LO and Big Layoffs LO5592

Mon, 12 Feb 96 18:13:22 GMT

Michael McMaster wrote:
> He asks, "What about mature industries?" Can the not renew or
> transform? If they do, won't it take huge capital investment?
> My response is "No." It will take a huge knowledge investment.
> Maybe better expressed as creative, innovative effort. That is, new
> thinking. My example is steel. Mini-mills have stolen the market
> from the large steel mills.
> The trend of the world is knowledge for capital. Knowledge for
> capital means, in my interpretation, increasing complexity. By
> integrating more fully with markets, suppliers, knowledge available,
> technology in innovative ways.

I think that lacking of capital may not be a constrain,
especially not for some old, successful companies (like in the oil
business). More likely, the constrain is the paradigm and the whole
cultural web of those companies. If it is that what you express with
'hugh knowledge investment', I think that this is very valid.

To stay within your example, it is part of the paradigm of steel mills
that they must be large, to be able to gain the competitive advantage of
economies of scales (like other mass-producers of similar commodities).
However, mini steel mills are not compareable with the classical steel
mills, since it is very likely that they produce specialities, and can
run very successful a profitable niche strategy, while the classical
steel mill must have a broad focus, produces a product with a much
higher commodity character, and suffers from overcapacity, and can only
run a costleadership strategy.

But the more important point is that the belief in 'ecomomies of scale'
is part of the paradigm or shared beliefings, and therefore hard to
change. But the error was not that for the classical steel mill
'ecomomies of scale' are not important (they still are, I think). The
error was that the people who run such a mill could not imagine that
mini-mills could be successful, too. All together it is important to
learn this new knowledge, and change the existing mind-sets.

Wolfgang Schmid
e-mail: ws2@student.open.ac.uk
Compuserve: 100101.3210@Compuserve.com ($!!)

company address:
OMV AG Raffinerie Schwechat
Mannswoertherstrasse 28
A-2320 Schwechat


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