So, How do we know? Again, as mentioned earlier, we can't directly observe a black hole. We can, however, make observations to the surroundings around the black hole. It used to be that theorists were the only scientific persons who acknowledged an existence of black holes, however, today, the story is quite different. The popular idea today is that black holes do exist and are common in all the galaxies so far investigated. One reason is Einstein's theory of General Relativity. This theory accounts for the existence of black holes, and if they do not exist, then the General Relativity theories by Einstein would be wrong. Considering all the tests and experiements done to date to try and disprove this theory have all been rejected, this seems unlikely. Also, scientists today look for high concentration of mass in a small area. Calculations and technology allow this to happen. Another factor in proving the existence of black holes is the Hubble Space Telescope. The Hubble Space Telescope has accumulated a large amount of data and information supporting the existence of black holes.

Hypercompetition

Jouma! of Marketing Management, 1997, 13, 4 2 1 ^ 3 0 Evert Gummesson Stockholm University, School of Business, Stockholm, Sudden In Search of Marketing Equilibrium: Relationship Marketing Versus Hypercompetition This paper is a discussion on work in progress conceming tke development qf relationship marketing (RM). It is particularly focused on the concept of marketing equilibrium which is a marketing management correspondence to market equilibrium, the traditional concept of neoclassical economic;. The paper starts with a brief introduction to the author's approach to RJ4.It proceeds with a summary of the concept of marketing equilibrium. The next section is a discourse on hypercompetition, a partiailarly intense type of competition that has been observed by several authors. RM offers a marketing theory based on collaboration with various stakeholders through long-term relationships, customer retention and loyalty. In contrast, hypercompetitiett claims that customers uHU switch bet ween suppUers at an inaeasingly faster rate and that competitors will become increasingly hostile to one another.Two basic questions are raised: do RM and hypercompetition represent two conflicting but coexisting trends that arc both growing in intensity? and How can this coexistence or conflict be conceptually handled? Tlie aim qf this paper is not to be complete and provide an answer, only to draw the reader's attention to hypercompetition as an opposite trend to RMand to offer a platform for further analysis and constructive and reflective scholarly dialogue. The 30R Approach to R M The 30R approach to RM is the outcome of an ongoing research project on â€Å"the new markedng† (Gummesson 1994, 1995). 0R refers to thirty reladonships that were found to exist in marketing. During the research process, three core variables stood out: relatiorahips, networks and interacdon. A consequent definidon of RM then became â€Å"RM is marketing seen as reladonships, networks and inter acdon†. The 3ORs wiU not be listed here, but their basic structure wiU be given. A distinction is made between market reladonships (reladonships between actors in the market such as suppUers, customers, compedtors and intermedieiries), nd two types of non-market reladonships which exercise an influence on market reladonships, but are not part of the market propier. These are mega reladonships (reladonships in society, above the market reladonships, such as reladonships to governments) and nano reladonships (reladonships inside organizadons, such as intemal customer reladonships). Services markedng and ttie network approach to industrial marketing have provided the primary theoredcal impietus for the author to explore the shortcomings 0267-257X/97/050421 + 10 $12. 00/0  ©1997'nte Dryden Press 422Evert Gummesson of traditional marketing management theory. ^ Both theories were bom in the 1970s and have continued to giow in importance. The author's idea to merge the two goes bac k to 1982 and has since been pursued and broadened (Gummesson 1983, 1987, 1995). The term RM, however, was not used in a general sense until about 1990 (see e. g. Christopher et al. 1991; Groru-oos 1994; Gummesson 1994; Hunt and Morgan 1994; Sheth 1994). Instead, terms Uke long-term interactive relationships, interactive marketing, network approach and a new concept of marketing were used.My resejtrch approach is theory generating and based on comparative, qualitative analysis and syniiieses between data from inductive, real-world studies^ received theories and new theories in the process of development. Marketing Equilibrium This section is an introduction to the general concept of marketing equilibrium and a discussion on certain aspects of the equilibrium. Marketing equilibrium is a serendipitous outcome of the author's research on RM. The concept is further elaborated in Gummesson (1995, 19%). The three forces of marketing equilibrium are competition, collaboration and regulatio ns/institutions.Although Western economies are repeatedly referred to as market economies with free competition as their ethos, in reality they are mixed economies in which competition coexists with collaboration and regulations/ institutions. Marketing equilibrium contends that a sound market is the outcome of an optimal combination of the three forces of competition, collaboration and regulatiorw/institutions. As all kinds of equilibria in dynanuc envirorunents are unstable, it is a matter of heading toward a moving target, orJy rarely reaching it and only rarely staying there for any longer period of time.Whereas traditional marketing management literature primarily deals with competition, RM highlights collaboration. Collaboration implies that aU parties actively assume responsibility to make relationships functional. The author's conclusion is that: The focus on collaboration is the most important contribution from RM, with an impact on both marketing management and economics, and that collaboration in a market economy needs to be treated with the same attention and resped as competition. Although the third force, regulations/institutions, is not the theme of this paper, a few words will be said about it.Regulations indude both formal regulations through legislation, and informal codes of conduct through culture; institutiorts are both formal authorities whose task is to ascertain that regulations are enforced, and phenomena such as the family or religion that enforce a certain behaviour. In marketing rhetoric, regulations/institutions—and to a large extent also collaboration— are treated with suspidon and as inhibiting competition and the dynamics ^Inputs to the 30R concept also came from traditional marketing management, sales management, quality management, orgaruzation theory, and other areas. The term real world data is iised here instead of empirical data. Thereasonis that too often researchers in business subject mistake empirical for qiiantitative, while in the geiieral language of sdence empirical refers to all types of data, whrther they come as qualitative, quantitative, or in any other format. In Search of Marketing Equilibrium: Rdationship Marketing vs Hypercompetition 423 of an economy. In narketing practice, however, they are ubiquitous. Douglass North, Nobel Prize laureate in the economic sdences in 1993, has shown that regulations/institutions are dynamic and necessary elements of a narket economy (North 1993).Marketing equiUbrium attempts to see the role of marketing management in the context of sodety and on an industry and economics level. It should not be confused with the market equiUbrium of neoclassical theory of economics (also referred to as microeconomics or simply price theory). ^ In neoclassical economics, the core variables are supply and demand balanced by the invisible hand of price in a market of free competition. The market is assumed to be striving in the direction of a longterm equiU brium in which aU prices are equal and all products are standardized. Customers and suppliers are anonymous masses.Companies and industries are not managing their production and sales, they are orUy adjusting to exogenous market influences. All deviations from this idealized model axe referred to as unwanted imperfections. Although marketing management is offen described as an adaptation of neodassical economics, it is blatantly obvious from even a simple real-world study of markets, industries and individual companies, that a different foundation for a marketing management theory is imperative. For example, services which constitute anything from 60 to 90% of today's economies (depending on definition) are not considered.The assumptions of neoclassical economics are simply not vaUd. There are signs that the interest in coUaboration is gaining ground not only in real business life but also in marketing theory; the most obvious being the upsurge of literature on RM and related subjec ts such as customer loyalty and alUances. Brandenbui^er and Nalebuff (1996) introduce the term â€Å"co-opetition†, which is a combination of co-operation and competition. They show that game theory is one possible way of exploring this combination (â€Å"the prisoners' dilemma†).Gray (1989) points to coUaboration as a solution to multi-party problem and says (p. 54): â€Å"Despite powerful incentives to collaborate, our capacity to do so is underdeveloped†. In the same spirit Senge (1990), in his treatise on learning organizations and the need for dialogue says (p. 10): â€Å"Interestingly, the practice of dialogue has been preserved in many â€Å"primitive† cultures†¦ but it has been almost completely lose to modem sodety. Today, the prindples and practices of dialogue are being redbcovered and put into a contemporary context†.EMalogue UteraUy means â€Å"tlunking together† There is ein extensive literature on competition both in mark eting and economics. Particularly the books by Porter (1979, 1985) have received the attention of marketers. No effort wiU be made here to review the various aspeds of competition; the treatment of competition will be directed to its role in the marketing equilibrium and to the properties of hypercompetition. In market economies, competition is hailed as the driver of economic evolution and a necessary condition for wealth. The customer is given a choice, and a supplier can never be sure to have the customer in its pocket.ITiis is a traditional view advocated by the business community, and to an extent also by the pubUc sector in many countries where deregiilation and privatization have become foreeful strategies. The countries of the Westem world—the capitalist sodeties—are not genuine ^See Hunt and Morgan (1995) for further analysis of the shortcomings of neoclassical theory. 424 Evert Gummesson market economies. They are mixed economies in which market forces and re gulations have entered into wedlock. In totally unregulated markets only few can obtain the necessities of life.For example, free markets give large corporations the freedom to offset competition, and those who cannot compete on the labour market are left to charity or misery. The opposite—total regulation — leads to rigidity. There is no general formula that tells us in what projx)rtions individual discretion and collective regulation should be mixed. Every market and period have to find their own specific solution. Competition is a driver of certain types of change. Even if RM puts emphasis on collaboration, I would like to see RM as a synthesis of competition, collaboration and regulations/institutions.The issue is which combination of these will create the balance—the marketing equilibrium — in each sptedfic situation. If either of the three forces becomes unduly powerful, the economy will suffer; regulations/institutions is the sole force of a planne d economy. To some extent there is a naive belief in competition to set everything right. The global wave of privatization and deregulation is a reaction in markets that have become stified. It is an effort to find a marketing equilibrium. Bureaucratic and legal values have often led to a misguided interference by politidans and an unreal belief in centralized control of sodety.Although the term deregulation implies that regulations are abandoned, it is a search for more adequate laws and institutions which can become supportive to constructive forces of sodety and hold back destructive forces: Deregulation is reregulation! Some of the more conspicuous results from deregulation are found in the split up of Bell in the US and national telecom operators in many countries have lost their monopoly; the privatization of British government bodies such as the British Rail and the Airport Authority; and the most dramatic of all, the breakdown of the communist planned economies.However, nobo dy so far has been able to overview the long-term effects of deregulation and privatization. There are necessary elements of the market economy that competifion and the free market forces do not master. They can be expressed in two paradoxes. The first paradox says: regulations are needed to secure that free competition will not be curbed. In spite of adl sweet talk about competition, every individual company or industry prefers to be spared the hazards of competitions (but they consider it essential for other comparues and industries). The second paradox says: The purpose of competition is to get rid of competition.Competition attempts to reduce the infiuence of other suppliers by lower costs and prices, differentiated and difficult-tocopy offerings, or dominance of selected market niches. Hypercompetition The ideas on a new type of competition will be assembled under the umbrella concept of hjfpercompetition. They are taken from many sources, among them D'Aveni (1994), Hamel and P rahalad (1994), Moore (1996), and Verbeke and Peelen (1996). The term hypercompetition was first found in D'Aveni and the ensuing discussion on hypercompefition is mainly based on his concepts, but the comparison with RM strategies and the conclusions are my own.In marketing management and strategy, the recommendation is usually advanced that companies should build a sustainable competitive advantage, thus limiting In Search of Marketing Equilibrium: Relationship Marketing vs Hypercompetition 425 price competition or even creating a monopoly-Uke situation. Hypercompefition is the opposite: a company should actively disrupt status quo and the current competitive advantages, both its own and those of competitors, in an environment of hypercompetition, advantages are rapidly created and eroded.Hypercompefition trends are identified in four arenas of traditional competition (D'Aveni 1994, pp. 13-17): /. Cos/ and quality arena For example, upstarts Uke Southwest Airlines attack estabUshe d carriers by slashing costs or enhancing quaUty, thus lowering the bottom of the market and raising the top of it. This behaviour counteracts the RM strategy of frequent flyers' programmes. 2. Timing and know-hot/' arena The first mover in the nnarket may create an advantage and sets up impediments to imitation. Followers quickly try to overcome these, fordng the first mover to change its tactics.The know-how exploited by one company is imitated by another and imitation becomes faster and faster; eventually the innovator cannot recapture its R&D investment. 3. Strongholds arena Companies create entry barriers to keep the competition out Entrants circumvent the barriers, giving rise to a series of attacks and counterattacks. This is currently happening in inten:ontinental air services between major American carriers and national European carriers. The current war for mastery over the Intemet, with Microsoff and Netscape as the combatants, is another example. 4.Deep pockets arena Thi s means having more money than the competition. The finandally stronger and usuaUy bigger companies can endure price competition from smaUer companies. The latter, however, can caU upon govemment regulations and form aUiances with others, thus balancing out the financJal advantage. In marketing equilibrium, regulations is one of the balancing forces, and alliances is a collaborative RM strategy. For example, Microsoff's financial advantage has been counteracted by the aUiance between IBM and Apple. Information technology is a driver of hypercompetition.By using databases it is possible, and wiU be more so in the future, to quickly survey prices and other conditions, and select the best combination at each point of time. Purchasing then becomes close to the system of exchanges. But even if comparisons of suppUers are made easier for customers, so many conditions are not comparable, for example, to 426 Evert Gummesson what extent can you trust the supplier. Trust and security are basi c condidons for collaboradon and trust has proven to be a driver of business in all types of sodedes (Fukuyama 1995).D'Aveni concludes that the battle for comp>eddve advantage is eventuaUy driving the market back into a price-compieddve market. The outcome is the neodassical long-term equilibrium, although the road to this equiUbrium goes via marketing equilibrium and not just via price adjustments. He refers to the old compedfive equilibrium as looking stable because it moved so slowly that it appeared stable. Hypiercomp>eddon is a coristant state of disequiUbritim. D'Aveni deploys a revised 7Ss framework to propose hypiercompeddve strategies.The original 7Ss — designed by the McKinsey consulting company—comprise seven factors for success: structure, strategy, systems, style, skills, staff, and shared values. Successful hypiercomp;eddve firms need a new set of Ss in order to create disrupdon (p. 31ff). The first new S is stakeholder satisfacdon, referring to new ways of creating satisfied customers and a modvated eind empowered work force. The second is strategic soothsajdng â€Å"a process of seeking out new knowledge necessary for predicting or even creating new temporary windows of opportunity that compiedtors wiU eventuaUy enter but are not now served by anyone else† (p. 2). The comparafive advantage of these two factors is â€Å"†¦ the abiUty to win each dynamic strategic acdon with compiedtors† (p. 32). The third and fourth Ss are spieed and surprise, both capabiUdes for disrupdon. The hypercompeddve company both reacts more quickly and is proacdve, thus taking the market with surprise. The final three are tacdcs for disrupdon. Shifting the rules includes new ways of sadsfying the customers and playing the marketing game with a new set of rules. Signals refer to announcements of strategic intent with the purpose of stalling acdons and misleading compiedtors.For example, a preannouncement of a coining product may make cus tomers wait to see the new version and postpone planned purchases of competing products. Simultaneous and sequendal strategic thrusts â€Å"†¦ are used by hypercompieddve firms to harass, paralyze, induce errors, or block compiedtors† (p. 34). Several acdons are taken at the same dme in combinadons that make it difficult to understand what a compiedtor is actuaUy up to. In summary, whereas RM strives for stabiUty through long-term reladonships, hypercompieddon strives for continuous disrupdon at an increasingly faster rate.In RM, security is found in stabiUty; in hypercompeddon it is fotind in the ability to continuously counteract instabiUty. The RM concept is by many authors broadened to comprise more than the suppUer—customer dyad,'* for example, reladonships through alUances which is a way of counteracting hyp>ercompieddon. The imaginary organizadon^ is a network-based company which transcends the tradidonal organizadonal boundaries. It can more freely acquire Jind drop resources through outsourcing (or rather: resourcing) instead of investing in tradidonal growth (intemal or through acquisidon); the advantage of the deep pocket is thus offset. †¢See Christopher et al. (1991), Kotler (1992), and Hunt and Morgan (1994), who have approached marketing as relationships with a series of stakeholders. This is in line with the 30R approach, but flie 3ORs go further and also establish relationships based on other than the stakeholder dimension. ‘See Hedberg et al. (1994). Other terms representing the same phenomenon are virtual organizations, boundarykss organizations, and rwtwork organizations. In Search of Marketing Equilibrium: Relationship Marketing vs Hypercmnpetition 427D'Aveni (1994) discusses the role of co-operation and collusion and says that they should only be used for hypercompetitive purposes. They are not long-term relationships, they are merely temporary strategies. He lists a number of generic instances of hypercompet itive use of collaboration (pp. 338-339): to gang up against others groups; to limit the domain of competition; to biuld resojirces; to buy time; to gain access; and to leam. Hunt and Morgan (1995) suggest a comparative advantage theory of competition within a marketing management paradigm, and they present a devastating critique of neoclassical economics.D'Aveni's conclusions are contrary to Hunt and Morgan's; he rewrites neoclassical theory, using marketing management theory as a lever. Interpreted in my terms, we depart from the original and simple form of neoclassical market equilibrium, go through a phase of marketing equilibrium, and arrive at a more sophisticated level of market equilibrium. Hjrpercompietition goes beyond the neoclassical theory of perfect connpetition and restores it on a new level. Through a series of disruptive moves, where competitive advantage is surpassed, an escalation toward perfect competition develops.This means that we are back in transaction marke ting, the very evil to which RM is held to be the antidote. Conclusions for Discussion This paper has dealt with certain aspects of marketing equilibrium, one of several RM issues that preoccupy the author's nund during the ongoing research joumey into the world of RM. ‘The paper is limited to the two trends of collaboration, advanced by the RM concept, and hypercompetition, advanced by authors on strategy and competition. A paradox is seemingly a contradiction; it is not in actual fact a contradiction. An oxymoron is a combination of two phenomena that cannot be combined.So the first question in the beginning of the paper could be rephrased: are RM and hypercompetition forming a paradox or an oxymoron? When I read up on the current literatxire on competition, I found that the â€Å"new† competition was described as more fierce and faster than ever before. It had affinity with marketing warfare which was in vogue in the 19S0s. It certainly seemed contradictory to the RM idea of long-term relationships and collaboration. In my present state of ignorance the answer is: within the concept of the marketing equilibrium, both competition and collaboration coexist. They can do so and will do so.Our attention has to be directed to both of them. When competition becomes hypercompetition, collaboration may become hypercollaboration. Could it be that hypercompetition is the current driver of the upsuiging interest in RM and that RM tries to neutralize the effects of hypercompetition? To be Continued As this is work in progress, the issues that have been presented are not complete and the views are tentative and wiil be further studied. Among other issues concerning marketing equilibrium that are also being studied are the following: Tlie marketing equilibrium which has so far been described could be seen as 28 Evert Gumntesson partial marketing equiUbrium. The RM researdi project is suggesting an extention into complete marketing equilibrium. It consists of a synthesis of RM and the theory of imaginary organizations where not only the market but also the organizations (suppUers, customers, competitors and others) and sodety are included in a network of interactive relationships (Hedberg et al. 1994; Gummesson 1996). In traditional marketing management and economics, the market is outside the company and n «rketing activities are directed toward extemal customers.But there are also markets inside the company and marketing activities take place between intemal customers. This is laid bare in the treatment of the nano relationships of the 30R approach. Both intemal and extemal customers interact in networks of relationships. The boundaries between the â€Å"inside† and the â€Å"outside† have dissolved and both can be seen as parts of the same networks. Another area is the black economy with tax evasion, bribery, fraud, and organized crime as additional and disrupting forces of competition. One of the relationships in the 30R approach is named The Criminal Network.For example, Blumberg (1989) has pointed out that the strength of the market economy — competition and the profit incentive—encourages fraud. It pays to cheat! He calls this the paradox of the market economy. Everybody is familiar with it from jobs and private consumption, but it is swept under the carpet in marketing theory and textbooks. The Literature prefers the idealized image: competition as the driver to create customer satisfaction and customer perceived quality; to give customers everything they want and are willing to pay for; and to offer numerous options for consumers.Customers are asked about satisfaction and quality, but their knowledge is limited and the ignorance of the customer is exploited. Neither market economies through competition, nor command economies through regulations, have proven themselves capable of handling environmental and ecological issues. What has been achieved is primarily the outcome of vo luntary pressure group activity and law enforcement. Competitive forces have clearly not provided enough incentive for the market to innovate and reinnovate in the field.One of the relationship in the 30R approach is The Green Relationships, adding a relationship angle to environmental issues. Probably most of the achievements for a long time will only come through legislation (regulations), tight control and litigation (institutions). Can the marketing equilibrium conceptually include environmental and ecological issues? After the Paper Presentation: An Addendum In the discussion following its presentation, the paper was criticized on two points in peirticular: (1) The choice of the term â€Å"marketing equiUbrium†.The critics said — and some were dearly provoked by the term — that it gives the wrong connotation and that the term is so heavily committed to neoclassical economic theory that people will not be able to see my point. Suggested substitutes were â₠¬Å"dynamic balance† or â€Å"optimal combination†. EquiUbrium, it was claimed, conveys the idea that such a state exists and it is just a matter of time {long-term, though) before it is reached. In defence of the term {but I intend to give it more thought) I would like to claim that equilibrium can be perceived as dynamic and unattainable, but still have a value n Search of Marketing Equilibrium: Relationship Marketing vs Hypercompetition 429 in providing direction, although the journey is a never-ending journey. Perhaps the provocation as such is o( value. When a new thought or term is met with aggressions from several established scholars it may have hit a sore spot; it may even be important. The original intention was to show that equilibrium from the idealized and imrealistic assumptions of neoclassical theory could be supplemented by a marketing management-oriented equilibrium based on real-world premises.Neoclassical economics currently seems to be no more than a computer game for adult entertainment and career boosting under the disguise of â€Å"sdence†. To me, the contrast between â€Å"market† and â€Å"marketing†, designating an economics versus a management approach but still indicating affinity, makes the term expressive. Whatever term I choose, however, I am confident that economists and â€Å"me-too† researchers wiU not be impressed. 2. â€Å"Hyper† was claimed by Americans to mean â€Å"too much†, for example a hyperactive child is active to a degree that implies mental and/or physical disorder.The British perceived it as â€Å"very much†, for example a hypermarket which is a bigger European version of a supermarket. Maybe this is evidence of the validity of Oscar Wilde's statement that â€Å"England and America are two countries separated by a common language†. On the other hand, maybe â€Å"too much† is also a correct interpretation. For many of us, hypercompetition i s probably too much. Personally, it makes me nervous. References Blumberg, P. (1989), The Predatory Society, New York, Oxford University Press. Brandenburger, A.M. and Nalebuff, B. J. (1996), Co-opetition, Boston, MA, Harvard Business School Press. Christopher, M. , Payne, A. and Ballant)Tie, D. (1991), Relationship Marketing, London, Heinemarm. D'Aveni, R,A. (1994), Hypercompetition, New York, The Free Press. Fukuyama, F. (1995), Trust, New York, The Free Press. Gray, B. (1989), Collaborating, San Francisco, CA, Jossey-Bass. Gronroos, C. (1994), â€Å"Quo vadis, marketing? Towards a relationship marketing paradigm†, Joumal of Marketing Martagement, 10, No. 4 Gummesson, E. 1983), â€Å"A New Concept of Marketing†, paper presented at the 1983 EMAC Annual Conference, Institut d'Etudes Commerdales de Grenoble, France, April. Gummesson, E. (1987), â€Å"The New Marketing: Developing Long-term Interactive Relationships†, Long Range Planning, 20, No. 4, pp. 10-20. Gum messon, E, (1994), â€Å"Making Relationship Marketing Operational†. The International Joumal of Service Industry Management, 5, No. 5, pp. 5-20. Gummesson, E. (1995), Relationsmarknadsforing: Frdn 4P till 30R (Relationship Marketing: From 4Ps to 3ORs), Malmo, Sweden: Liber-Hermods (forthcoming in English).Gummesson, E. (1996), â€Å"Relationship Marketing and Imaginary Organizations: A Synthesis†, European Joumal of Marketing, 30, No. 2, pp. 31-44. Hamel, G. and Prahalad, C. K. (1994), Competing for the Future, Boston, MA: Harvard Business School Press, 1994, 430 Epert Gummesson Hedberg, B. , Dahlgren, G. , Hansson, J. and Olve, N. -G. (1994), Imagindra organisationer (Imaginary Organizations), Malmfi, Sweden: Liber-Hermods. Hunt, S. D. and Morgan, R. M. (1994), â€Å"Relationship Marketing in the Era of Network Competition†. Marketing Management, 3, No. 1, pp. 9-28. Hunt, S. D. and Morgan, R. M. (1995), â€Å"The Comparative Advantage Theory of Competitionâ⠂¬ , Joumal qf Marketing, 59, April, pp. 1-15. Kotter, P (1992), ‘Total Marketing†, Business Week Advance, Executive Brief, Vol. 2. Moore, J. E (1996), The Death of Competition, Chichester, UK, Wiley. North, D. C. (1993), â€Å"Economic Performance Through Time†. Stockholm, The Nobel Foundation, Prize Lecture in Economic Science in Memory qf Alfred Nobel, Stockholm, December 9. Porter, M. E. (1980), Competitive Strategy, New York, The Free Press. Porter, M. E. 1985), Competitive Advantage, New York, The Free Press. Senge, P. M. (1990), The Fifth Discipline. New York: Doubleday/Currency. Sheth, J. N. (1994), â€Å"The Donnain of Relationship Marketing†. Handout at the Sectmd Research Conference on Relationship Marketing. Centre for Relationship Marketing, Emory University, Atlanta, GA, June. Verbeke, W. and Peelen, E. (1996), â€Å"Redefining the New SeUing Practices in an Era of Hyper Competition†. Paper presented at the workshop Relationship Market ing in an Era qf Hypercompetition, Erasmus University and EIASM, Rotterdam, May.

Major League Baseball Playoffs Alds And Alcs - 1594 Words

Major League Baseball Playoffs ALDS and ALCS Baseball starts in the spring and ends in the fall with a total of 162 games that every team must play. The playoffs start about a week after the regular season ends, and is composed of eight teams in total, four from both the National and American league. The Playoffs are divided into 3 series, the first one being the ALDS or the NLDS in which two teams face off in a best-of-five-game series. The American and National League are each divided in a best-of-seven-game series. The world series which reigns the best baseball team in the league is made up of 7 games in which 2 teams; one from the National and American league have to reach to seven games to win the championship title. However,†¦show more content†¦The final criteria is that every player should play their bodies off making sensational plays that will be highlighted the next day on ESPN Sports center. Overall the playoffs were one for the records because my evaluation co nsists of achieving in all aspects of the game. The road to the actual playoffs began in a single game in which the Houston Astros defeated the Yankees in an effort to win the last playoff spot. Two days later after their win the Astros faced the Kansas City Royals and this series lasted the 5 games. Sadly for the Astros, the Royals won the series and advanced to the ALCS. The Royals did everything right but they wouldn’t have done it without the help of Alcides Escobar who got on base almost every single game and Eric Hosmer who hit a couple of home runs and managed to get an RBI in almost every game. This series was really intense because all the games were played; meaning that there was a tie between the teams and games 5 was the last shot for both of them. Both of these teams played really good and players from both teams made a lot of sensational plays that led their teams to a win. Alex Gordon a former gold glove award winner who is always diving for impossible fly ball s didn’t fail to make several catches. Mike Moustakas playing the hot corner managed to snatch every single shot that was hit towards