The Business of Economics

Overview

Medicine and business management share certain similarities, writes John Kay. For centuries, the theories behind medical practice were mostly nonsense. Doctors simply applied fashionable nostrums, bleeding one patient, starving another, and sometimes the patient got better, sometimes not. The prestige of a doctor rested more on the social rank of his patients and the confidence of his assertions than on the evidence of his cures. Much the same can be said of present-day management gurus. But there is one ...

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The Business of Economics

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Overview

Medicine and business management share certain similarities, writes John Kay. For centuries, the theories behind medical practice were mostly nonsense. Doctors simply applied fashionable nostrums, bleeding one patient, starving another, and sometimes the patient got better, sometimes not. The prestige of a doctor rested more on the social rank of his patients and the confidence of his assertions than on the evidence of his cures. Much the same can be said of present-day management gurus. But there is one difference between medicine and management, Kay adds. In the last 100 years, medicine has been transformed by science. Management has not.
In The Business of Economics, Kay argues that it is economics that can provide the science that management presently lacks, that economics is the natural backbone of business management. In the many insightful and lively pieces collected here, Kay looks at the application of economics to the central strategic issues facing firms—their choice of activities and markets. He is particularly interested in microeconomics, the study of markets, industries, and firms, and is on the other hand highly critical of macroeconomics, economic modeling, and economic forecasting (which he says is inevitably wrong). He is especially illuminating on the recently developed resource-based theory of strategy, which attempts to explain the success or failure of a firm in terms of its "distinctive capabilities" (the factors which differentiate them from others in the same market and which cannot be easily reproduced by competitors even when recognized.) For instance, BMW's highly skilled work force, due to Germany's high level of general education, is hard to reproduce by competitors in other countries. Kay shows how BMW exploited its highly skilled labor force (opposed to low-wage foreign workers or robots found in many other auto plants) to get a large share of the market for up-scale, high-performance cars. Among the many other topics discussed in this idea-rich book are Saatchi & Saatchi's dismal attempt to globalize in the 1980s, Honda's great success selling low-end motorcycles in the U.S., the fare of the Eurotunnel, and the reason why race-car driver Nigel Mansell makes seventy-five times as much money a year as Britain's Prime Minister, John Major.
Described in Business Age as the "most important business analyst in Britain bar none," John Kay is renowned for his incisive, entertaining, and controversial columns in the Financial Times of London. In addition, he is a regular commentator on radio and TV, and is in much demand as a speaker and consultant. In The Business of Economics, he shares his thoughts on a wide range of issues facing businesses today. His clear and down-to-earth writing style informs, challenges, and entertains, and his rigorous and clever analysis of the corporate world offers insights into the business problems and decisions faced by executives and managers every day.

In this collection of insightful and lively pieces, major business analyst John Kay argues that it is economics that can provide the science that management presently lacks--that economics is the natural backbone of business management.

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Editorial Reviews

From the Publisher
"Mr. Kay has a gift, rare among academic economists, for explaining how economics can be put to practical use.... The best of his essays apply microeconomic analysis to everyday questions in a lucid and entertaining way."—The Economist
Booknews
The well-known British columnist demonstrates the value of microeconomics over macroeconomics in articles and columns previously published in the "Financial Times" and the "Daily Telegraph", organized in sections on economics in business, competitive advantage, shareholders, and using economics. For executives and managers. Annotation c. by Book News, Inc., Portland, Or.
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Product Details

  • ISBN-13: 9780198292227
  • Publisher: Oxford University Press
  • Publication date: 3/20/1997
  • Edition number: 1
  • Pages: 232
  • Sales rank: 561,392
  • Lexile: 1290L (what's this?)
  • Product dimensions: 6.38 (w) x 9.50 (h) x 0.84 (d)

Meet the Author

John Kay is Visiting Professor of Economics at the London Business School and Chairman of London Economics, a leading consulting firm whose clients include many blue-chip companies. He is also director of several public companies, the author of numerous books, including Why Firms Succeed, and a frequent commentator on business and economic affairs on both radio and television.

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Table of Contents

List of Figures
List of Tables
Pt. I Economics in Business 1
1 Economics and Business 3
2 The Failures of Forecasting 9
3 Economic Models 14
4 Uses and Abuses of Economics 20
5 Can There Be a Science of Business? 26
Pt. II Competitive Advantage 33
6 The Structure of Strategy 35
7 Competitive Advantage 50
8 Adding Value 57
9 No Free Lunches 64
10 The Competitive Advantage of Nations 69
Pt. III Corporate Personality: Shareholders and Stakeholders 81
11 Relationships and Commitments 83
12 Contracts or Relationships 89
13 Corporate Governance 105
14 The Customer Corporation 122
15 Inclusive Economies 137
Pt. IV Using Economics 149
16 Applying Economics 151
17 The Strategic Audit 163
18 Pricing the Tunnel 175
19 The Media Revolution 188
20 Firms and Industries 193
References 207
Index 211
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