volume 7 number 1 spring 2003 - ebea

T H E J O U R N A L O F T H E E C O N O M I C S A N D

B U S I N E S S E D U C A T I O N A S S O C I A T I O N

T H E J O U R N A L O F T H E E C O N O M I C S A N D

B U S I N E S S E D U C A T I O N A S S O C I A T I O N

VOLUME 7 NUMBER 1

SPRING 2003

Economics UpdateEconomics and the

Internet

Economics in theClassroom

What Externalities?

Business Update Free Cash Flow

Business in the ClassroomManufacturing in the

Classroom

Economics andBusiness Education

Beyond the Lesson Plan

ICT On Line

Resource Reviews

Registered Charity297012

ISSN 1367-3289

VOLUME 7 NUMBER 1

SPRING 2003

Economics UpdateEconomics and the

Internet

Economics in theClassroom

What Externalities?

Business Update Free Cash Flow

Business in the ClassroomManufacturing in the

Classroom

Economics andBusiness Education

Beyond the Lesson Plan

ICT On Line

Resource Reviews

Registered Charity297012

ISSN 1367-3289

New EBEA websiteThanks in the main to themonumental efforts ofEBEA member AndyBeharrell, the EBEA’swebsite has been upgraded.

In its new form, it should helpto keep you in touch withcurrent developments. Inparticular, keep an eye on‘Current news and issues’ and‘Focus on’ for anything newthat might help you. If you wantto know what is happeningwhere, and when, go to‘Events’. You’ll find the EBEA athttp://www.ebea.org.uk.

www.ebea.org.uk

THE JOURNAL OF THE ECONOMICS AND BUSINESS EDUCATION ASSOCIATIONGeneral Editor: Duncan Cullimore (01273) 330226Please send comments on this edition or material for publication to 6 Varndean Holt, Brighton, BN1 6QX or (preferably) e-mail: [email protected]

Send Review material to:Colin Harber-Stuart, 20 Aberley Fold, Littleborough, OL15 9LU

Front cover

Fading Glory? The internet has putletter delivery services in trouble. See‘Economics and the Internet’ on page 3.

1

ECONOMICS UPDATEEconomics and theInternet Ken Heather

ECONOMICS IN THECLASSROOMWhat externalities? Page 10Ken Webster

BUSINESS UPDATEFree Cash Flow Page 13Duncan Williamson

BUSINESS IN THECLASSROOM Manufacturing in the Classroom Page 18Andy Hammond

ECONOMICS ANDBUSINESS EDUCATIONBeyond the Lesson Plan Page 21Jacek Brant and Adam Unwin

ICT ON LINE Page 27Andy Beharrell, Richard Young,Kate Sharp and Angela Joyce

RESOURCE REVIEWSEdited by Colin Harber-Stuart Page 32

OFFICERS, STAFF AND CONTACTS Page 40

PLEASE NOTE:the ‘Current SubscriptionsRates’ box is on page 35

Teaching Business & Economics

C O N T E N T S - S p r i n g 2 0 0 3

All Journal contributors please notethat articles for the next issue shouldbe with the General Editorby 1 May 2003.

Please supply files (via e-mail ifpossible) and a hard copy of text. Try to include relevant charts, graphsand/or photos to aid visualpresentation (hard copy only please).

Editorial Panel:Andy BeharrellPeter Davies Andy Hammond([email protected])

Ken HeatherNancy Wall (01825) 724387Robert Wilson (01224) 485432Richard Young (01993) 702355

2

Duncan

CullimoreEditor’scomment

Welcome to the Springedition of TeachingBusiness &Economics. We haveseveral new writersand editorscontributing to thisedition.Working fromback to front for achange: Colin Harber-Stuart has taken overas Resource Reviewseditor and has drawntogether threeinteresting reviews. Colinwould welcome resourcesand reviewers for the nextedition. ICT on Line has fourcontributors on thisoccasion. Andy Beharrellhas moved from BizEd but

we have managed to keephis input and gain theservices of hisreplacement(s), Kate Sharpand Angela Joyce.

This edition continues the trendtowards including articles onCitizenship although I have toadmit this is entirely accidental.Jack Brant and Adam Unwinprovide an excellent case studyfocused on the work of a group ofbeginner teachers at the Institute of

Education in London. It has quite

a lot to say both about professionaldevelopment and citizenship

education.

Andy Hammond continues his

excellent series of articles for

Business in the Classroom but

please read the request at the end

of his piece. He would welcome

some assistance.

Duncan Williamson has written

an interesting article ‘free cash

flow’, a concept that I had not

come across before but which

clearly has implications for, and

applications to, our teaching of

Business Studies.

The Economics article

uses some web sourced

case studies as a basis

for a Citizenship

related classroom

activity. I think it

should have relevance

outside the traditional

study of Economics

although it is clearly of

relevance here.

Finally, Ken Heather

has produced a readily

accessible but serious

consideration of the

impact of the Internet on business

and the economy.

Duncan CullimoreEditor

D U N C A N W I L L I A M S O N H A S

W R I T T E N A N I N T E R E S T I N G A R T I C L E

‘ F R E E C A S H F L O W ’ W H I C H C L E A R L Y

H A S I M P L I C A T I O N S F O R , A N D

A P P L I C A T O N S T O , O U R T E A C H I N G

O F B U S I N E S S S T U D I E S

INTRODUCTION

The Internet is undoubtedlyone of the phenomena of the lastdecade. In the UK just over halfthe population now has Internetaccess. [1] With fast and ‘always-on’ broadband connectionsbecoming increasingly common(and cheaper), the averageamount of time that people stayon-line is also rising. [2] It isestimated that in September2002 over 600 million peoplewere on-line worldwide. [3].

While Internet and other hightech companies may find thevalues of their stocksconsiderably lower than at theirpeak before the dot.com bubbleburst in 2000, consumers’ use ofthe Internet has grownenormously.

Recent figures from theInteractive Media in RetailGroup (IMRG) indicate thatUK consumers spent over £1billion online in November2002, an increase of more than10% on the previous month. [4]

E-Commerce sales in the USAare also rising - according to thelatest Census Bureau figuresretail E-Commerce sales in thethird quarter of 2002 were morethan $11 billion, up 34% on theequivalent period in 2001. [5].

As a headline in the New YorkTimes in July 2002 put it“Investors May Have

Repudiated the Internet, butConsumers Have Not”. [6]

The Internet is affecting theeconomy in many ways otherthan its influence on retail sales,however. Most businesses nowhave Internet access and only asmall part of their use of theInternet is for sales tohouseholds. Business to Business(B2B) transactions account forover 80% of those involving UKfirms, enabling them to increaseefficiency with better supplychain management [7]. Alsoimportant are consumer toconsumer transactions, albeitmediated via online auctioncompanies such as eBay [8], or bypeer to peer file exchangeservices such as Kazaa.[9]

The use of the Internet has

become commonplace in manyareas of our lives. In addition toits use for e-commerce and e-banking, the Internet is a meansof communication, a source ofnews and information, a mediumfor delivering entertainment andmuch more besides.[10]

As consumers turnincreasingly to the Internet as ameans of communication, sotheir use of more traditionalforms of communication hastended to decline. Among thehardest hits are businesses thatspecialise in delivering letters.Text messaging using mobilephones and the use of e-mail hasput pressure on postal services.In the UK, the Royal MailGroup plc, which has avirtual monopoly of letter 3

Economics and theInternet

Ken

Heather

Airline bookings are an internet growth area

delivery, is experiencingparticularly hard times and islooking to rationalise its wholeoperation as well as to find newsources of mail to deliver.Currently, it is making lossesthat exceed £1 million eachworking day, and has initiated a3-year recovery programme.

ECONOMISTS AND THEINTERNET

Not surprisingly, a number ofeconomists have shown aninterest in the economics of theInternet and its associatedtechnologies. [11] What kind ofquestions are they asking, andwhat can students of economicslearn from what they have tosay?

A fundamental question to beasked is why the Internet hasgrown so rapidly. Rohlfs (2001)devotes a chapter of his recentbook to explaining how theInternet was able to benefit fromtwo types of bandwagon effectsthat led to positive feedback andan irresistible momentum, oncea critical mass of users had beenreached.

The first effect, commonlyreferred to as a networkexternality (a term first coinedby Rohlfs himself in 1974),arises from the fact that thevalue of the Internet to any oneuser increases with the totalnumber of users. This is areflection of ‘Metcalfe’s Law’,based on the observation madeby Bob Metcalfe that, since eachperson in the network canconnect to the remaining n-1persons, ‘the value of a networkis proportional to the square of

the number of users’. [12]

Many other high technologyproducts have spread rapidlybecause of network externalities,the most obvious recent examplebeing mobile phones.Particularly in the start up phaseof a product, producers will doeverything that they can to try toreach the critical mass requiredfor take-off. This helps toexplain why some Internetproducts (news services, searchengines, browsers etc) are

provided free at early stages intheir life cycles.

Internet users can also benefitfrom what Rohlfs callscomplementary bandwagoneffects. Because the Internet isused together with variouscomplementary products andservices (e-mail, web browsers,news and other web sites,streaming video etc.), part of itsvalue to users derives from theavailability of thesecomplementary products. As thenetwork expands, there are

incentives for suppliers of thesecomplementary products toincrease their production and soreduce their average costs and inturn their prices. Rohlfs drawsan important policy conclusionfrom this analysis: low prices inbandwagon markets do notnecessarily constitute predatorypricing even if they are belowcost.

Questions about the diffusionof Internet access focus both onthe different rates of adoption

across countries and the digitaldivide within countries. Kiiskiand Pohjola (2000), in a studyof annual data on Internet hostcomputers for a sample ofOECD countries, find that GDPper capita and Internet accesscost explain much of theobserved variations in thenumber of Internet hosts.

Competition intelecommunications marketsdoes not seem to exert anindependent influence onInternet penetration (although it4

E C O N O M I C SU P D A T E

T H E J O U R N A L O F T H E E C O N O M I C S &

B U S I N E S S E D U C AT I O N A S S O C I AT I O N

Search engines find even the obscurest data

may do so indirectly through itseffect on the cost of access).Investment in education also doesnot seem to be a statisticallysignificant predictor of Internetdiffusion in this sample, althoughit is significant in a larger sampleof both industrial and developingcountries. Kiiski and Pohjola citea United Nations report, whichshows that Internet access is evenmore unequally spread thanincome. The figures show that in1997 the top 20% of people(ranked by GDP) received 86%of the world’s GDP and had 93%of Internet access. Incontrast the bottom 20%received only 1% ofGDP but a mere 0.2% ofthem had Internet access.

MARKETS: ACCESS,INFORMATION ANDCOMPETITIVENESS

The advent of theInternet and e-commerceis changing the way thatmany markets work. Thisis most apparent in themarkets for various types ofgoods and services, but labourand financial markets are alsobeing affected.

Access. The Internet has givenboth consumers and producersaccess to markets that previouslywere beyond their reach.Consumers can now see what isavailable in markets outside theirlocal or national areas. They havean expanded set of potentialsuppliers. Producers have apotentially larger customer base,extending over a widergeographical area. This isespecially true for producers ofinformation products that can be

delivered over the Internet as wellas ordered and paid for throughthis medium.

The location of the producerrelative to that of the consumerbecomes of less significance.Cairncross (1997) has called this‘The Death of Distance’. Thisopens up possibilities for newmarket entrants, whosebusinesses were previously notviable because they had only asmall local potential customerbase, to establish themselves onthe global market.

When trading on the Internet,however, a company’s reputationbecomes all the more important.Since customers will not be ableto see exactly with whom they aredealing, they must haveconfidence that products orderedand paid for over the Internet willbe delivered. Thus, although itmay not cost all that much to setup a Web site, considerableadvertising and promotionalexpenditure may be required toestablish a brand name and areputation for good service.

Information. If mostcompanies selling goods andservices have web sites providing

information about the productsthey are selling (availability,product characteristics andprices) then it might be expectedthat markets would work moresmoothly (frictionlesscommerce). Search costs forconsumers can be reduced,enabling them quickly towithdraw their demand foroverpriced products and move itto cheaper ones - or to productsthat more closely match theirpreferences. This is particularlyso given the development ofspecialized shopping search

engines (shopbots) thatcan scan retailers’ websites and providecomparative priceinformation.

For well-defined,homogeneous productsthat customers do notneed to see in order toconfirm thecharacteristics (itemssuch as books, CDs, etc)we might expectcustomers to use theInternet not only to

glean information but also forconducting the trade itself.Weshall look at some empiricalresearch that has been carried outon this issue.

Gathering information via theInternet is not simply a case ofconsumers finding out aboutpotential suppliers, however.Information flows in bothdirections. Companies can trackwhere consumers go on the web,and the more information theyhave about consumers the easierit is for them to discriminatebetween different groups. Bymaking relatively costless changesto the product design so 5




S I N C E C U S T O M E R S W I L L N O T B E

A B L E T O S E E E X A C T LY W I T H

W H O M T H E Y A R E D E A L I N G , T H E Y

M U S T H A V E C O N F I D E N C E T H AT

P R O D U C T S O R D E R E D A N D P A I D F O R

O V E R T H E I N T E R N E T W I L L B E

D E L I V E R E D

as to offer a number ofdifferent versions of theproduct - versioning (a kind ofproduct differentiation) -producers may find that theInternet enables them to chargedifferent prices to differentgroups of consumers and soextract the maximum willingnessto pay from all of them, ratherthan having to keep their priceslow because of competitionfrom other suppliers.

EMPIRICAL EVIDENCEON THE EFFECT OF THEINTERNET ON PRICES

Brynjolfsson and Smith

(2000) analysed the effect ofthe Internet on prices for twohomogenous products - booksand CDs. Their data setconsisted of over 8500 priceobservations on matchedsamples of CD and book titlesfrom 41 Internet andconventional retail outlets.

They find that prices on theInternet are between 9 and 16%lower than prices inconventional outlets, dependingon whether additional costs(taxes, shipping and shoppingcosts) are included. As well ascomparing price levels they alsolooked at price changes andprice dispersion. Internet

retailers’ priceadjustments over timeare up to 100 timessmaller than those ofconventional retailers.This reflects lowermenu costs on theInternet. It costsvirtually nothing tochange the price on aweb site for allconsumers to see,compared with thecosts of amending allthe price lists andlabels in conventionalshops.

In comparing pricedispersion betweenthe different types ofoutlets the resultsdepend upon themeasures used. Takingthe raw prices theyfind substantial pricedispersion on theInternet - around33% for books and25% for CDs.

However, when these areweighted by proxies for marketshare the price dispersion isfound to be lower for Internetchannels, reflecting thedominance of certain well-known brands.

The authors identify twomain sources of pricedispersion on the Internet -awareness and trust. Contraryto what one might expect, thecheapest suppliers do notattract the most customers.Brynjolfsson and Smith findthat Books.com is on average$1.60 cheaper thanAmazon.com, yet it has lessthan 2% market share of theonline retail book marketcompared with Amazon’s over80%.

Similarly, CD Universeaverages $1 cheaper for CDsthan Amazon. Amazon hasspent a considerable amount ofmoney on marketing and thisseems to have paid off in termsof awareness and trust. It takesmore than just having a website to break into the market.

Another study by Clay et al(2001) examines the predictionthat the price and pricedispersion of advertised items,or items that are purchasedrepeatedly, will be lower thanfor unadvertised items. Theresults confirm the lower pricesfor New York Times bestsellersas compared with randomlyselected books. However, pricedispersion does not conform tothe prediction. According to theauthors this is because storeshave succeeded indifferentiating themselves eventhough they are selling a6




Some trading offers are Internet-only

commodity product.

An interesting paper byZettelmeyer et al (2001) lookingat car prices finds that onlineconsumers pay on average 1.2%less than do offline consumers(2.2% less, after controlling forselection). The authors interprettheir findings as showing thatconsumers who choose to use theInternet may be those who woulddo poorly using the traditionalchannel, perhaps because theyhave a high personal cost tocollecting information and tobargaining and thus have themost to gain.

EFFICIENCY ANDPRODUCTIVITYIMPROVEMENTS

Ordering and paying forproducts over the web canreduce paperwork and hencereduce transactions costs.According to a report by theOECD (OECD, 1998, p63)cited in Brynjolfsson and Kahin(2000), transactions costs on theweb can be anything between 50-99% lower than they are usingconventional processes. Arecently published study byVarian et al (2002) suggests thatthe cumulative cost savings forUSA companies from using theInternet is of the order of $155billion and the country’sproductivity has almost doubledits historic rate. [13]

THE EFFECT ON JOBS

The Internet, and the use ofInformation and CommunicationTechnology generally, is having aprofound effect on the way manyof us work.

More and morepeople make use ofcomputers in theirwork situation, andthis hasimplications foreducation andtraining to ensurethat workerspossess thenecessary skills.

The substitutionof automated ITprocesses forhuman mediatedtasks can lead tothe elimination ofsome jobs - or theirdisplacement toother, cheaperlocations. Forexample, theincreased use ofthe Internet in thebanking andfinancial servicessector means thatthere will be areducedrequirement forbanking staff athigh street locations.

Internet growth has also led tolabour reduction in some of theindustries with which theInternet competes. In the UK,the Royal Mail Group is lookingto reduce its workforce by tens ofthousands in an effort to cutcosts and return to profitability.Measures undertaken includecutting back to one letter deliveryper day, reducing the number ofcollections from post boxes andbringing forward the time of thefinal collection each day.

The programming of webbased services, help desks and

call-centres can be carried outwherever there is skilled butcheap labour - for example inIndia or Eastern Europe ratherthan in the UK or other EUcountries. However ICT and theInternet can introduce flexibilityinto working in ways that benefitemployees, with ‘teleworking’becoming possible for some staff.So long as they can be inpermanent contact with theiroffice - by telephone and theInternet - it can be possible forthem to do some or all of theirwork from home.




7

The internet has opened up the jobs market

INTERFIRM ANDINTRAFIRMORGANIZATIONALCHANGES

As Brynjolfsson and Kahin(2000) note “The Internet andthe Web have enabled profoundchanges in the organisation offirms and in processes withinfirms.” (page 1).

In many companies, becauseall employees can be connectedtogether by e-mail,organizational imperatives canbe communicated to workersdirectly rather than passeddown through a hierarchicalstructure. A ‘flatter’organizational structure may bemore responsive to changingcircumstances and mayencourage teamwork.Virtualmeetings (using videoconferencing) can be arrangedenabling employees to reducetravel time, or stay in toucheven when they are travelling tovisit customers or suppliers.

Companies can reorganizetheir processes to become muchmore customer oriented anddemand driven. For example,rather than producing

computers of various types andthen trying to persuadeconsumers to buy them,computers ordered over theInternet can be put together tomeet the customer’s exactspecifications. Similarpossibilities exist for producersof other manufactured goodsthat can be assembled fromcomponents, including cars.

THE INTERNET FORECONOMISTS

Rather more parochially, theInternet has transformed theway that economists themselveswork. They can access journalarticles, working papers,conference reports and dataonline. They can efficientlyconduct joint research withcollaborators on the other sideof the globe, exchanging thelatest results and drafts ofpapers as e-mail attachments. Ifthey teach, they cancommunicate with theirstudents via e-mail and throughtheir web pages, or thoughvirtual learning environmentssuch as Blackboard andWebCT. [14] They can keep upto date via current awarenessalerting and e-newsletters. [15]

FINAL REMARKS

This article has touched onlybriefly on some of the ways inwhich the Internet is affectingthe economy. For moreinformation go to TheEconomist web site(www.economist.co.uk) andsearch for articles containingwords such as Internet or web.

REFERENCESBrynjolfsson, E. and Kahin, B. (2000)Understanding the Digital Economy:Data, Tools and Research. MIT Press,Cambridge MA. Papers from theDepartment of Commerce conference,Washington DC, May 1999 available athttp://mitpress.mit.edu/books/0260523302/ude.html

Brynjolfsson, E and Smith, M (2000)Frictionless commerce? A Comparisonof Internet and Conventional Retailers.Management Science. April 46: 4Available athttp://ecommerce.mit.edu/papers/friction

Cairncross, F. (1997) The Death ofDistance: How the CommunicationsRevolution Will Change Our Lives.Harvard Business School Press, BostonMA.

Clay, K., Krishnan, R. and Wolff, E.(2001) Prices and price dispersion onthe web: evidence from the online bookindustry. NBER WP 8271

Graham, A. (2001) The Assessment:Economics of the Internet. OxfordReview of Economic Policy. Volume 17No 2 pp 145-157.

Kiiski, S. and Pohjola, M. (2002) Cross-country diffusion of the Internet.Information Economics and PolicyVolume 14 pp297-310.

Rohlfs, J. (1974) A Theory ofInterdependent Demand for aCommunications Service. Bell Journalof Economics. Volume 5 No 1 pp16-37.

Rohlfs, J. (2001) Bandwagon effects inHigh Technology Industries. MIT Press,Cambridge MA.

Rowlatt, A (2001) Measuring E-commerce: Developments in the UnitedKingdom. Economic Trends No 575(October) pp30-36.

Shapiro, C. and Varian H.R. (1999)Information Rules. A Strategic Guide tothe Network Economy. HarvardBusiness School Press, Boston MA.

Temple, J. (2002) The Assessment: TheNew Economy. Oxford Review ofEconomic Policy. Volume 18 No 3 pp241-264.

Varian, H.R. et al. (2002) The NetImpact Study. The projected economicbenefits of the Internet in the UnitedStates, United Kingdom, France andGermany. Sponsored by Cisco SystemsInc. Available online atwww.netimpactstudy.com

Williams, M (2001) E-Commerce Inquiryto Business 2000. Economic Trends No572 (July) pp29-36.

Zettelmeyer, F. et al. (2001) Cowboys orcowards: why are Internet car priceslower? NBER W 8667.

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H A V E E N A B L E D P R O F O U N D

C H A N G E S I N T H E O R G A N I S AT I O N

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P R O C E S S E S W I T H I N T H E F I R M S

END NOTES

[1] ‘Internet witnesses continental drift’by Owen Gibson. The Guardian, Friday6th September 2002.http://media.guardian.co.uk/Print/0,3858,4495420,00.html. Statistics quotedabout the Internet and its use need to beassessed very carefully. Some comefrom official sources such as the officefor National Statistics in the UK -www.statistics.gov.uk - or the CensusBureau in the US - www.census.gov.Many others come from private researchand consultancy groups such asNua.com (www.nua.ie), ForresterResearch (www.forrester.com) andNielsen//NetRatings (www.nielsen-netratings.com).

These different organisations use avariety of different survey methods andother methodologies to produce theirstatistics, quite oftenproducing astonishinglydifferent figures. Forexample, Nua.com has achart showing the estimatedconsumer online shoppingrevenues in the US for 1999as reported by fourteendifferent groups. The figuresvary from $3.9 billion rightup to $36 billion.

You also need to be carefulabout the definitions used.For example, do quotedaccess figures refer to thenumber of activesubscriptions, the number ofregular users or to someother indicator?

[2] Oftel figures say 1 million in October2002, up by 100% since May 2002 andgrowing by around 20,000 a week.Gibson (2002), quoting figures fromNielsen NetRatings, reports that theaverage UK Internet user spends sixhours and 45 minutes online eachmonth.

[3] Source: Nua Internet Surveyshttp://www.nua.ie/surveys/how_many_online/index.html

190.91 million of these are in Europe,which for the first time in 2002 overtookNorth America, where 182.67 million areestimated to be online in the USA andCanada.

[4] See www.imrg.org. Research wascarried out for the IMRG by ForresterResearch.

[5] Seewww.census.gov/mrts/www/current.html

[6] New York Times, July 22, 2002.Article by Amy Harmon and FelicityBarringer.

[7] Source: ONS First e-commercesurvey of business, May 2001. SeeRowlatt (2001).

[8] BBC Business news reported in July2002 that eBay had hosted 145.2 millionauction listings during the secondquarter of 2002 (up 47% on the previousyear). eBay’s reported profits for thatperiod were $54.3m.http://news.bbc.co.uk/1/low/business/2137491.stm

[9] Kazaa operates a file-swappingservice from the Pacific island state ofVanuatu, 1,550 miles north-east ofAustralia. The company is currentlyfacing a court action concerningcopyright infringements that could see itgo the way of Napster. Seehttp://news.bbc.co.uk/1/low/entertainment/music/2514153.stm

[10] You can study for a qualificationonline, look for a job, complete your taxreturn or (in some areas) send off arequest for a repeat prescription to yourdoctor’s surgery. As part of a course thatI teach called ‘The Internet for BusinessEconomists’, I have a web pageattempting to list and categorise thingsthat you can you do on the World WideWeb;www.pbs.port.ac.uk/~judge/IfBE2002/whatweb.html. If you have any furthersuggestions to add to the table please e-mail them to me [email protected]

[11] One of the first was Hal Varian. Seehis web page atwww.sims.berkelet.edu/~hal/ for links tohis papers and information on his bookwith Carl Shapiro. Recently a number ofeconomics journals have devoted specialissues to the subject - see for examplethe issues of the Oxford Review ofEconomic Policy beginning respectivelywith Graham (2001) and Temple (2002).

[12] See Rohlfs (2001) p29 and Shapiroand Varian (1999) p184. As Rohlfs pointsout, the values that different users derivefrom these links is likely to varyconsiderably, perhaps with early usersgaining the greatest utility. Thus, it isunlikely that Metcalfe’s ‘Law’ representsan accurate guide to the utility of anetwork. Nevertheless the value of thenetwork is likely to be an increasingfunction of the number of users.

[13] The study also surveyed the threelargest European economies - France,Germany and the UK. The estimatedcost savings and productivity gains inthese countries were more modest,reflecting the fact that the Americans aremore advanced in their use of the web,or perhaps less flexible labour markets inEurope. The survey found that relativelylost-cost applications, such as e-mail

communications withcustomers, salespeople andsuppliers can have a bigpayoff. More thorough goingchanges to workplaceactivity, such as supply-chainautomation, can have evenmore dramatic effects oncosts - but such changes aremore complex to introduceand take time to implement.

[14] Bill Goffe’s ‘Resourcesfor Economists on theInternet’ is probably the mostused starting place foreconomists looking for onlinematerial. It is sponsored bythe American EconomicAssociation and lists over1000 resources in nearly 100

sections. Goffe exercises editorialjudgment about what to include andprovides brief descriptions of all theresources covered. The original versionof Bill Goffe’s guide was published in theJournal of Economic Perspectives. Youcan find the latest version online athttp://econwpa.wustl.edu/EconFAQ/EconFAQ.html or at its UK mirror site inManchesterhttp://netec.mcc.ac.uk/~adnetec/EconFAQ/EconFAQ.html Mirror sites are usedto cut down unnecessary intercontinentalweb traffic.

[15] For example I find it helpful toreceive daily newsletters by e-mail fromboth the BBC and the New York Times,alerting me to the latest news items onmy chosen topics of business andtechnology.

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T H I S A R T I C L E H A S T O U C H E D O N LY

B R I E F LY O N S O M E O F T H E WAY S I N

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T H E E C O N O M Y. F O R M O R E

I N F O R M AT I O N G O T O T H E E C O N O M I S T

W E B S I T E : w w w. t h e e c o n o m i s t . c o . u k

As an economics teacherturned educator with a strongcommitment to an ecologicallysustainable future it has alwaysbeen a puzzle to me that weinsist on talking about‘externalities’ - whether positiveor negative.

External to what, exactly? Ofcourse it might appear to be amatter of abstraction, a usefultool. But as these practicalexamples suggest, some of ouruseful tools may beinappropriate within a differentset of assumptions about howthe world works.

The context is familiar -excess carbon dioxide emissionsfrom the burning of fossil fuels.

The steps below show howyou might introduce thiscontext and develop discussion.The briefing sheet can bephotocopied for students.

STEP 1

Ask students to read Briefing1, then investigate the ClimateCare web site.

STEP 2

Discussion might centre onhow effective students feel thisscheme might be in reducingcarbon dioxide emissions.Would they themselves sign up?Or should schools? Is this likelyto be a popular scheme? Mightthe scheme encourage citizens

to pay and forget - theirconscience salved?

STEP 3

Briefing 2 leads students tothe Future Forests web site.Having looked at it, studentscan consider how the costs andbenefits of Climate Care mightcompare with Future Forests,or other alternatives such as:

a) compulsory charging tointernalise these costs withinthe price of the fuels;

b) doing nothing, as the figuresin Climate Care and FutureForests are just estimates andthe science of storing carbon intrees is undeveloped andcontroversial;

c) leaving it to governments toregulate emissions as in theKyoto protocol.

STEP 4

Now ask students to considera USA scheme for carbonsequestration. It has newfeatures. The information is inBriefing 3. Encouragediscussion and introduce thefollowing ideas as appropriate.

The USA is one of theleading producers of carbondioxide emissions and it has notratified the Kyoto agreement,but this proposal seems to offera cheap offset option. Thetrouble is that there arescientific arguments against it.10

Whatexternalities?

Ken

Webster

Any environmental issues here?

In the Observer article on whichBriefing 3 is based, Prof AndrewWatson of East Anglia Universityis quoted saying:

‘It is not just that this projectmay be dangerous; it is alsounethical.What right has onegroup or country to use the world’soceans to resolve its domesticproblems?’

Two key issues arise. First, ifthe ecosphere is a complex,iterative and pretty open systemin which human kindparticipates and within which wedo not control even a fraction ofthe possible variables, it surelyfollows that certain choices areruled out in principle, thatprinciple being theprecautionary principle.

Under this principle, the onusof proof has to be on those whopropose changes that appear toput at risk the integrity of thewhole system. The onus does notlie on those systems ‘external’ toprivate decision making to provethat there is a problem, for oncethe problems are known andtheir significance established thesituation may already beirreversible.

Secondly, if another principlewere to be added - that ofextended producer responsibility[EPR] - the firm would not bemaking arbitrary decisions aboutmaterials and waste. It wouldaccept that ecological design andEPR (including take back for‘end of life’ items) made anonsense of terms such as

‘externalities’ becausesystemically designing out waste,making all of it internal, is themore efficient approach overallas it transfers fewer costs toanother part of the system.

‘Externalities’ make sense onlyin a world of infinite resourcesand infinite waste sinks, and in alargely Newtonian andmechanical worldview wherehumankind is in control and,once the mechanisms areunderstood, all things arepossible. There is no such world.

Ken Webster is a freelancewriter of classroom materials,specialising in environmentalissues.

E C O N O M I C SIN THE CLASSROOM



11

Briefing 1

Whether we are driving our cars, flying away on holiday or simply heating our homes, we arecreating carbon dioxide - the main gas responsible for global warming.

Everyone should try to reduce their impact on the climate but there will be some emissions thatare difficult or impossible to avoid. The Climate Care scheme helps people reduce the impact oftheir emissions by offsetting them.

Climate Care offsets emissionsby funding projects that reducegreenhouse gases. When youbuy offsets from Climate Care,you are funding a share ofthese projects, and so buying ashare in the savings they make.

Take a look at the detail on theClimate Care web site athttp://www.co2.org Try out theirengaging on-line calculators.

12

E C O N O M I C SIN THE CLASSROOM



Briefing 2

One way to reduce carbon emissions is todevelop schemes for sequestration of thecarbon. This means that excess carbon istaken up more directly via the planting ofspecific numbers of trees.

Find out more about this by going to theFuture Forests web site athttp://www.futureforests.com/

Briefing 3

Reducing greenhouse gases

Recent research has shown that tiny amountsof iron - around one part per billion - arecritical in stimulating phytoplankton growth inseas. Because such plankton absorbs carbondioxide, proponents argue that increased ironand plankton levels would lead to the removalof carbon dioxide from the atmosphere, thushelping to slow down global warming.

In many parts of the world, iron in seawater isvirtually non-existent - and plankton levelscorrespondingly low. As a result, severalgroups of USA entrepreneurs have begunexperiments aimed at correcting this problem:by pumping tonnes of soluble iron compoundsinto sea areas.

For example, Planktos, backed by the rockstar Neil Young, who provided his yachtRagland free of charge, has completed trialsoff Hawaii. Tonnes of iron compounds weredumped overboard and the growth ofplankton measured.

Results have encouraged Planktos - which isfunded by donations from USA energycompanies - and other groups, such asGreenSea Ventures, to consider selling theirservices.

They hope to charge the USA governmentaround $10 for each tonne of carbon that theyremove from the atmosphere by pumping ironsulphate solutions into the sea. This would

then allow the USA to reduce the carbonemission cutbacks that it will have to makewhen it signs the Kyoto agreement on globalwarming.

In other words, by interfering with the world’soceans, the USA will be able to maintain itshigh output of industrial gases. “There is nolaw or international agreement that preventsus from doing this,” said Dr Lee Rice, ofGreenSea Venture. “It is perfectly legal.”

Dr Rice envisages tracts of sea being seededwith soluble iron compounds. Plankton wouldbloom and then die, sinking to the seabed,carrying with them the carbon dioxide theyhad absorbed.

You can read the whole article athttp://www.observer.co.uk/uk_news/story/0,6903,873108,00.html

INTRODUCTION

Free cash flow was mentionedrecently in an article about themega-investor Warren Buffet(Fortune Europe Edition No 11,The Oracle of Everything, pp20-30). The purpose of this article isto review that term.

Why do we need measures ofcash flow at all? Thereare hundreds ofdifferent ratios thatfinancial analysts canuse without everbothering about cashflow. This article startsby exploring the roleof cash flowcalculations in general.This is followed by anexplanation of freecash flow, withexamples from real lifeto illustrate why it is such animportant concept for thefinancial analyst. Finally, we willattempt to apply the free cashflow concept in a companyvaluation situation.

CASH FLOWCONSIDERATIONS

It is widely recognised now thatthe income statement, and thebalance sheet for that matter, isless than perfect in itsdemonstration of corporatereality. Anyone who triesanything other than the most

basic financial analysis will carryout the kind of adjustments thatwe are about to see here: not justwith cash flow either, but alsowith turnover, expenses, accruedexpenses, prepaid revenues. Justabout anything is potentiallyadjustable, in order to assess acompany’s true performance andpotential!

Jeff Fisher writes, at the MotleyFool web site:

... income statements do not providea clear picture of a company’sresults.The income statement istypically clouded by interest earnedor paid, fluctuations in tax rates,one time events, and numerousdistorting but ... legal accountingmanoeuvres. By contrast, the cashflow statement ... gives investors amuch clearer view of a company’scash generating capabilities.www.fool.com/dripport/2002/dripport020228.htm

Whitney Tilson, also writingfor the Motley Fool, adds:

Revenues (to some extent) and netincome (to an increasingly largeextent in this market) are opinions,but cash is a fact.That’s why Ispend so much time focusing oncompanies’ cash flow statements.http://www.fool.com/news/foth/2000/foth001212.htm

Fisher continued as follows:

We celebrate free cashflow (FCF) ... because itis the most importantthing that a publiccompany can accomplish.Lacking free cash flow, it’sdifficult for a business topursue new opportunities,acquire other businesses,or pay dividends.Whenachieving free cash flow, acompany is much morecapable of those things

plus paying down debt, saving cashfor a rainy year, and buildingshareholder equity. So, what exactlyis free cash flow?www.fool.com/dripport/2002/dripport020228.htm

The FCF can then be used toreward the company’sshareholders, to buy back shares,to acquire new business ... allsorts of useful things that acompany without FCF cannotdo.

Let’s look at the adjustmentswe now need to turn operating cash flow into free cash flow. 13

Duncan

Williamson Free Cash Flow

A N E X P L A N AT I O N O F F R E E C A S H

F L O W, W I T H E X A M P L E S F R O M

R E A L L I F E T O I L L U S T R AT E W H Y I T

I S S U C H A N I M P O R TA N T C O N C E P T

F O R T H E F I N A N C I A L A N A LY S T

14

B U S I N E S SU P D A T E



A DEFINITION OF FREECASH FLOW

Free cash flow is moneyearned from operations that abusiness can put aside at the endof an accounting period.

Free cash flow is net cash flowfrom operating activities lesscapital expenditures, which areinvestments in property, plant,and equipment.

The very basic definition offree cash flow is:

FCF = Net Cash Flow fromOperating Activities – CapitalExpenditures

An example

The principal activities of Torexplc are the design, supply andsupport of computer basedmanagement systems forhospitals and retailers, amongothers.

In Figure 1 we can see thatTorex’s free cash flow for the

year ended 31/12/2001 was:

FCF = £18,564,000 –2,218,000 = £16,346,000

MORE ADVANCED FREECASH FLOW

The definition of FCF is quiteclear; but we did say that thedefinition we started with wasthe very basic version. After all,the FCF value is to be used, asmuch as anything, for longerterm analysis; it is not just anindicator of how well a companyhas done over the last year.Warren Buffet uses FCF tovalue the companies he mightwish to buy: it is extremelyimportant in that context.

So a more advanced definitionof FCF, then, takes account ofone-off items and such things asdeferred taxes.

FCF = Net Cash Flow FromOperating Activities – CapitalExpenditures – One-off items

Tilson makes the point, andwe should find this reassuring,that

... if you put 10 analysts in aroom, gave them identical financialstatements, and told them tocalculate free cash flow, you mightget 10 different answers.There’s alot of judgment involved, so youshouldn’t necessarily take myapproach as gospel.http://www.fool.com/news/foth/2000/foth001212.htm

This is reassuring, because ithelps us to see that there are nofixed rules for adjusting theStatement of Cash Flows to getto FCF. There are guidelines, butwe are allowed to have our ownopinions as to what true FCF is.We need not worry too muchabout precise definitions.Figure 1

There are often items in thecash flow statement, gatheredtogether under ‘operatingactivities’, that have nothing todo with a company’s actualoperations. A good examplewould be deferred taxation, as itcan be found in many sets offinal accounts.We should get ridof these amounts as we look atFCF.

Similarly, whilst we have usedcapital expenditure in our initialevaluation of FCF, we mightneed to adjust that figure too.

Tilson again:

But what if a company decidesto invest in a new line of businessand makes big capitalexpenditures, funded from its freecash flow, to do so? This growthcapital expenditure is not arequirement of the business, as thecash could have been returned toshareholders, but managementdetermines that it can generate ahigh rate of return from thisadditional capital expenditure.In this case, one must estimate how

much of a company’s capitalexpenditure is for maintenance,and subtract this amount to arriveat free cash flow, and how much isfor growth, which should not besubtracted when calculating freecash flow.http://www.fool.com/news/foth/2000/foth001212.htm

Other examples ofadjustments that need to bemade would includeredundancy payments toemployees, or payments thathave been made in settlement ofa legal dispute. These payments

do not relate to ordinarybusiness and so must bededucted from our assessmentof FCF.

Torex plc has no suchadditional adjustments neededin arriving at FCF, but Tilsongives us the example of LucentTechnologies in Figure 2.

Figure 3 is an extract from theAnnual Report and Accountsfor Tesco plc.You could trycalculating the FCF for each ofthe two years:

15




See http://www.fool.com/news/foth/2000/foth001128.htm for thesource of this table.

Figure 3a

Figure 2

O T H E R E X A M P L E S O F A D J U S T M E N T S

T H AT N E E D T O B E M A D E W O U L D

I N C L U D E R E D U N D A N C Y P AY M E N T S

T O E M P L O Y E E S , O R P AY M E N T S T H AT

H A V E B E E N M A D E I N S E T T L E M E N T O F

A L E G A L D I S P U T E

VALUATION OFCOMPANIES USING FCF

We have mentioned WarrenBuffet twice already. Buffet usesthe present value of acompany’s future FCF as thebasis of valuing a potentialacquisition; and then pays nomore than 60% of the presentvalue.

Consequently, Buffet takesthe statement of cash flows fora company, makes anyadjustments that he feelsnecessary and then carries out arelatively simple NPVcalculation on the results. Theadditional information Buffetneeds includes:

● an estimate of the cost of capital

● an estimate of future FCFs.

Since we never intended todiscuss the detail of these twopoints here, let’s imagine acouple of scenarios for you touse to calculate the PresentValue of the FCF (FCFpv):

A WORKED EXAMPLE

1. XYZ plc has the followingFCF history and it isanticipated that the futureannual FCF will equal theaverage of the last 10 years’worth of FCFs plus 15%. The

cost of capital for the industryin which XYZ operates iscurrently 7.5% per annum.

Calculate the FCFpv.

The average is the arithmeticmean of the FCFs for the entireperiod.

The forecast average for eachyear of the rest of the life of thecompany is £179.9 x 115% =£206.89

With a cost of capital of 7.5%,the present value of the futureFCFs is:

FCFpv ÷ Cost of Capital =£206.89 ÷ 0.075 = £2,758.47

The answer works this waybecause we are dealing herewith a perpetual annuity: hence,all we need to do is to establishthe perpetual annual cash flows,£206.89, and divide that figureby the cost of capital, 7.5% or0.075.

A QUESTION FOR THECLASSROOM

At the top of page 17 is anextract of the Statement ofCash Flows for Alldays plc,taken over by the CooperativeSociety in October 2002.

16




Figure 3b

Figure 4

Did you get this?

i) Evaluate Alldays’ Free CashFlows for both years for whichyou have data.ii) Now, based only on:

b) an estimated cost of capital of4% of Alldays; andc) an estimate of future averageFCF of £5,000 per year inperpetuity,

determine the maximum amountthe Cooperative Society shouldhave paid for Alldays.

Please note: the figures in ii) b)and c) are for illustration only.

Note: we have adjusted theexceptional expenses: they arenot normal, annual items, so wehave adjusted for them ... maybeyou didn’t and maybe youwouldn’t.You would need tojustify your answer, though.

CONCLUSIONS

Free cash flow is seen by somesignificant financial analysts andinvestors as a vital indicator ofthe health of a business.Warren

Buffet, the world’s mostsuccessful investor according tomany, uses free cash flowinformation as one of the keyindicators as he seeks to assess apotential acquisition. The freecash flow calculation is verysimple at the lowest level.However, if we try to get morescientific in our approach andmake adjustments for unusual orexceptional accounting items,our life can become much moredifficult.

Nevertheless, mostaccountants and financialanalysts will agree that the finalaccounts of a company are filledwith subjective accounting data,whereas cash flow informationtends to be free from suchproblems. Hence, the idea of freecash flow gives us a basis formore realistic analysis thanotherwise.

Duncan Williamson has taughtaccounting and related subjectsat a variety of levels atcolleges, universities andbusiness schools in the UK,Africa, Central Asia, theCaucasus and the Balkans. He iscurrently working as a CostAccounting Consultant for avariety of organisations; hisweb site has extensivemanagement and financialaccounting resources on it thatare of value both to teachersand students. Find Duncan’s siteat www.duncanwil.co.uk

17




Figure 5

Figure 6

18

With so many Businesscourses containing aproduction or operationsmanagement module, thosemany of us with littlemanufacturing industrynearby find students withzero backgroundunderstanding of productionissues, such as job, batch orflow production or qualitychecking.With sofew opportunities forarranging usefulfactory visits, theclassroom can be astrangely abstractplace to teach suchconcepts…..unlessthe classroombecomes a factoryitself.

My Deputy Headseemed somewhatunconvinced by myexplanation of why theclassroom was coveredin paper, with students, scissorsin hand, grasping paperaeroplanes and felt tips.Fortunately, she retreated fromwhence she had come, mutteringsomething about too much noise.She had, of course, stumbledacross the paper aeroplanemanufacturing lesson, used toillustrate the differences betweenjob, batch and flow production.

The students at the table at thefront were using job production

to satisfy the orders being placedon the board – demonstrating anability to manufacture to exactspecifications in order tocomplete the highly specialisedhigh price orders that appearedon the board. A flow productionsystem at the back of the room(formed by taping many piecesof paper together to form aconveyor belt run over 3 tables

placed together, lengthways)dealt with the largest orders forstandardised aircraft, whilst otherorders, for batches of 10 to 20aircraft were taken by the groupwho had set up a batchproduction system in the middleof the classroom.

Roughly 20 minutes ofmanufacturing was sufficient toillustrate the three productionmethods (and to get through theyear’s pile of scrap paper). At the

end of the process, a plenarysession was held, allowing eachgroup to identify:

● the type of orders for which their method was most suitable

● the ways in which automation would/would not have been useful

● the types and level of skills needed by each production worker

● the level of interest associated with each job.

As with so manyother ‘practical’lessons, this is one ofthose that stays withstudents throughouttheir Business Studiescareer, with moststudents able to usethe activity as the key

to remembering key issuessurrounding different productionmethods.

QUALITY

A similar scenario can be usedto illustrate different approachesto quality control in amanufacturing context. Settingup the flow production systemallows the illustration of a finalquality check and also quality

Manufacturing in the Classroom

Andrew

Hammond

T H E P L E N A R Y S E S S I O N A F T E R S U C H

A N E X E R C I S E A L L O W S S T U D E N T S T O

W O R K T H I N G S O U T F O R T H E M S E LV E S ,

T H E R E B Y A D D I N G T O T H E L I K E L I H O O D

T H AT T H E Y W I L L R E M E M B E R T H E I R

O W N C O N C L U S I O N S

B U S I N E S S I NT H E C L A S S R O O M

checks at various stagesthroughout the productionprocess. It also allows a TotalQuality approach to jobs, bymeasuring the total amount ofwasted materials. Again, theplenary session after such anexercise allows students to workthings out for themselves,thereby adding to the likelihoodthat they will remember theirown conclusions.

LEADERSHIP STYLES

Leadership styles can also beillustrated in the classroom in aproduction context. A class splitinto groups can be organised sothat different groups are led in

different ways. Once each grouphas elected a leader, that leadercan be told how to manage thegroup and the rest of their teamcan be told what is expected ofthem. Thus, for example, theteam led by an autocrat can betold to do everything the bosstells them to do and forget aboutmaking constructive suggestionsbecause there in no way thattheir views or ideas are going tobe heeded.

The task should be one thatinvolves several stages and anelement of problem solving.Perhaps a design and build typeof task is best, since this allowsmembers of some groups to

have a creative input and to feelthe sense of achievement thatcomes from having a suggestionadopted by the whole group.

Clearly the exercise should beadapted to suit the students youhave and to your own personalstyle of working, but thefollowing table could be used asa basis of the briefing given toeach group and its leader. By allmeans, try to selectgroups/leaders that will help toillustrate the different styles(either go for a naturally bossystudent to be the autocraticgroup leader or get that studentto take on the role of theconsultative leader!). 19



Not all Business teachers and students are able to visit manufacturers’ premises

After the exercise, draw ablank table on the boardshowing just the differentleadership styles and columnsfor the advantages anddisadvantages of each. Eachgroup should be allowed to fill inthe information for their owngroup before the rest of the classoffers any other points theymight have.

This exercise can be linkedfairly easily to motivationtheorists. It might also act as abridge between the two topics, tolead students from a study ofmotivation into an introductionto leadership styles.

I have no doubt that many ofyou have plenty of ideas to add

to these. Perhaps you havecunning ways to liven up life inthe classroom, or possibly otherideas that involve operatingoutside the classroom. TheBusiness in the Classroomsection of your journal should bea forum for sharing best practicein Business education, so I amvery keen to hear from anyonewho has a lesson that worksparticularly well and who wouldbe willing to share it with otherEBEA members. If you’d like towrite a little commentary on thelesson, together with somesupporting photographs, pleasesend it to me at:

[email protected]

I am happy to either insertyour submissions directly, or, ifyou’d prefer, just let me knowabout your ideas.We can discussthem by phone and then I canwrite up the idea for you.

Please also send in other usefulideas – perhaps on how to use aparticular free and easilyavailable resource that you’vecome across or share yourfavourite lesson with us. Anyonewho has run successful industryvisits would also be mostwelcome to tell us about thevisit, why it worked well and howwe can arrange the same tripourselves! Of course, there’s nomoney involved in this exercise,but a published article in theEBEA journal can’t hurt a C.V.or threshold application form!20

B U S I N E S S I NT H E C L A S S R O O M



Autocratic Leader Take a few minutes to work out how the job should be done should be (without talking to the other members of the group). Then telltold to them what you expect them to do and how you expect them

to do it. Make it clear that their ideas are not necessary since you have worked out the best way to do the job.

Group Give the leader a few minutes to herself/himself. Once theshould be leader is ready they should listen carefully to what they aretold to told to do and do it when they are told to. There is no point in

trying to make suggestions; that is not your job and your leader will not listen.

Consultative Leader Explain the task to the whole group. Then give the team anshould be opportunity to offer suggestions as to what should be done.told to After about 5 minutes, make your mind up as to how YOU

think the job should be done and start telling your team what you expect them to do.

Group Offer suggestions when the boss asks for them, but once theshould be boss tells you what to do, just follow instructions.told to

Laissez faire Leader Explain the task to the whole group. Then tell the group how should be long they have to do the job and leave the room.told to

Group Work out for themselves what to do. They ought to be smart should be enough to work out what’s going on without needing to asktold to every step of the way.

THE CONTEXT

At the Institute of Education,University of London, we trainfifty to sixty business andeconomics teachers (known asBeginning Teachers, or BTs)each year. In applying Shon’s(1983) notion of reflectivepractice we encourage thesesubject specialists to examine therole of economics and businessin a wider context thanthey might have donepreviously. After all,every society has todeal with the problemof scarce resources,their distribution andexchange (Lawton,1997) and, at its best,business andeconomics education(BEE) confronts theseissues in an informedand critical way. Thisis something that tends to bedenied to some other curriculumsubjects that may not possess theconceptual armoury ortheoretical framework requiredfor deeper analysis.

Recent curriculumdevelopments in economics andbusiness require young people todo a great deal more than acceptreceived wisdom on, forexample, the behaviour of firmsor the economic activities ofgovernments. Students are now

expected to question the aimsand objectives of businessorganisations and governmentsand to extend their vision ofbusiness behaviour beyond thehigh street of small-town UKtowards the global village,complete with its footloosemultinational corporations,income disparities andenvironmental degradation.

In training BTs of businessand economics, we at theInstitute of Education regard asessential the opening up of ourtrainees’ minds to the possibilitiesof exploring development issues,alongside the more routine butequally important task ofproviding a traditional subject-specific input. This approach notonly provides them with startingpoints for integrating such issuesinto their subject teaching butalso opens up possibilities fortheir making positive and creative

contributions to wider aspects ofthe school curriculum.

GLOBAL PERSPECTIVESAS A THEME OF THEBUSINESS ANDECONOMICS PGCE

This case study describes howwe integrate wider globalperspectives into the PGCE

training year andreports on the successof the approaches used.Our aim is to makeglobal perspectives animplicit and evolvingtheme of the course,and to this end weensure that thetechniques we use areintegrated into the keyteaching and learningmethods in businessand economics

education. By the end of theBTs’ training we would expect tohave succeeded in:

● raising their awareness of global perspectives and issues;

● helping them to consider waysof integrating global perspectives and issues into the teaching of economics andbusiness studies.

This case study will look indetail at how these aims areachieved through the course,using business case 21

T H I S C A S E S T U D Y D E S C R I B E S

H O W W E I N T E G R AT E W I D E R

G L O B A L P E R S P E C T I V E S I N T O T H E

P G C E T R A I N I N G Y E A R , A N D

R E P O R T S O N T H E S U C C E S S O F

T H E A P P R O A C H E S U S E D

Beyond the Lesson Plan:Developing a global dimension in

Initial Teacher Education

Jacek Brant

and

Adam Unwin

studies, educational visits andworking with partners andschools.

CASE STUDIES INBUSINESS ANDECONOMICSEDUCATION

Simulations havetraditionally beenused in businesseducation to harnessthe learning power ofthe real world in theclassroom setting(Whitehead, 1988).Case Studies inparticular havebecome central, notonly to pedagogy butalso to assessment.

They provide an excellentvehicle for engaging students inthe subject area via imaginaryor real-life scenarios.

Appropriately designed caseswill emphasise subjectknowledge and understanding,

but also allow for thedevelopment of a wide varietyof skills such as those ofanalysis, application, creativity,communication and perception(Marcousé, 1994). The bestcases operate at different levels,

depending on the learningoutcomes which are beingtargeted and the skills of theteacher.

One such is called ‘TheDoppler Effect’. The case iscentred on a company that

produces two goods, Doppler Xand Doppler Y, the latter beinga new and superior version ofthe earlier one. The firm is themarket leader in Britain withDoppler X, which it alsosuccessfully exports to the

USA. In the USA it isvery much a pricetaker. Because ofcompetition there,prices are generallymuch lower than inthe UK market andconsequently marginsand profit levels arealso lower. Naturallythere is potential toexport to othermarkets; the firm’sown market researchsuggests a country

within South America may beready to buy either X or Y, orboth.

The case is, at one level, allabout marketing strategies.Armed with data on costs ofproduction and output potentialfor the X and Y, together withinformation on sales and pricescharged for the X at home andin the USA, the participantsmust carefully consider theirtactics and a strategy for thefuture.

The teaching focus at thisstage is about prices and salesvolumes, but after results havebeen collected, it expands tobusiness ethics anddevelopment issues. The resultssuggest a uniformity of thinkingand this is not surprising,because participants, working ingroups, want to “win” in thesense of offering the “best”market solution.22

ECONOMICS & BUSINESSE D U C A T I O N



T H E T E A C H I N G F O C U S AT T H I S

S TA G E I S A B O U T P R I C E S A N D S A L E S

V O L U M E S , B U T A F T E R R E S U LT S

H A V E B E E N C O L L E C T E D ,

I T E X P A N D S T O B U S I N E S S E T H I C S

A N D D E V E L O P M E N T I S S U E S

Invariably Y is introduced intoboth the home market and theUSA at a premium pricebecause companies who demandthe technically superior productwill pay the extra. The price ofDoppler X is reduced to squeezethe competitors further. (In thehome market there is even thepossibility of destroyer pricing toeliminate the competitiontotally). But what of the countryin South America? Is it offeredY? Almost invariably andseemingly inevitably the answeris ‘no’; it must accept the inferiorDoppler X, and very often at apremium price.

The case works so wellbecause it operates at a numberof levels, with developmentissues as a subliminal theme.Participants concentrate onprofit maximisation strategiesand usually make sophisticatedbusiness decisions that reflectthe ways multinationals oftenact.

Just as in the real world, withprofit pursuant companies, the

secondary impact of theirdecisions is rarely considered.This is why, in using the case,sufficient time must be built infor debriefing the participants,because it is here that ethicalissues can and should beexplored.

Through first-handexperience, not only will theplayers recognise the pressureson decision making in westernfirms, they will also understandsome of the problems andchallenges facing LDCs.

EDUCATIONAL VISITS INBUSINESS ANDECONOMICS EDUCATION

Educational visits have muchpotential in business andeconomics education, and thecourse covers how they can beused successfully. In particularthey are presented within ateaching framework of activelearning. Emphasis is placed ontheir effectiveness through theexperience they provide:

students who actually seeorganisations and processes firsthand are more likely to increasetheir theoretical understandingof business and economicsconcepts (Baker, 1991; Bennettand Dunne, 1994).

In addition, other benefits ofeducational visits are explored,such as their socialisationaspects, resulting from the visitbeing ‘something special’.Because the students are‘outside’ their normalinstitutional setting of schoolthey will remember theeducational visit long after it isover and this providesopportunities that can later beexploited in a classroom setting.Furthermore, relationships arechanged; the teacher is oftenseen in a new, more positive lightand the students themselvesconsolidate friendship groups sothat work back at school takes onnew perspectives and vigour.

A number of trips areorganised for our BTs in theLondon area but the mostambitious one is a weeklongresidential in Poland. Theprogramme includes visits to alarge farm that has now becomea model of agriculturalefficiency; however, discussionreveals the backward state ofagriculture in general in what ispredominantly still a ruralcountry. Issues such as theproblem of agricultural reformsand implication of entry into theEU are explored.

A day is spent in Nowa Huta,an industrial region near thehistorical city of Krakow. Itwas developed on prime




Poland’s power station programme raises environmental issues

23

agricultural land and is a majorsource of pollution; yet newinvestment has curtailed muchof the excesses of industrialwaste and further expansion ofthe many profitable enterpriseshas been limited by the localcouncil to keep a control ofpollution. Industry is nowcleaner and more efficient, butthe new technology has alsobeen labour-saving and there isnow a serious unemploymentproblem.

The visual impact of the visitsis important in developing theknowledge base of our BTs, butdiscussion raises other issuesand develops conceptualthinking. For example, there isthe tension between economicgrowth and protecting theenvironment: the issues arecomplex and require carefulconsideration.

The visit to Auschwitz istraumatic but educational, and

again raises a large number ofissues. Discussions of an ethicalnature tend to be deep andinsightful, not least wheninviting the BTs to considerwhat factors, in their view, haveso far served to prevent othermodern Western democraciesfrom descending into similardepths of inhumanity.

It is always illuminating for usto discern the extent to whichindividual BTs combine theirinterest in economics andbusiness with a consideration ofthe strengths and weaknesses ofthe political and institutionalframework within whichbusiness organisations findthemselves operating.

In terms of globalperspectives, Barber (1998)suggests ‘There is no better wayof encouraging globalperspectives than enablingyoung people to haveopportunities to travel andstudy abroad...’

WORKING WITHPARTNERS ON GLOBALPERSPECTIVES

The Business and EconomicEducation department at theInstitute of Education hasdeveloped strong links withGeography Education, andsince 1996 both departmentsbeen part of a larger academicgroup named EducationEnvironment and the Economy(EEE). Early on, synergies ofinterests and expertise wereidentified, especially aroundglobal perspectives andenvironmental issues.

The EEE group worked onintegrating such issues into theirrespective PGCE courses viaboth subject and cross subjectwork such as fieldwork andconferences. This collaborationhas proved fruitful, allowingparticipants to look beyondtheir traditional subjectboundaries and approaches.Many of the activities haveinvolved working with otheragencies including Oxfameducation, Save the Children,Development EducationAssociation (DEA), GlobalTeacher Project (GTP) and JustBusiness, a project of theNorfolk Education and ActionDevelopment (NEAD) fundedby DFID.

Recent developments in bothInitial Teacher Education (ITE)and the introduction ofCitizenship Education haveinfluenced BEE’s approach toglobal perspectives. The courseteam has sought to build on thestrengths of previous globalperspectives work, but has also24




A visit to Auschwitz leads to deep, insightful discussion

opened this up to partnershipschools and pupils by hosting aGlobal Perspectives conferencefor Year 10 Business Studiespupils (circa 120 in June 2002)in collaboration with JustBusiness.

As part of their trainingprogramme, the BTs run thisconference themselves towardsthe end of their PGCE year afterthey have participated in atraining day run by JustBusiness. The BTs engage inexperiential activities andworkshops and spendconsiderable time in preparationfor the Year 10 conference.

The Year 10 conference startswith a whole group session tointroduce the context and focusof the day. However the majorityof the time is spent in smallermixed school groups taking partin role-play, simulations andsimilar ‘active learning’workshops facilitated by theBTs. These workshops exploreissues including trade, workingconditions, debt, commodityproduction (eg cocoa andchocolate) and sustainabletourism.

There are wider roles for theBTs on the day, such as beingpart of a news team with ‘roving’reporters, photographers andeditors. This team produces aconference newsletter for thepupils and school staff to takewith them on the day; someschools requested and receivedelectronic versions for theirschool websites. The newsletterincludes descriptions and photosof the activities and quotes frompupils. For example, the exerptfrom the newsletter (below).

Another key part is a plenaryand evaluation session for pupilsat the end of the day to enablereflection and assessment oftheir experience.

For the pupils, they participatein a daylong event run byenthusiastic BTs, andevaluations show that this provesto be a valuable learningexperience. The outcomes of thisconference prove to benumerous and listed on page 26are some of the most apparent:




THE TRADING GAME

‘It’s just not fair’…….. a phrase I am sure all of you are familiarwith, and something you may have found yourself saying morethan once during the game. The game was simple enough - makingshapes to a set size and selling them to make money in differentgroups. Each group was a different country and each was given aset of resources for this purpose.

So why was it all so unfair?

These are some of the things the groups had to say:

“We were quite lucky to start off with what we had.”

“Most people were stealing stuff - not trading!”

“We did not have resources and we had 50% of our profit takenaway by a multinational.”

“We had nothing…….”

“We made them beg….. we were proper businessmen.”

The interesting part is that the world operates very much as thegame did.Within the game, some countries are naturally rich (withraw materials like paper, and technology like scissors) and some,like many in the Third World, are quite poor. Many Westerncountries are able to control and buy the resources of poorercountries because of their wealth and their knowledge. Being partof one of those ‘poorer groups’, you may have experienced this -and hey, it is reality.

A N O T H E R K E Y P A R T I S A P L E N A R Y

A N D E VA L U AT I O N S E S S I O N F O R

P U P I L S AT T H E E N D O F T H E D AY T O

E N A B L E R E F L E C T I O N A N D

A S S E S S M E N T O F T H E I R E X P E R I E N C E

25

● BTs experience working withpupils on global issues.

● BTs observe fellow BTs working with pupils on global issues.

● BTs experience running games, role-plays and other active learning teaching methods in areas connected/linked with business education but specifically incorporating a global dimension.

● BTs experience organising,running and evaluating a ‘conference’.

● Year 10 pupils from several schools visit a central London venue meet and work together.

● Year 10 pupils engage with global perspectives in several ways through a variety of techniques led by new teachers who are not their own. Many feel that they can be more open/ natural than in their own school environments.

● All participants are involved in thinking about matters of equity, fairness and justice.

● Participants develop skills of communication and gain confidence in debating issuesof a political and social nature.

CONCLUSION

Beginning Teachers ofbusiness and economics oftenembark on their PGCE coursewith particular views on theepistemology of their subjectspecialisms.We take a holisticview of ethical issues,promoting them to centre stagein the teaching of economicsand business, and preferring toachieve this more implicitlythan explicitly.

Our aim, and certainly that ofthe activities described in thispaper, is for BTs to challengetheir own preconceptions,stereotypes and perhaps evenprejudices in an unthreateningenvironment, so that they mayin turn reflect upon their ownpositions and consider similarchallenges for the pupils theywill soon be teaching.

REFERENCES

Barber, M. (1998) Global Perspectivesin Initial Teacher Education (ITE):Training Teachers for Tomorrow,Conference papers, in Bourn, D., andLambert, D. (Eds). DevelopmentEducation Association and Institute ofEducation, University of London.

Baker, A. (1991) Field Courses: TheEuropean Experience in Economia 1 (2)

Bennett, N and Dunne, E. (1994) HowChildren learn in Moon, B and Mayes, A(Eds) Teaching and Learning in theSecondary School London: The OpenUniversity page

Lawton, D (1996) Beyond the NationalCurriculum: Teacher Professionalismand Empowerment: London: Hodder &Stoughton.

Marcousé, I., & Lines, D. (1994)Business Case Studies Longman:Harlow

Shön, D. (1983) The ReflectivePractitioner: How Professionals Think inAction, New York: Basic Books

Whitehead, D., (Ed) (1988) Trade-Offs.Simulations and Role Plays forEconomics Harlow: Longman26




W E TA K E A H O L I S T I C V I E W O F

E T H I C A L I S S U E S , P R O M O T I N G T H E M

T O C E N T R E S TA G E I N T H E T E A C H I N G

O F E C O N O M I C S A N D B U S I N E S S

ICT on line

So you’ve been using theWeb for some time, but youstill haven’t found the idealmaterials for your students.Sure there are some excellentsupport sites like Biz/ed(www.bized.ac.uk), but youwant to be able to create yourown materials – ones thatare ideally suited for yourstudents. So how do you goabout it? How can youdevelop your own interactivelearning materials for yourstudents and put them up onthe school/college intranet?In this article we will aim totell you about some of thetools that are available andwhich tool is mostappropriate for whichpurpose.

As always with software, thereis a wide range of optionsranging from cheap and cheerfulto expensive commercial tools.Happily for us, some of the freeand cheaper tools are more thanadequate for most purposes. Thefirst stage though is to work outwhat you want to do. Do yousimply want to create simple webpages or web versions of

presentations? In this case, theeasiest solution may be softwarealready available to you likeMicrosoft Office. Or do youwant to create interactivity onyour web pages – multiple choicequestions, crosswords or otheractivities? If this is what youwant to do, there are once againa number of options.

Let’s start with simply creatingbasic web pages.You may already

have word files and presentationsthat you want to create versionsof for your intranet. The bestsolution for this may be to usethe ‘Save as web page’ optionfrom Microsoft Word andMicrosoft PowerPoint (this isavailable from the ‘File’ menu –see Figure 1).

This is a simple and quick wayto create web pages.You cancreate links between

Andy Beharrell

Richard Young

Kate Sharp

and

Angela Joyce

27

Creating online learning materials Andy Beharrell

Figure 1

documents by selecting the textthat you want to act as the linkand going to the ‘Insert’ menuand clicking on the ‘Hyperlink’option. A dialogue box willappear and clicking on the‘browse’ button will enable youto select the file to which youwant to link (see Figure 2).

The easiest solution may beto create all the files you wantand then add the links later.Youcan also use the ‘Save as webpage’ option from MicrosoftPowerPoint to create webversions of your PowerPointpresentations.

Having created these basicweb pages, you may become alittle more ambitious and wantto add some questions andactivities for your students.Perhaps the best way to startout down this road is with apiece of software called ‘HotPotatoes’. This may not be themost likely sounding title for auseful piece of software, but itis an excellent package and isfree for educational use. HotPotatoes is available from(http://web.uvic.ca/hrd/halfbaked/). It is made up of a series offive packages, each one with adifferent purpose.With these

packages, it is possible to createmultiple choice exercises,crosswords, drag and dropexercises, text fill exercises anda range of others. The softwareis fairly easy to learn to use withgood help and tutorialsavailable from within theprogram and also from the website.

One problem with the simpleword solution is that you needto do a lot of work in organisingthe files and creating a wholeseries of separate pages. Thereare also no options for creatinginteractivity – that has to bedone separately. A commercial

28

I C T O N L I N EI C T O N L I N E



Figure 2

option that may be one of thesimplest solutions is a packagecalled Coursegeniewww.coursegenie.com.

This package acts as anadd-on to Word where allthe interactivity can beadded through the Wordstyles menu (where youadd heading 1, heading 2and so on – see figure 3).Using Coursegenie youcan split a singledocument into a series ofinterlinked web pages(including images, audiofiles, video files, flash movies anda range of other resources).Youcan also add captions, pop-ups,boxed text, definitions and evenincorporate other web pages intoyours (as ‘includes’) so that yourstudents can click on them andexplore them from within your

pages. An excellent way to keepan eye on where they are going!

Using dialogue boxes you canadd multiple choice, true/falsequestions and a range of otheractivities. These can very easilyinclude photos, diagrams orcharts. Once you have addedeverything you want, you cansimply save the file as a series of

web pages and the program willcreate all the pages, a table ofcontents with links and all thebuttons, images and otherresources it needs.You simplyneed to upload a single folder toyour intranet and the whole thingwill work. The beauty of thisapproach is that all the editing isdone in Word, which shouldsignificantly shorten yourlearning curve and ensure thatyou can create highlyprofessional looking materialsvery quickly.

If you want to go on to thenext stage and create entire websites and perhaps learn a littlemore about web technologies,then you will need to look atmore commercial tools. One ofthe best around is Dreamweaverfrom Macromedia, but there arealternatives like Microsoft’sFrontPage or Adobe’s GoLive. If

you are interested inany of these products,then do checkcarefully withsoftware suppliers, aswith most of themthere are significanteducational discountsavailable. Forexample, Macromediaoffer a web designstudio package withDreamweaver,Fireworks (an imageeditor), Freehand(further imagecreation) and Flash

(for creating Flash graphics andmovies) all at a very significantdiscount on the full commercialprices.

So why not have a go –creating web materials may beeasier than you thought.

29




www.coursegenie.com

I F Y O U WA N T T O G O O N T O T H E

N E X T S TA G E A N D P E R H A P S L E A R N

A L I T T L E M O R E A B O U T W E B

T E C H N O L O G I E S , T H E N Y O U W I L L

N E E D T O L O O K AT M O R E

C O M M E R C I A L T O O L S

ICT On Line

30




Since the Biz/ed web sitewas redesigned in October2002 the Biz/ed team hasbeen interested to find outmore about who uses thesite.This article follows upon the launch of the new siteand shows how students andteachers are making use ofsome of the new features onoffer.

WHO IS USING BIZ/ED?

By tagging each page on thesite with relevantinformation aboutsubject, level,examination boardand relatedinformation we arenow in a betterposition to targetspecific resourcesfrom Biz/ed’s 19,000+ pages to theindividual needs ofusers.

When users choosethe criteria that applyto them, they arepresented with relevant subjectby subject, course by course ortopic by topic listings. Thelistings break down the resourcesinto all their different types. So,for example you can now see allthe worksheets we have for‘transport economics’ or for‘accounting and finance’.

We have also added listings forAVCE Business, Leisure &Recreation, and Travel &Tourism - unit by unit and boardby board.

Via the ‘quickjump’ box wehave been able to record whichsubjects, levels and exam boardspeople visiting the site areaccessing. This helps us prioritisethe subjects for which to creatematerials in the future. Thesestatistics are pretty basic butinteresting to note. SinceOctober 2002 there have been

127487 ‘quickjumps’ made(figures collated 03/02/03). Ofthese 127487 ‘quickjumps’ thehighest percentage was: 23.7%selecting A level, BusinessStudies, with 16.9% of userschoosing A level, Economics and16.7% of users selecting AVCE,Business Studies. Users can also

still access information bybrowsing the Biz/ed site in thetraditional way.

In the three months since theredesign there has been a 60%increase in the number of pagesaccessed per month.We believethat the implementation of the‘quickjump’ box, the redesignand the restructuring ofinformation are directlyresponsible for this increase.

INTERNET RESOURCES

The InternetResources section is agreat resource for allBiz/ed users.What isit? A catalogue of over3700 recommendedweb sites reviewed byBiz/ed, withstraightforwardSearch Tips to helpstudents or teachersfind their way around it.

When Biz/ed wasrecently redesigned,

the Internet Resources sectionwas updated to reflect the newlook of the site and is now morefully integrated with the rest ofthe Biz/ed site.

Look at the ‘What’s New’ linkin Internet Resources to seewhich web sites we have justadded.We have recently

Biz/ed Developments Kate Sharp, Biz/ed Service Manager and Angela Joyce, Biz/ed Library Research Officer

W H E N U S E R S C H O O S E T H E C R I T E R I A

T H AT A P P LY T O T H E M T H E Y A R E

P R E S E N T E D W I T H R E L E VA N T S U B J E C T

B Y S U B J E C T, C O U R S E B Y C O U R S E O R

T O P I C B Y T O P I C L I S T I N G S . T H E

L I S T I N G S B R E A K D O W N T H E

R E S O U R C E S I N T O A L L T H E I R

D I F F E R E N T T Y P E S

catalogued sites on GCSEBusiness Studies, Germancompany information, retailing,the Retail Prices Index andvirtual learning environments.We constantly update and checkthe resources. Send us yoursuggestions for good sites -simply click on the ‘Add aResource’ link and we willconsider the site.

Some popular sites already onBiz/ed include: Banana Link,Gurusonline, UpMyStreet,Onepine, S-Cool, RDN CaseStudies and BBC News articles(various). Find them bysearching in Internet Resourcesat:

http://catalogue.bized.ac.uk/

BIZ/ED NEWSLETTERS

The Current Topics section isnew to Biz/ed and was launchedwith the redesign in October2002. It incorporates the ‘In theKnow’ section that used tohouse the weekly newsletters.This section has up to datenews, a newsfeed, weeklynewsletters and a monthlysupplement with sample examquestions, case studies andgeneral features.

During academic terms wepublish four weekly newsletters -introductory and advancedeconomics and business. Eachweekly newsletter has a piece oftopical news, related theory, atopic of the week and questionsbased on the news. There arealso printable versions of the

newsletters for classroom use.These versions do not have theanswers with them! The monthlysupplements contain additionalcase studies and questions withsample mark schemes

OTHER NEWS

We are also adding a great dealto our Company Informationsection including businessprofiles, financial data andanalysis for a wide range ofcompanies - visit regularly to seethis valuable resource grow!

Biz/ed has a new informationleaflet available. If you would likecopies of these then please [email protected] your details.




31

http://catalogue.bized.ac.uk/

32

All the reviews published in'Teaching Business andEconomics' are nowavailable on the TESBookFind CD ROM,published termly by BookData Ltd., NorthumberlandHouse, 2, King Street,Twickenham,TW1 2RZ, inassociation with The TimesEducational Supplement.Reviews are linked to booktitles on the CD - ExecutiveDirector

MARKETS by COLIN G.BAMFORD and STEPHENMUNDAY

Markets, Colin Bamfordand Stephen Munday,Heinemann, 2002,paperback, 122 pages, £7.25,ISBN 0-435-33223-6

I recall starting work as headof economics at what is still myplace of employment. One ofthe reasons I had accepted thepost was that it came with aroom where I would do most ofmy teaching. In the room wasan ancient (1930s) cupboard. Itwas padlocked. In it was theeconomics library. I wasinclined to be impressed; sevenshelves were filled with weighty

tomes, mainly of an historicalnature. Two titles will suffice toillustrate: ‘Population inHistory’ edited by Glass andEversley and ‘NationalizedIndustry and PublicOwnership’ by William A.Robson , both very weightyindeed.

If my predecessor had indeedread his way through this lot,then I had much to live up to. Ifthe students regularly dippedinto this lot, I had come theHeaven in terms of studentcommitment. I would also haveto undertake some urgentreading and much academicpreparation if I was to keepahead.

I should have spared myselfthe anxiety. For the next eightweeks the padlock stayedresolutely in place.

Enter Heinemann series ofStudies in Economics andBusiness – before the internetbroadened horizons. Atestimony to the usefulness ofthe series is that the tomesreferred to have virtually alldisappeared and been replacedby books from the series orother similar. Topics becameaccessible and more relevant.

How does the recentaddition, ‘Markets’ live up to

the achievements of itspredecessors? Its authorsclearly have high credentials.The editor states that AS/Alevel students are the intendedaudience, with relevance for allthe examination boardspecifications.

By judicious use of real worldcase studies cleverly integratedinto the text, ‘Markets’ providesthe economics student with aneffective and relevantintroduction to the workings ofAdam Smith’s ‘invisible hand’in a modern context. It achievesthis in a series of shortchapters, straight to the pointand, therefore, manageable formost Year 12 readers.

The diagrams, always astrength of the series, are largeand are clearly constructed.They are accompanied in thetext by explanations that mostAS Level students should beable to understand. A valuablefeature for those preparing forexternal examinations is thatthe adopted style mirrors therequirements for writingexamination answers. The besttraditions of the series aremaintained in the examples andillustrations, reflectingcontemporary businesseconomics, and there is awealth of twenty first century

Resource reviews

Edited by

Colin

Harber-Stuart

case studies. All economics textsare cursed with the problem ofdating from the moment a bookgoes into print, but the fact thatall examples are post 2000means that the validity of thetext should be maintained for anumber of years.

‘Markets’ is particularlytargeted at AS level studentsand the supply and demandanalysis is clearly aimed at thisgroup. There is no attempt todeal with A2 topics relating tothe equilibrium of the firm indifferent market structures,Chapter 7 containing only abrief coverage of markets andmarket structure. HoweverChapter 6 Applications ofSupply and Demand Analysis isto be highly commended in thatit includes reference to thewidest range of markets, moneyand labour markets forexample. In my experience,making links between theorylearned at different times issomething weaker students finda trial; to have a chapter whichmakes the links for them is veryuseful. In addition, the booklives up to its claim of relevancefor all specifications in itsgeneral coverage and, quiteexplicitly, in its use of exampledata questions from Edexcel,OCR and AQA which Irecommend for use by allstudents preparing for whateverboard.

The inclusion of suggestedsources for further reading withuseful websites makes this booka useful addition to the

economics library, thoughperhaps something of a luxuryas a text to be used with allstudents in departments withlimited budgets.

In summary, it is a text to beused for revision, as a teacherresource, as an additional textto reinforce class textbooks, alibrary item, reference forhomework purposes and mighteven be the economics prize!

Sue Turner, Verulam School,Harpenden.

GCSE Business Studies,Chris J. Nuttall, CambridgeUniversity Press, 2002,paperback, 315 pages,£12.50 ISBN 0-521-00364-4

This book is endorsed byEdexcel for use with theirGCSE Business Studiessyllabus.

The book sets out from thestart to be student friendly, andit meets this aim well. Everysection and sub-section isframed in the form of aquestion, and this follows theauthors’ intention to adopt an‘enquiry based’ approach. Forexample, the syllabus section onproduction is divided intochapters titled ‘What isProduction?’, ‘Is smallbeautiful?’, and ‘Can you getmore for less?’

Each chapter is introduced

via learning outcomes, which isexcellent practice and allowsstudents to focus on what theyneed to achieve. Key words areexplained in the margins. At theend of a chapter is a summarythat usually relates back to theoriginal objectives. However,the author has not beenconsistent in this approach. Forexample, the summary pointsfor Chapter 18 on franchisesseem very basic when held inrelation to the objectives set atthe start. Even more so is unit13 titled ‘Why do we needpressure groups?’ where the twosummary points do not extendfar beyond the obvious.

Chapters follow the samestyle, with ‘Business in Context’exercises and ‘Activities’. This isa real strength of the book.Cases are relevant, often recent,and allow students to relatewhat they are learning both tothe business world (e.g. Tesco)as well as to their ownimmediate environment (e.g.their school). Activities are veryeasy to use and fit well with thecontent. The difficulty ofquestions is made explicit, toallow differentiation. However, Ifeel this could have beendeveloped more.

Whilst the concept ofindicating degrees of difficultyin books is not new, there isnothing in the book to showstudents the different skills thatare involved, and therefore verylittle opportunity for them todevelop these skills. Forexample, some of the 33

R E S O U R C ER E V I E W S



more difficult questions requirestudents to ‘evaluate’ but noguidance is given on whatevaluation actually is or howstudents should evaluate. Itcould be argued that skillsdevelopment is the job of theteacher, but for a book thatemphasises an active learningstyle, I feel this is a missedopportunity.

The design of the book,whilst having some merits, alsohas some serious drawbacks.What I did like was the size. Atconsiderably smaller than thestandard A4 size textbook, thisbook is more likelyto survive years ofbeing carried to andfrom school – animportant point forbudget consciousdepartments.However, theartwork suffersfrom the sameproblem as a lot ofthe book, that beinga lack ofconsistency. Some of theartwork and illustrations arevery good indeed, especially thephotographs. However, toooften diagrams and activitiesare illustrated using what looksto be clipart. In some places theartwork adds nothing to thetext.

As a general textbook pricedat £12.50, GCSE BusinessStudies is undoubtedlycompetitively priced. However,my overall opinion is that thisbook adds little to the current

crop of GCSE Business Studiesbooks and, whilst it is tailoredfor a specific exam board, thereis very little content whichcould not be found elsewhere.

So, in summary the pros areprice, style and general content.However, to my mind there area few too many concerns tojustify throwing away your oldbooks.

Paul RapleyHead of Business Studies,Copleston High School,Ipswich

SYNCHRONIC.INFO CDof UK Industries, 2002, £25,available fromhttp://www.synchronic.info

This is a CD that looks atand gives information on over800 UK companies in a crosssection of industries, all ofwhich are listed in alphabeticalorder. The aim of the resourceis to be a reference andbackground guide to a variety

of different Business Studiescourses.

Content

The CD is split into 3 mainsectors. The first sector covers alist of UK companies, followedby a list of UK industries andfinally we have an alphabeticallisting of companies that can beaccessed by a simple alphabetsystem .

The individual content ismostly on the history of thecompanies rather than notes ontheir present structure or

current businesspolicies. For example,if we take as anexample the page forBlack and DeckerLtd we are told whatindustrial sector itbelongs to, theaddress of its webpage, a little pottedhistory and areference to theinvention of the

strimmer, but very little else.

Who might find it useful?

This could be useful forstudents doing a degree coursethat includes any appliedBusiness or Economics units.AVCE Business students couldalso use it as an informationresource for their portfoliowork.

Level

This is difficult to assess as it34




ALL THE REVIEWS PUBLISHED IN 'TEACHING BUSINESS AND

ECONOMICS' ARE NOW AVAILABLE ON THE TES BOOKFIND CD

ROM, PUBLISHED TERMLY BY BOOK DATA LTD.,

NORTHUMBERLAND HOUSE, 2, KING STREET, TWICKENHAM,

TW1 2RZ, IN ASSOCIATION WITH THE TIMES EDUCATIONAL

SUPPLEMENT. REVIEWS ARE LINKED TO BOOK TITLES ON THE

CD - EXECUTIVE DIRECTOR

35




could be used across differentlevels for different reasons, butit would be of reduced usebeyond A or AVCE level.

Format/style

I did not like the style inwhich the information was setout. The use of 10-point printto convey the individual piecesof data on each company wasnot at all user friendly andmade reading the material achore rather than an enjoyableactivity. Having said that, thelinks between the individualcompany, the related industry

and the other information thatexisted on the web were wellresourced.

User friendliness

On the surface this is veryuser friendly as the index couldnot be easier to use: a simplelist of firms in alphabeticalorder with hyperlinks to furtherinformation. That is where inmy opinion the friendlinessstops. The information islimited, poorly set out and setin a format that is difficult tofollow. If this resource wasaimed at pupils who are under

18 it may lack the presentationfeatures that make it interestingto them.

How it might be used

This would be a usefulgeneral resource to makeavailable on a computernetwork, or in the schoollibrary. I think the best usewould be as a back up resourcefor AVCE Business, as it wouldprovide some information tohelp with portfolios.

Roger Williams, PlymouthCollege of FurtherEducation

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The Times 100 - Business Case Studies

http://www.tt100.biz

What is The Times 100?It's a website for students, teachers and lecturers of business studies. The Times 100 brings businessstudies theory to life with case studies on real companies, written by leading business studies textbookauthors and linked to all exam specifications.

What are the case studies like?Each business case study expands on basic business studies topics using real world examples to help yourunderstanding. Select any of the logos to the right to view a summary of that case study.

e-learninge-learning exercises have been added to develop curriculum concepts and make the site more interactiveand fun. e-learning was requested by students and teachers.

Why should business studies teachers use the case studies?

• to enhance lesson plans and schemes of work

• to practice seen and unseen case studies

• to set coursework/homework

• to bring theory to life in lessons/lectures

• to recommend to their students for research

• to set e-learning for students. © MBA Publishing Limited 2003

ww

w.t

t100.b

iz

tt100.biz

A good activity to get your class thinkingabout issues of inequality and fairness is ‘If there were 100 people in the world’.This activity is best run with an actual groupof 100 students, so is most suited to anassembly but can be run with a large class(thirty plus) – it also best run in a very largeroom or hall.

Divide up £1000 of monopoly moneyequally between the class; if you have 100then £10 note for each. Clear theclassroom of tables and chairs andthen divide the class into continents,using the figures in table 1; e.g. if youhave a class of 33, then 2 would live inEastern Europe, 11 in Eastern Asia, andso on. These groups should be thenplaced geographically about the roomroughly in the shape of the continentsto show the spatial difference.

When this is completed you can usethe demographic map you havecreated to challenge certaindevelopment myths, such as poverty isdue to overcrowding and ‘themoverpopulating’. If you have done agood job it will be shown very clearlythat ‘rich’ Europe is a lot more crowdedthan ‘poor’ Africa.

From this set up we can introduceother issues about global citizenshipand inequality. Redistribute the money

between the continents i.e. steal most of themoney from the ‘South’ and give it all toEurope and America according to thefigures in table 2. This activity is a very visualway of highlighting the distribution of wealthglobally. Now it is your job as a professionalto get the pupils to think about their roles asglobal citizens:

● Is this situation is fair?

● What can we do to make it fairer?

● What has this to do with the role of businesses?

● Where do transnationals produce their goods and where are the headquarters? Where are profits repatriated?

● Why do campaigners say the WTO rules governing World trade are unfair?

● Is this situation sustainable?

TABLE 1If there were 100 people in the world…

5 would live in North America.

8 would live in South and Central America.

7 would live in Western Europe.

6 would live in Eastern Europe.

13 would live in Africa.

6 would live in Central Asia.

22 would live in Southern Asia.

33 would live in Eastern Asia. (Of whom 3 would live in Japan)

0 would live in Australia. (Approx. 0.3% ofthe worlds population live in Australia)

(These figures are based on data contained inthe Population Information Network website ofthe United Nations Population Division.)

TABLE 2If there were £100 in the world…

£31.00 would go to North America.

£7.00 would go to South and CentralAmerica.

£30.00 would go to Western Europe.

£2.00 would go to Eastern Europe.

£2.00 would go to Africa.

£3.00 would go to Central Asia.

£3.00 would go to Southern Asia.

£22.00 would go to Eastern Asia. (Of which £15.00 would go to Japan)

£1.00 would go to Australia.

(These figures are based on data contained inthe website of The World Bank [InternationalBank for Reconstruction and Development]).

If there were 100 people in the world by Stephen Fairbrass, Just Business

www.justbiz.org

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The Economics and Business Education AssociationO F F I C E R S • S T A F F • C O N T A C T S

volume 7 number 1 spring 2003 - ebea

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