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4.2 Economics

Business hierarchy

Business operations

There are changes to how businesses operates and organize their employees with the emergence of the digital age

  • Maximizing profits and revenues shifts to maximizing values for customers

Customers have much more power now because they can post anything on the internet

  • Google review, Yelp, Reddit, Facebook

Happy customers = they stay + new customers = $$$

  • Note: a con is that short-term profits is sacrificed as a result

Ex. Starbucks

  • Good customer service = people like going there = people continue to go there = they keep buying from you = $$$ + they bring new customers = $$$$$

Business hierarchy

  •  Business organizations used to operate on a vertical hierarchy where the boss manages all their staff that work under them (see above)

  • BUT!  Technology is forcing work forces to be creative and accommodating of the changing demographics (covid also sped up the process with the WFH [work from home] culture

  • Teams are more dynamic and work in shorter cycles for projects (think back to gig economy)

  • Employees are able to branch out of their job duties and explore other areas that they have expertise on (UX/UI designer that is perhaps interest in doing the marketing strategy for the company)

Pro:
  • Allows for multitasking/greater efficiency
Con:

  • Lower quality of work per item

  • Potentially less efficiency due to work overload

Pros and cons of flat business hierarchy

Pro:

  • No more constant surveillance (micromanaging)

  • Cheaper to operate since less leadership roles and less salary expenses

  • More beneficial for small business (less expenses as less employees/less higher paid employees

  • Each individual employee has more power for themself

Con:

  • Less attention given from the manager

  • Les delegation

  • Having to take time to set up meetings in order to ask for help, etc (reduces efficiency) (if you work in office, you can ask a fellow co-worker who is sitting beside you, but if you work from home, you would need to set up a meeting with said co-worker to get it resolved AKA time wasted)

  • Hard to scale up due to lack of leadership

  • “Dictatorship” - fariba

  • Easier for abuse of power to happen as individuals are given more power

Systems that help businesses

Transaction Processing System

Real life example: 

  • payments and sales record system that records information such as employee records, payrolls, customer transactions, taxes (so that the IRS leaves you alone), etc.

Meat analogy: 

  • The butcher/warehouse, as they manage the flow of the meat products and distribute the meat in exchange for money

Office Automation System

Real life example: 

  • word processing applications (MS WORD), desktop publishing, emails, video-conferences (ZOOM)

Meat analogy: 

  • the sheep dogs, the sheep is data and the sheep dog guides and navigates the data towards us, the consumer who then consume said data

Fun fact! The very app you are reading this on (hopefully google docs) is an office automation system, as it is a word processing application, processing the words you type on your keyboard onto letters and words on a virtual document so that you, the reader/consumer, is able to interpret them.

Diversity in business and corporation

Diversity: what does it mean?

Business perspective:

  • Having different platforms of business offered

  • Ex. e-commerce (online website), physical stores

Human resource perspective:

  • Having different types of employees in your business

  • Ex.

  • Professions (programmer, graphic designer, etc)

  • Skills (lock picking, Multilingual, etc)

  • Racial diversity (Asian, Hispanic, Black, etc)

  • Age diversity (20-50 years old, etc)

  • Gender diversity (Male, female, lgbtq+, etc)

  • Meat analogy: The different variety of meats: Pork, Lamb, beef, etc)

Technological perspective:

  • Allow employees to have access to different technologies to perform different tasks or increase efficiency (ex. Computers, various programs such as adobe, MS Office, etc)

  • Meat analogy: Using varying technologies and methods (ex. Sous vide, pan fry, simmer, the GRILL) to cook the meat

Different types of diversification

Horizontal diversification

  • Expansion within the same industry or market with related products/services

  • Ex.

  • Apple moving from PC to iPhones, iPads, and Apple watches

  • Mcdonalds expanding from burgers to pancakes, wraps, milkshakes, ice cream

  • Uber expanding from a taxi service to include food delivery (uber eats)

Conglomerate diversification

  • Expansion into complete unrelated industries or markets

  • Ex. 

  • Mr. Beast expanding into random Products with their name on it (Feastables, beast burger, etc)

  • Berkshire Hathaway’s (investment company created by Warren Buffett)  investments in insurance, energy and consumer goods

  • Microsoft Investing in clean energy solutions

  • Facebook creating FaceBook Marketplace

  • SAAB making fighter jets

Vertical diversification

  • Expanding a company’s operation into different stages of the same industry’s value chain, either backward (upstream) or forward (downstream)

Backward integration (upstream):

  • Occurs when a company expands into activities earlier in the production process

  • Ex.

  • Tesla Vertically diversified by producing its own batteries (ex. Gigafactories), a key component in EV’s (electric vehicles). 

  • This allowed tesla to control the costs of batteries and to ensure a stable supply for its own cars

Forward integration (downstream):

  • Happens when a company moves into activities closer to the consumer

  • Ex. 

  • Apple’s vertical diversification includes operating its own retail stores (Apple stores) to sell its products directly to customers, instead of supplying to a phone store.

  • This helps apple control the customer experience and the branding of the company

Concentric Diversification
  • Expanding into related or complementary markets that leverage a company’s existing core competencies or technologies
Core Competency:
  • Amazon’s core competency was its extensive IT infrastructure and data management capabilities, developed for its e-commerce operations
Diversification:

  • Amazon diversified concentrically by launching Amazon Web Services (AWS), a cloud computing platform. 

  • AWS leveraged amazons expertise in managing large-scale data centers. 

  • Now, AWS provides web hosting, storage, and computing solutions to businesses worldwide, separating from its e-commerce businesses.

Quiz: 

Evaluate the ethical implications of using AI-powered facial analysis and voice recognition technologies, as described in the text, for assessing a job candidate’s employability. 

12 marks - 25 minutes

How to tackle the question

  • In your response, you should provide

  • A balanced evaluation of the ethical implications of using AI-powered facial analysis and voice recognition technologies for employability assignment

  • Discuss the perspectives of both supporters and critics (as outlined in the text)

  • Mention the potential benefits and concerns by each group

  • Provide specific examples (from the text) to support your analysis

  • Consider the fairness, privacy, diversity, and potential biases connected with these technologies

  • End off with your own perspective/opinions on whether these technologies should be used for their “intended” purposes (in this example the employability assessment, considering the arguments presented

A example of a good answer

“There are both positive and negative aspects when computers are used to judge whether individuals are suitable for jobs based on their appearance and speech, as portrayed in the story.

On the positive side, it can make the hiring process more efficient. This means companies can find the right employees more quickly. For example, these computer systems can identify important skills like problem-solving and teamwork, which might not be immediately evident from a person’s resume or interview answers. This helps businesses select the best candidates more easily.

However, on the downside, some people are concerned about these computer systems because they operate using secret algorithms, often referred to as “black boxes.” These algorithms are not transparent, meaning that no one, including the job candidates, knows exactly how they work. This lack of transparency can lead to suspicions of unfairness and discrimination in the hiring process. People worry that the computer might make biased decisions, unintentionally excluding some individuals from job opportunities. This raises concerns about privacy and fairness in people’s lives and work.” - Poon

Employment and labour

 P.217 in textbook

Start ups

Definition: 

  • Start ups are companies in their initial stages of business

  • It can create a very stressful environment, as they rely on new product releases, grants, and investments to satisfy investors and build up their market reputation

The action to de-stress

  • To keep people from leaving, many startups invest in: 

  • Entertainment

  • flexible hours

  • Being able to work from home

  • Beautiful and fun work spaces

  • These are called working practices

Thoughts from the class

  • When you start a new company

  • What are some challenges of startups?

  • Lack of customers

  • Financial risks (taxes, expenses)

  • Legal situation (what permits do you need?)

  • Mountains and mountains of paperwork

  • Why do people want to work for startups?

  • The experience of owning a company and starting a business

  • They have a vision

  • “Startup is to start a business and go like WOOOOOO” - Abdu

  • “They took a look at Mark Zuckerburg and thought they can do it” - Michael

Pros and cons of modern office spaces

Pros: 

  • Happy, comfortable environment

  • Increased productivity and efficiency since you are not wasting time a lot of time commuting between home and office

  • Positive atmosphere

  • Incorporates multiple amenities such as gyms, swimming pools, laundry rooms, bikes to move between buildings, etc

  • Work-life balance within the office

Cons: 

  • You become distracted and can’t leave the office

  • You can easily get burnt out from work

  • Reduced/NO social life outside work (work is LIFE)

  • High stress, reduced sleep

  • Physically taxing as you are constantly working

  • Being contacted all the time by co-workers 

  • Become understimulated to the outside world since you spend so much time in the office you become used to that environment

Pros and cons of remote work

Pros:

  • Work at your own schedule/pace (most of the time as there are still deadlines)

  • More comfortable work environment (aka HOME)

  • More personalized workspace, as again, it’s your own home

  • Ex. you could be watching vtubers in the background while working and no one would know

Cons

  • Increased expenses (hydro bill, wifi, groceries, electricity) (cue I Can’t Pay Electric Bill [Meme])

  • I got usb cord

  • Plugged to my microphone

  • Im gonna talk to the power

  • I can’t pay electric bill

  • There are still fixed times for meetings

  • Can lead to reduced productivity

  • Become lazy and hence less willing to go out

  • Minimal human interaction for 6+ months (cries in covid) can induce isolation caused mental issues and mental breakdowns (oh and NO, ONLINE PEOPLE DON’T COUNT AS HUMAN INTERACTION)

  • Loss of perception of the outside world (ex. Forgetting direction, road and landmarks, etc)

Digital Nomads (Gig economies)

  • Work remotely and do not tie themselves down permanently to any particular location (ex. No specific office that you need to go to)

  • They take on “gigs” from crowdsourcing platforms such as Fiverr and freelancer.com (where mr poon used to work at)(yes thats on his linkedin)

  • Examples: Photographer, Graphic designer, Programmer

  • They could travel the world while logging in to complete tasks anywhere

  • This kind of work is great at promoting work-life balance, as they decide when to stop and relax

  • Also comes with the benefit of boosting the tourism industry if they travel frequently

  • This type of work can often happen in local study spaces, such as cafes (ex.waves near london drugs, charges a premium hourly cost to use their study spaces)

  • Other examples look like this

It’s not all sunshine and rainbows however as a digital nomad

Isolation:

  • Frequently work alone

  • Leads to feelings of loneliness and isolation

  • The lack of a traditional office environment and coworkers can be emotionally challenging

Inconsistent income:

  • Income can be inconsistent

  • Freelancers and remote workers often face periods of financial instability due to project-based work or irregular clients (instead of weekly income the income rate could be once every few weeks, without set dates)

Legal and visa issues:

  • Staying compliant with visa regulations and legal requirements in different countries can be complex and time consuming (trust me you do not want to become a illegal immigrant, been there done that it was not fun)

Security issues:

  • Depending on the destination chosen, may face security risks such as: 

  • Political instability (imagine if you got caught in a coup)

  • Natural disasters

  • Health emergencies (cough cough covid 2019)

Goods, services, currencies

What is E-commerce?

  • Short for electronic commerce, refers to the buying and selling of goods and services over the internet

  • Has revolutionized (Digital Transformation) the way businesses and consumers interact, enabling online transactions and digital trade

  • There are 3 main categories of e-commerce:

B2B: Business to Business

  • Involves transactions between two or more businesses, where one business sells products or services to another business

  • Ex. Nike selling their shoes to another business such as footlocker

Basically it’s a transaction between two businesses

B2C: Business to Consumer

  • Involves a transaction between a business and a consumer.

  • Ex. Nike selling to sneaker enthusiasts

C2C: Consumer to Consumer 

  • Involves transactions between individual consumers. 

  • Often involves a third party platform that facilitates these transactions (ebay, fb marketplace, craigslist)

  • Ex. Sneaker enthusiasts selling to enthusiasts

Personalized and targeted marketing

There is no free lunch. When you use something for “free”, they will ask you to pay them back with your own data.

  • The practice of tailoring marketing efforts to individual customers or specific customer segments based on their: preferences, behaviours, and demographics

  • The goal is to create a more relevant and engaging shopping experience, 

  • Ultimately increasing conversion rates, customer loyalty, and revenue

How it works

  1. E-comm websites analyze a customers browsing and purchase history to suggest products they might be interest in

  2. Ex. you buy one lego set, websites sees this purchase, thinks you have interest, shows you ads for lego

  3. E-comm businesses divide their customer base into segments based on characteristics such as: age, location, purchase history, or preferences.

  4. Each segment receives marketing message tailored toward their specific needs and interest

  5. Ex. Once again, you buy lego. Companies see this, group you with the “lego nerds”, and give this entire group lego ads.

Pros and cons of targeted marketing
Pros:

Business

  • Ads are more effective, as it reaches target market group (lego ad → lego nerds)

  • Increase in revenue and therefore increase in profit (lego nerd see ad, lego nerd buy product in ad, $$$)

Consumer

  • I get things i didn’t know i needed, but now that i do know, i WANT

  • Too much variety of ads can make people overstimulated

  • Seeing relevant ads can make the experience more entertaining, as you genuinely have interest in the ad”

Cons: 

Business

  • Less cost effective, as you need to spend more time and money creating custom ads for a specific market/group (compared to just creating one ad and mass advertising it)

  • Potential legal/PR issues (knock knock it’s the criminal justice court) depending on how you source the “private” information. (if acquired legally and consensually, then 👍, if acquired via stalkery and is illegal and non consensual, then 👎)

Consumer

  • Oh no! My personal info is no longer personal!

  • Can result in excessive spending (why buy one can opener when i can buy 50 different variants that all do the same job)

  • Too many ads can cause overstimulation 

Crypto, NFTs, Cashless, Microtransactions (aka bye bye money)

Tradition vs crypto currencies

Traditional:

Centralized control

  • Issued and regulated by central authorities, such as governments and banks

  • Have the authority to manage the flow of money and control monetary policy

Physical representation

  • Exists physically (cash, coins), along with digital representations

  • Widely accepted and used for in-person transactions (ex. Your local mcdonalds)

Regulation and oversight

  • Traditional financial systems are heavily regulated, with established laws and oversight agencies to ensure compliance, security, and consumer production
Crypto

Decentralization 

  • Operate on a decentralized, disturbed ledger technology like blockchain (see DS community notes)

  • Not controlled by any single entity, gov, or central authority (this aint 1984)

  • Only exist in the online world for online transactions

Peer to Peer transactions

  • Crypto enables direct p2p transactions without the use of intermediaries, users are able to send digital assets/money directly to another

  • So if you want to buy something, you first need to get money from the bank, and then use said money to pay. with crypto no need for bank just transfer money

Volatility and security

  • Values can change significantly over short periods, which impacts their use as a store of value or medium of exchange (so it’s like the stock market. One wrong move and 📉📉📉, effectively making your 100 bitcoin worth dust)

  • Tractions are recorded on public ledgers, but the users identities are often under false names, thus security relies on cryptographic techniques (Cryptography Techniques: Everything You Need to Know | Simplilearn )

NFT

  • Non-Fungible Token, aka NFT’s are digital tokens that represent ownership or proof of authenticity of unique digital or physical items, such as art, music, collectibles, and virtual real estate
Pros:
Non-Fungible: 

  • Nfts are non fungible, which means each token is unique  and cannot be exchanged on a one to one basis with other tokens

  • Each nft ahs its own unique value and properties that make ownership very clear and unique.

Blockchain-based:

  • Typically built on blockchain technology

  • Ethereum is one of the most commonly used platforms

  • Blockchain ensures the scarcity and provenance of the digital assets

Smart contracts

  • Often rely on these types of contracts, which are self executing contracts with the terms of the agreement directly written into code

  • These manage the transfer and ownership of NFTS

Cons:

NFT ownership does not inherently confer copyright or intellectual property rights to the underlying digital content (to be precise you dont really own the nft despite paying a kidney for it, that still belongs to the artist)

  • Concerns about copyright violation and unauthorized use of digital assets (“borrowing” art to use in commercial purposes)

  • Challenging to verify the authenticity and legal ownership over the digital items, leading to potential legal disputes and intellectual property violations

  • These legal challenges will become an ongoing concern in the nft space

Environmental concerns:

The energy consumption regarding with the creation of NFT’s and transactions, especially on platforms like ethereum, has raised environmental concerns due to its blockchain’s proof of work consent mechnaism (whatever that means)

  • The mechanism eats a LOT of energy during the minting and trading process

  • These energy hungry computers that are required for these blockchain transactions have raised concerns about their contribution to the carbon emissions and their environmental stability

  • Playing minecraft

Cashless society

A society where all transactions happen digitally (no more physical cash)

  • Ex. online transaction (e-transfer), bank transfers, credit card, cryptocurrencies, etc.

IRL examples

  1. Sweden: often cited as one of the most cashless societies in the world

  2. Decrease in use of physical cash, with many businesses preferring cashless transactions.

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