8-1 Discussion: Vallee Jennifer Vallee posted Nov 19, 2018 6:34 AM The text this week does not seem to provide much information on Schumpeter and “creative destruction” other than to mention it, from what I could find anyway. I did however find some interesting information online about it. “Schumpeter argued that capitalism exists in the state of ferment he dubbed "creative destruction," with spurts of innovation destroying established enterprises and yielding new ones. This view seems far more current than Smith's Newtonian notion of an "invisible hand" generating stability in the marketplace” (Rose, 2018). The important distinction between Schumpeter and Smith is that Schumpeter centered on the idea that entrepreneurs drive economies and generate growth through success and failure which sets business cycles in motion (Rose, 2018). Creative destruction, in essence, means that through the business cycle products are constantly created to replace the old ones. “Products based on ideas - music, software, pharmaceuticals - require an enormous investment to develop but very little to keep making” (Rose, 2018). This then means that the economic structure is constantly being destroyed and replaced with a new one. “The essence of Schumpeter’s argument is that firms act and rivals react, and it is in the context of action and reaction that advantage is created and destroyed. Indeed, if competition is a perennial gale, every business advantage will eventually be eroded through competition” (Grimm, Lee & Smith, 2006, p.21). Strategy as action is like a game plan. The strategy of one player is based on the actions and reactions of the competition (Grimm, Lee & Smith, 2006, p.70). This is of course not as simple as it sounds because the players also have to take into account the information each player has and make a decision of how they each will react in order to time if they should release a product. Will the competition release theirs sooner? Will they release it at the same time? Should there be cooperation between the competitors so they both don’t suffer loss from it? These are all questions that have to be considered as part of the strategy and action plan (Grimm, Lee & Smith, 2006, p.70-71). References: Grimm, C., Lee, H., & Smith, K. (2006). Strategy as action. New York: Oxford University Press. Peng, M. W. (2017). Global Strategy, 4th Edition. [MBS Direct]. Retrieved from https://mbsdirect.vitalsource.com/#/books/9781337655712/ Rose, F. (2018). The Father of Creative Destruction. Retrieved from https://www.wired.com/2002/03/schumpeter/ Week 8 Discussion Sean Delaney posted Nov 14, 2018 1:02 PM I did not see the term “creative destruction” in Chapter 8 of the text nor reference to Joseph Schumpeter. Perhaps I am rushing trying to finish next week’s deadlines by the holiday. Outside research was conducted as follows... Creative destruction is a term defined by Joseph Schumpeter who identified the term as ‘the essential fact about capitalism’. The term refers to the outdated product and process innovation mechanism by which new production units replace outdated ones. This process is felt in many macroeconomic indicators and over the long run accounts for more than half of all productivity growth. Recessions are sometimes intensified as restructuring is typically conducted during economic downtimes (MIT, n.d). An example that I could give to a friend would be the extinction of the newspaper business. The decline started in the mid-1990s as internet usage was starting to gain more mainstream traction. In the mid-1990s when The New York Times launched its web presence a reporter had suggested that the paper would become a primary information provider in the digital age, which would lead to cost cutting for newsprint, delivery, and labor. Internet sites such as Craigslist offered classified ads for free and 40% of newspaper’s advertising revenue dropped as a result (Kennedy, 2016). In this case creative destruction would refer to the transformation from digital to print. Other examples that come to mind (perhaps to a lesser degree) would be laptops, tablets, and smartphones replacing the desktop computer. Strategy as Action refers to the fact that the essence of strategy is interaction, which consists of actions and reactions leading to a competitive advantage (Peng, 2017). In 2011, Brad Greenberg of UCLA law school constructed an essay advocating for the temporary exemption from the collusion and price-fixing prohibition in Section 1 of the Sherman Act stating that an exemption would allow executives in the industry to collaborate on a sustainable online business model for the press ultimately saving newspaper reporters’ jobs. This would stabilize the contributions of news and ideas which would slow the consolidation and concentration of newspaper ownership (Greenberg, 2011). There was no temporary lift to the act which caused many acquisitions in the industry. In 2015, 70 daily newspapers were sold for a combined $827 million including the Chicago Tribune acquiring the San Diego Union Tribune. Newspapers need to acquire smaller publications and cut costs to survive all while attempting to transition to a digital subscription model that will earn them revenue (Smith, 2016). References Greenberg, B. (2011). The News Deal: How Price Fixing and Collusion Can Save the Newspaper Industry-and Why Congress Should Promote It. Retrieved November 14, 2018, from https://www.uclalawreview.org/pdf/59-2-4.pdf Kennedy, D. (2016, January 26). Print is Dying, Digital is no Savior: The Long, Ugly Decline of the Newspaper Business Continues Apace. Retrieved November 14, 2018, from https://www.wgbh.org/news/2016/01/26/local-news/print-dying-digital-no-saviorlong-ugly-decline-newspaper-business-continues MIT. (n.d.). Creative Destruction. Retrieved November 14, 2018, from https://economics.mit.edu/files/1785 Peng, M. Global Strategy. Cengage, 2017. Smith, G. (2016, March 29). Newspapers gobble up one another to survive digital apocalypse. Retrieved November 14, 2018, from https://www.chicagotribune.com/business/ct-newspaper-consolidation-20160329story.html Reply to Thread
Purchase answer to see full attachment