Inspire - Issue 4 by Loughborough University

Loughborough University School of Business and Economics Bi-Annual Magazine /

issue 4 / winter 2012

After the Fall Restoring faith in business, post-crisis

David Llewellyn on the Governmentâ&#x20AC;&#x2122;s Fiscal Strategy P14 the 7 deadly sins of project management P18 lessons on corporate recovery P28

www.lboro.ac.uk/sbe

Loughborough university School of Business and Economics

Welcome Engagement is undoubtedly one of the current buzzwords in the university community. Whether it is “student engagement in the learning process” within the new undergraduate fee-regime or “engaging with business” as agents of economic development, the idea of engagement permeates all aspects of university planning for the future.

Editor: Ondine Barry Designer: Ian Jepson Photographer: Phil Wilson

Dean Angus Laing

This focus on engagement is hardly surprising when one reflects on the multiple constituencies that universities, and business schools in particular, serve. Encompassing not only students and alumni, but also the business community, policy makers and that amorphous beast called society, it is easy to see why Tim Wilson in his review of university-business links articulated the idea of universities being “anchor institutions” within their regional economy. Business schools, and their research and teaching activities, lie at the very core of the contemporary university’s role as such anchor institutions. The School of Business and Economics is rightly proud of its tradition of working with businesses and of the partnership we have with our students. The idea of delivering value and developing winners is central to our mission for very good reason. Yet the demands for engagement, with students and with business, challenge the School to continually adapt and improve our performance, to achieve excellence across all our activities. In responding to these challenges we are ever more dependent on working with our alumni community, of engaging with alumni around the School’s research, teaching and enterprise activities. As part of that increasing engagement, the School held the inaugural Distinguished Alumni Awards ceremony in October. The awards showcased the outstanding success of just a small part of that alumni community across business, the media and academia. The influence of the Loughborough experience, in all its richness, in contributing to their success was palpable. As an expression of the contribution of the School to society it was both inspiring and humbling.

This latest edition of Inspire focuses on a number of examples of the way in which the School is contributing to society. Ranging from work on the evolving shape of town centre retailing through to the impact of the international sourcing of services, this edition highlights engagement of the School’s research with local and global issues which affect us all on a daily basis. Similarly, the reach and impact of the School’s programmes are highlighted in pieces on the experience of an alumnus working at the heart of the 2012 Olympics, and on the internationalisation of the School’s activities. No edition of Inspire would be complete without the latest independent testimonies to the School’s successes. I am once again delighted with the ranking of the School and the School’s programmes in the top echelon of British business schools according to the latest set of national newspaper rankings. This success is further highlighted by the winning performance of the School’s students in the Targetjobs Undergraduate of the Year competition. It is indeed a privilege to lead a School of the stature of Loughborough, and I look forward to working with our alumni and friends to further build on this performance. We are, after all, motivated by winning.

Sincerely Yours,

Angus Laing Dean, School of Business and Economics Loughborough University

Developing Winners | Achieving Excellence | Delivering Value

Loughborough University School of Business and Economics

News

Distinguished Alumni Honoured at Inaugural School Awards Dinner On Saturday 13th October, the School of Business and Economics welcomed friends and former students to the first-ever celebratory dinner and presentation of the Distinguished Alumni Awards. Chair of the School’s Strategic Advisory Board, Mr Ian Stopps, CBE, presented the awards with the Dean of the School, Professor Angus Laing, and Vice-Chancellor Professor Bob Allison. The Distinguished Alumni Awards were established by Loughborough University to recognise alumni who have demonstrated outstanding inspiration, merit, achievement or commitment in a particular role, or to society, education, knowledge and research.

News

The Business of Sport Alumni enjoy the evening – from left Ian Wilding (PE/Sp Sci 96), Michael Mealing (Geography 96) and Chair of the School of Business and Economics Alumni Council Nigel Kirkland (Acct & Fin Mgt, 96)

On 2nd October at Hollywell Park, the School, led by Professor Jim Saker (Associate Dean of Enterprise), were involved in helping organise a Barclays-sponsored ‘Business of Sport’ evening. The event was part of the Bank’s involvement with the ATP tour and attracted about 70 members of the local business community. The major part of the evening consisted of a panel discussion chaired by Marcus Buckland from Sky Sports with the panel members being Annabel Croft, sports psychologist Jeremy Snape and Andie Borrie from the Sport Development Centre. The key themes were about lessons that business could learn from elite athletes and how they are managed and coached. The event gave an opportunity to promote our MBA programmes and consolidate our relationship with Barclays Bank plc.

Commenting on the evening, Professor Angus Laing said: “It is a great pleasure to recognise and celebrate the extraordinary achievements of our alumni tonight – our six award recipients are fantastic role models for our current students and superb ambassadors for both the School and the University”.

Mr Mark Brown, Chief Executive Officer, Canaccord Genuity Limited In recognition of his contribution to the finance industry and investment banking strategy

Mrs Christine Hodgson, Chairman, Capgemini UK In recognition of her commitment to inspiring women in business Stuart Miller, Chief Executive Officer and Founder of ByBox In recognition of his outstanding achievement in enterprising business Mr Percy Mistry, Owner and Chairman of Oxford International Associates In recognition of his dedication and extraordinary vision in developing innovative approaches to international finance

from SBE Strategic Advisory Board Chair, Ian Stopps CBE.

With the 2012 summer graduation ceremonies postponed due to the University’s involvement with the Olympic Games, the ceremonies were held in September instead, and the School took the opportunity to hold its first-ever celebratory drinks reception for all business and economics graduates.

The recipients of the Distinguished Alumni Award for the School of Business and Economics in 2012: Dean Angus Laing welcomes the new alumni

With a healthy turn-out of new alumni (and friends and family) and School staff, the event was a massive success thanks to the supreme efforts of the organising committee and Dean Angus Laing’s vision of a unified celebration.

Professor Peter Dawkins, Vice Chancellor and President of Victoria University In recognition of his contribution and commitment to economic and social policy issues

Christine Hodgson, Chairman of Capgemini accepts her Distinguished Alumni Award

First-ever school graduation drinks reception a great success

Jeff Prestridge, Financial Journalist (Personal Finance Editor, Mail on Sunday) In recognition of his commitment and contribution to personal consumer finance

Attendees at Barclays event

Professor Jim Saker

Speeches were made, music was played and special academic achievements were acknowledged during the reception, with a chance for informal photographs as well during the event. The School will hold receptions for both the winter and summer graduation ceremonies from now on, so do look out for invitations if you are a recent graduate or will be graduating in 2013.

Pride of Loughborough Inaugural Awards The SBE has great pleasure in announcing its participation in the inaugural Pride of Loughborough awards taking place Friday 23rd November. Inspire was going to press when the awards were underway, but we can reveal that Professor Jim Saker presented the Loughborough University-sponsored award for ‘best’ Green Business to Complete Wasters @ The Green Place (they operate a non-profit community recycling and re-use project to encourage people to adopt economical and environmentally sustainable practices).

Senior lecturer Nicola Bateman congratulates her research graduates

Loughborough University School of Business and Economics

News

New Centres of Excellence Launched The Glendonbrook Centre for Centre for Enterprise post-crisis finance Education

The Centre for Post-Crisis Finance (CPCF) at Loughborough University School of Business and Economics was launched in May.

Loughborough University is at the forefront of premier UK higher education in delivering superior enterprise education. Recently, the University set up the Glendonbrook Centre for Enterprise Education, which is housed in the School and led by Julie Holland. The vision of the Centre is to embed enterprise and innovation across the University, ensuring that students not only acquire academic know-how, but also develop enterprise skills for the workplace. Entrepreneurial behaviour is a key competency required by a growing number of graduate employers. A major part of the Centre’s work is to encourage all students to develop enterprising and innovative skills through formal modules and extra-curricular activity. In some cases, students show true entrepreneurial behaviour by running or aspiring to set up their own businesses. These students are supported on campus by a range of services offered by the Centre. At a curriculum level, the Glendonbrook Centre for Enterprise Education provides modules in entrepreneurship and small business planning. The popularity of these modules is growing as more students look at self-employment when they leave university. Support is also provided through stand-alone specialist workshops and courses. As well as using its own staff, the Centre draws upon its extensive network of business experts to cover topics such as commercialisation of ideas, marketing and intellectual property management. At an extra-curricular level, the Centre provides support for a number of activities including a business ideas competition, a student enterprise forum and access to business planning software and a student enterprise website with links to external business resources. In a new initiative, the Centre is seeking to establish a mentoring scheme with alumni or associates of the University who have extensive experience of entrepreneurship and innovation management. A number of our graduates who took the business planning module are now successful entrepreneurs, including Information Management and Business Studies alumnus Phillip Russell who went on to cofound Plan My Gap Year, a business that provides affordable need-driven volunteer programmes for students. Lord Glendonbrook

The CPCF was created to enable focussed research on many of the key issues facing the financial services industry, in the wake of the global financial crisis, with a particular interest in the applications of information technology to the financial sector and the ways in which IT may address the challenges of post-crisis finance. Its research is grouped under four different themes, with four co-ordinators who form the Centre’s academic steering group: Market Pricing and Efficiency (Alistair Milne), Long-term Finance (Mark Freeman), Financial Structure and Regulation (Max Hall), and Central Banking and Macroeconomic Stability (Joe Pearlman). “Our research at CPCF has a vital contribution to make to these crucial debates,” said Centre Leader Professor Milne, “offering independent and rigorous analysis uninfluenced by either political pressures or special interests. We welcome opportunities for engagement and collaboration with policy institutions and firms to ensure the practical relevance of our work, whilst maintaining our independence.” The May launch in London featured a debate on the Vicker’s Commission’s proposals for ring-fencing of UK retail banking, between Charles Goodhart of the London School of Economics (criticising the reforms) and Alistair Milne (supporting the reforms), followed by a round-table discussion on the banking business models of the future.

Centre for global sourcing and services Senior managers and academics gathered at Loughborough University in October to celebrate the launch of the newly formed Centre for Global Sourcing and Services (CGSS). Centre Director, Professor Ilan Oshri of the School of Business and Economics, along with experts in the field, gathered to discuss recent trends, challenges and opportunities in the global sourcing industry. The discussions were lively, bringing together insights from leaders in the industry and informed research from the academic world. Topics ranged from captive centres to offshore outsourcing, with experts from the legal, advisory, government, media, vendor and client organisations participating in the discussions. Ruth Miller Smith of UKTI shared her impressions from the day: “A big thank you to the Centre team for an extremely interesting day. My colleague and I gained some new and interesting contacts”. Chris Middleton, Editor of Professional Outsourcing and CGSS media partner, added: “Many thanks for such a well-organised and useful day. I found every single session to be useful and thought provoking”. The main objective of the launch event, and other events organised by CGSS, is to promote independent research on the trends and practices in global sourcing of IT and business services, and to improve sourcing practices through on-going engagement with managers and policy makers. Research at CGSS currently being launched includes two new projects that revolve around back-sourcing and multi-sourcing best practices. To learn more about CGSS and its activities and future events, please visit:

Peter Murdoch, TARGETjobs Undergraduate of the Year Award winner

SBE Student Wins Targetjobs Undergraduate of the Year Award Peter Murdoch, who studies Financial Management at the School of Business and Economics, won the Business and Finance Undergraduate of the Year award at the TARGETjobs Undergraduate of the Year awards 2012. With more than 5,000 applicants, Peter had to pass a number of complex challenges, including assessments and interviews by the award sponsors. Peter was one of four Loughborough University students shortlisted for awards on the night, and as part of the award, now has a summer placement with sponsor Morgan Stanley, with the chance to spend a week working at their New York headquarters, all expenses paid.

www.lboro.ac.uk/cgss

The Centre also organised a public lecture with leading UK economist and Financial Times columnist John Kay in November, which drew nearly 200 people from the field. Speaking on the topic of UK equity markets, this lecture was the first of what Professor Milne plans to be a regular series: The Loughborough Lectures on Finance and the Real Economy. CGSS Lond on launch at tendees

OUTSTANDING RANKINGS

John Kay Lecture Renowned economist and Financial Times columnist John Kay gave a very well-attended public lecture on UK equity markets at Loughborough University on 7th November. Organised by the Centre for Post-crisis Finance, this lecture is the first of what is expected to be an annual lecture series on finance and the economy.

The University was ranked 3rd for Finance & Accounting and 5th for Management in The Sunday Times’ University Guide 2013. The latest rankings further cement the School’s reputation as a leading centre of business and management education, having also received Top-10 rankings from The Times, The Independent and The Guardian this year. John Kay

Professor Ilan Oshri, Centre Director

Loughborough university School of Business and Economics

graduate profile Jo Symcox, International Business BSc

In her own words:

Bringing

London 2012 to the world Millions of people around the world experienced an incredible 16 days of worldclass sport during the London 2012 Olympic Games and took away memories that will last a lifetime.

But long before the venues were finished, the athletes had been selected or the tickets had been sold, there were dozens of people who were already living and breathing the London 2012 Games. I am one of those people. When London won the bid to host the Olympic and Paralympic Games I had just graduated from Loughborough University and I remember my first thought: ‘I am going to make sure I am part of that one day’. I managed to make my dream a reality and began my communications role at the London 2012 Organising Committee (LOCOG) in August 2009. I spent three years working with some of the most incredible people I have ever met, and we worked tirelessly as a communications team to nurture, promote and protect the London 2012 Games. It was exhilarating, exciting and exhausting, and there was never a dull moment – to 1,000 days to go, to 1 year to go, to the Opening Ceremony, we pulled together to ensure the world got a preview of what London 2012 had to offer.

When it came to the Games, I was lucky enough to be based at the Main Press Centre on the Olympic Park, working in the editorial team. We looked after london2012.com as well as several social media channels, spectator and workforce communications. Working at the Olympic Park was an eye opener – it is the heart of the Games. I vividly remember walking across the Park to start my shift a few days before the Opening Ceremony – music from the Opening Ceremony rehearsals echoed from the Olympic Stadium, news teams roamed the site looking for the best backdrop, athletes jogged past and hundreds of soldiers explored the Park, taking in the sights as they arrived for their first shifts. Seeing this number of people and amount of activity on the Park every day suddenly made me realise that these were not our Games to protect anymore. Everyone wanted to be part of it and to share in the experience – the Games belonged to the world. The size and scale of London 2012 was something that unless you have been involved in an Olympic Games before, you cannot prepare for. We’d often used facts such as ‘26 simultaneous world championships’, ‘more than 20,000 media’ and ‘15,000 athletes’ when talking about the Olympic Games, but when it actually starts happening around you, it is nothing short of surreal. It is bigger than any human being can comprehend.

Career

There were many moments that made me realise the sheer scale of it all – like waking up the day after the Opening Ceremony, turning on the television and seeing 15 sports going on simultaneously at our venues – what an incredible achievement for every one of those venue teams.

the Olympic Games a reality. Every day I was creating content and sharing it with millions of people around the world. Even small tasks such as adding a caption to a photo takes on a whole new meaning when you know that thousands of people are looking at the photo at that very moment.

The masses of excited ticket holders – families, friends, groups – outnumbering the commuters on London’s transport system and dressed in the colours of their country. Commuters reading the latest Olympic headlines, watching the live streaming or talking to each other about the latest gold medal. Opening up my Facebook account and seeing the dozens and dozens of comments from my family, friends, friends of friends, from far and wide, talking about the Games – but not just talking about it, loving it, getting excited about it. People who have never shown an interest in sport, or in my job, or who had even felt negative towards the Games previously – they all had something positive to say.

One thing I realised during the Games was how important every single person’s contribution is – whether it is the Games Maker welcoming spectators to a venue, the coach helping an athlete get to the start line, the volunteer performing in a ceremony or the venue manager resolving an operational issue – none of it could happen without them.

Normally, the British talk about the weather, and all of a sudden they were talking about athletes, heats, semi finals, gold medals, personal bests. Even my lovely 80-year-old Granny was watching – albeit she hadn’t got the hang of the red button – but she’d watched every minute of BBC coverage. It’s very hard not to feel proud of something that has so much impact, although when something is so huge it’s hard to define the significance of your role. It is very much a case of the whole being more than the sum of its parts. I played my part, as did thousands of others, in making

When I first joined LOCOG we were a close-knit group, and it felt as though the few hundred of us, most of whom knew each other by name, were the only ones who even remembered that the Games were going to happen at all. When I look back it astounds me how few of us there were, as within three years we grew to be around 8,000. I also remember with great fondness how passionate and enthusiastic we all were, despite the fact that all that existed of the Stadium was a hole in the ground. We believed in it. Everything that happened in the 16 days this summer was a result of the foundations that the people of LOCOG put in place, years before the Games.

From the age of 11, I was heavily involved in school sport, so when it came to choosing a university, Loughborough, with its sporting history as well as its friendly campus, won hands down. I began in Rutherford Hall in October 2001, studying International Business to further my German and to get a feel for foreign trade and marketing. The placement year I took as part of my degree was a turning point for my career. I spent 13 months as Internal Communications, Marketing and Events Assistant at the European headquarters of Xerox Corporation. It was here that I was introduced to my ‘trade’ – internal communications – and also to the multi- cultural, corporate world of a global blue chip organisation. Having learnt so much during my placement, Xerox sponsored me in my final year at Loughborough and employed me as a graduate to work alongside the European Internal Communications Manager. I spent three years developing my expertise before making an internal move to a project management role. It was at this point the perfect role appeared at LOCOG: Internal Communications Executive. I knew I had to nail it – a supplier I had worked with kindly put me in touch with a LOCOG staff member who told me about the workforce and culture at LOCOG, which helped me to shape my application and gain an interview. I started at LOCOG in August 2009 and life has never quite been the same since!

If you would like to be profiled in an up-coming issue, please get in touch: o.barry@lboro.ac.uk

l a e l a p e p p l a e Ap m r o f s n Tra l a n o i t a m r Transfo

Loughborough University School of Business and Economics

Stuart West

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Loughborough University School of Business and Economics

the Time is Ripe for

are you being Cathy Hart’s research team asks retail customers about their experiences

served? A research team led by Senior Lecturer Cathy Hart has received funding from the Economic and Social Research Council (ESRC) for a 12-month customer experience research project on UK town centres.

The research team includes Professor Angus Laing, Dean of the School of Business and Economics (see his Welcome on Page 3), and Dr Mohammed Rafiq and builds on six years of consumer-based town centre research done at the School.

Loughborough Town:

The Next Mary Portas Pilot Advising on the successful bid for Loughborough to become one of 25 new Portas Pilot towns this summer, the SBE is expected to play a key supporting role, utilising its expertise in marketing and retailing education and acting as a mentor for rejuvenation. The School is also looking at the possibility of running retail master classes for town centre businesses.

Says Cathy Hart: “Town centres are attracting high-profile attention with the Government backing measures to halt the economic decline of town centres, including the Portas Pilot scheme and the High Street Innovation Fund. “The town centre landscape is changing, and the way that shoppers use town centres has fundamentally changed. The Internet offers greater choice, comparison and convenience, and as a result, consumers will expect more of their high street. Understanding the customer experience in town centres will help towns to improve and strengthen that experience in order to adapt and develop to meet future customer needs.”

“Understanding the customer experience in town centres will help towns to improve and strengthen that experience in order to adapt and develop to meet future customer needs.”

The study, co-funded and supported by a group of project partners including Argos, the Association of Convenience Stores, Action for Market Towns, Boots UK and the British Retail Consortium, together with other town centre stakeholders, will focus on: n in-depth research into how consumers use a town centre, by tracking customers’ town centre journeys and the technology used to support these;

‘Open-source Banking’ by Alistair Milne

Are banks supplying enough loans to the UK economy? According to the press and politicians the answer is “no”, banks are being far too cautious, starving borrowers, especially small businesses, of funds. This is a popular explanation of the decline in UK economic output in the middle of this year (the “double dip” recession). It is also the reason why the Coalition Government is putting a lot of pressure on banks to increase lending, with penalties (withdrawal of cheap funds) if UK banks do not achieve targets for loans to businesses.

n the role of the internet and mobile technology in supporting or replacing aspects of the physical shopping experience.

Professor Alistair Milne of the School of Business and Economics argued – in a presentation to a launch event for the Centre for Post-Crisis Finance earlier this year – that this is the wrong way to mobilise funds for private sector investment. He thinks the problem is lack of competition, with only three banks (Royal Bank of Scotland, Barclays and HSBC) accounting for the overwhelming share of loans to UK businesses. Moreover, the guidance they are getting from regulators and Government is inconsistent. These banks continue to struggle with a legacy of impaired loans from the financial crisis of 2007-2009, and so they are under regulatory pressure to avoid risky exposures. Regulators are telling them to be cautious and not lend too much, while at exactly the same time the Government is telling them to lend more.

The findings from the study are expected to contribute to a robust framework for creating and adding value to the town centre experience from the customer’s viewpoint.

The problem of lack of competition arises because of the closed nature of the banking relationships. Most smaller firms rely on one bank for making and receiving payments. And this means only one bank can observe their payment history, crucial information for deciding whether or not to advance a loan.

n identifying physical or virtual ‘touch points’ for different types of town centres, across retail sectors and services; n the nature and quality of these interactions; and

Dr Cathryn Hart Placement Director & Senior Lecturer in Retailing and Operations Management. She can be emailed at c.a.hart@lboro.ac.uk

allows investors to earn a higher rate of return than they can get on a bank deposit, while allowing firms to access relatively cheap debt financing. The major problem for “peer-to-peer” lending is that investors typically do not have enough information about a firm to be prepared to lend at all. Only the most transparent business models, where investors can see exactly how they are able to turn a profit, can access such non-traditional loan sources. For this reason “peer-to-peer” remains a tiny niche market. Open-source banking can change this situation by giving any potential investor a much fuller picture of the activities of the firm and, crucially, a direct window into its payment flows, both in from sales and out from expenses. This process will show that not every firm has a strong enough revenue and margins to justify a loan, but for those that do there will be a multiple of potential lenders, and they can choose the best available price and terms.

Open-source banking means pulling back the curtain, and giving a company the right to release its payments history to any potential lender. So if they cannot get funds from their “main bank”, they can still request funds from a variety of other potential sources.

This is the right way to think about bank lending to smaller firms. Open-source banking can support much greater competition in loan provision and ensure that those that merit a loan get one. This is much better than any arbitrary loan target that might force banks or other providers of loans to extend credit to borrowers that are unlikely to repay.

A number of alternative forms of non-bank debt finance have emerged in the UK in recent years, including a small but growing amount of “peer-to-peer” lending, where investors looking for higher returns than they can get from the bank (which with today’s record low interest rates, are very low indeed) can lend directly to firms in need of cash. Cutting out the middle man in this way

Alistair Milne Professor Alistair Milne, Professor of Financial Economics. He can be emailed at a.k.l.milne@lboro.ac.uk

Loughborough university School of Business and Economics

RISKS IN THE GOVERNMENT’S FISCAL STRATEGY:

RECENT TRENDS AND THEIR LONG-TERM IMPACT

TIME FOR A PLAN B? It is universally agreed that the UK needs to reduce its budget deficit and lower the government debt: GDP ratio. Both are unsustainable and, unless corrected, will damage the economy in the long run. The debate is not about the need for fiscal adjustment, but about the timing, speed, and method of adjustment. And this debate is not only between politicians of different hues: economists and analysts are also divided.

by David Llewellyn

Will the recent recession have a lasting and negative impact on both the level and future rate of growth of maximum potential output in the economy? By definition, the actual level of output will always be equal to or usually somewhere below the full capacity of the economy. The major determinant of the growth of the economy’s productive potential is the trend growth in labour productivity.

Professor David Llewellyn

FISCAL RETRENCHMENT When it came to power early in 2010, the Coalition Government inherited one of the largest structural budget deficits in the industrialised world and immediately committed itself to two rules that serve as the centre-piece of its fiscal strategy: Public Sector Net Debt to be declining as a percentage of GDP, and over a rolling period of five years there should be a balanced structural current budget position in place. To date, neither have been achieved. There are several reasons why. Firstly, the Government has been de-leveraging at the same time as the personal sector and the banking sector. Never before in this country has there been a protracted period of simultaneous deleveraging in this way. This, of course, is a legacy of the crisis and the debt accumulation in the years leading up to it. Secondly, a false comparison was drawn with Canada and Sweden which, in the 1990s, adopted successful fiscal retrenchments that had a negative impact on growth for only a short period. The problem with this comparison is that those two countries applied the policy at a time when other countries were not and when the world economy was growing strongly. That is not the case now. Thirdly, with the combination of a sovereign debt, euro, and recent banking crisis, the European economy has been weaker than originally envisaged, which in turn has weakened the UK economy and made it more difficult to achieve the fiscal targets. Finally, externally generated inflation has been much higher than forecast at the time, which has had a massive impact on consumers’ real incomes and expenditure. The main issue is whether, as the circumstances have changed, the Government should slow-down its fiscal retrenchment.

A serious possibility is that the prolonged recession could have negatively affected the level of productive capacity and even its future rate of growth. In the former case, the loss of output is permanent and never regained. In the latter case, the trend growth of the economy in the future will also be slower than in the past.

THE OUTPUT/EMPLOYMENT CONUNDRUM The conundrum that is making it difficult to interpret recent trends is that, compared with past recessions, employment has continued to rise. Whilst public sector employment has decreased by 400,000, private sector employment has risen by over 600,000 since mid-2010. At 29.5 million, total employment is within 100,000 of the pre-crisis peak. By definition, this means that productivity has declined. The key issue is whether this is temporary or permanent. There are four possible explanations for this conundrum. Firstly, it may simply reflect hoarding of labour by firms in order to avoid the costs of recruitment when output picks up, and in order to retain key skills. Furthermore, in some areas of the economy the real cost of hoarding has decreased due to lower real wages. If this is the case, productivity will rise sharply when a sustained upturn occurs. A second possibility is that the composition of employment has changed as more workers have moved to part-time and self-employed status. In other words, while the numbers employed have held up, on average people are working less. A third possibility of course is that the output data published by the Office of National Statistics are wrong.

The main issue now is whether the Government should slow down its fiscal re-trenchment.

PERMANENT DAMAGE? The final possibility, and by far the most serious, is that the level (and possibly future growth) of productivity has been permanently lowered as a result of the recession. There are several explanations for this: a smaller capital stock as a result of weak investment; structural change in the economy from high productivity sectors (such as financial services) to lower productivity sectors; a loss of skills that will be difficult to regain; banks being less willing or able to finance new, dynamic and innovative companies most especially in the SME sector; and banks generally being permanently less able to expand lending at the same rate as in the past. There are serious implications if there has been a fall in productive potential and its future rate of growth: n Excess capacity will be lower at each level of output than in the past which in turn has implications for future inflation, n The standard of living will be lower and grow at a slower rate compared with earlier trends, n The structural budget deficit (i.e., abstracting from the economic cycle) will be higher than originally thought.

Partly because of this, fiscal austerity would be deeper and last longer than in the government’s current plan. In other words, if the Coalition Government sticks to its present fiscal strategy, more cuts would be needed as the long-run sustainable level of deficits and debt would be lower.

Loughborough university School of Business and Economics

A PLAN B? Because of all this, there have been increasing calls for the government to moderate its fiscal plans at least with respect to timing, as all governments should respond to changed circumstances. It might be necessary to look again at some of the assumptions and conditions at the time the policy was established early in 2010. The most common elements suggested for a new strategy are: slower fiscal retrenchment; a credible plan for a prolonged period of fiscal retrenchment; an increase in public sector infrastructure investment; and a cut in social security entitlements and fiscal transfers. Taking the last two together, this would imply a re-structuring of spending from current to capital. There would be several political problems: it could be seen as a “failure” and credibility could be lost; it would be seen as a capitulation to the ideas proposed by the Labour opposition, and the Liberal Democrats would certainly strongly resist cuts in entitlements. This is all about structure and timing of fiscal retrenchment so as to minimise the impact on the economy. There would still be a precommitment to addressing the debt and deficit problems. The new pre-commitment strategy would, of course, need to be credible, precise, and monitored (a new role for the Office of Budget Responsibility?). There are several reasons why such an alternative strategy has been recommended (by none other than the IMF for one). A central factor is that the current strategy is simply not working as originally envisaged with the costs to the economy being greater than initially thought. This is partly, as noted earlier, because circumstances have changed. Furthermore, there is a danger of an Austerity Trap emerging (i.e., if fiscal contraction weakens the economy it becomes yet more difficult to achieve the fiscal targets because tax receipts are lower and social security payments are higher: we begin to chase our tail): cuts in Government spending to lower the deficit/GDP ratio have the effect of lowering GDP which in turn (at least partly) offsets the decline in the ratio. Some analysts also question the wisdom of public sector de-leveraging when other sectors are doing so at the same time. There is a further consideration: real interest rates are now negative and lower than at virtually any time in the recent past. If the real cost of borrowing is negative the Government could borrow in order to finance real capital projects yielding positive real rates of return for generations. This could be an opportunity of a lifetime to cash in on exceptionally low real rates of interest to finance long-term infrastructure capital investment.

POLICY IS ALWAYS ABOUT BALANCING RISKS Economic policy is always about balancing risks in an uncertain environment, and there is an especially high degree of uncertainty at the moment which is likely to persist. That said, the main risk in maintaining the status quo with regard to fiscal policy is that the recession returns with an enhanced risk of long-term damage to the productive capacity of the economy. On the other hand, if an alternative strategy is adopted the risk is that the Government loses its credibility with regard to serious fiscal retrenchment, interest rates might rise (though some question whether this really matters), and the debt:GDP ratio would rise further and stay high for longer. There seems to be “problems for every solution”. My own judgment is that, on balance, the risks of not adjusting fiscal strategy are probably greater than the risks of making limited changes to the overall thrust of fiscal policy. But, in a situation of great uncertainty, it is a genuinely difficult call to make. This all means that the economy, Government policy management, and business face formidable challenges in the years ahead as the economy is forced to adjust to more sustainable structures, not the least of which will be the balance between the public and private sectors. However, many parts of the economy, such as the labour market, have become more flexible and more adapted to meeting the challenge. So there are silver linings…

David T Llewellyn Professor of Money and Banking at Loughborough University and the Vienna University of Economics & Business, Vice Chair of the Board of the Banking Stakeholder Group at the European Banking Authority. He can be contacted at d.t.llewellyn@lboro.ac.uk

Loughborough University School of Business and Economics

deadly sins

by Julie Holland

Project Management

Or, how to avoid the boardroom

The planning stage of a business project is considered by many to be an essential factor in its success or failure. Get the planning wrong and the whole project can go off the rails. The old saying, Fail to plan, plan to fail, really does hold true. Knowing how to plan is also an important skill. We all do it in everyday life, so why neglect it when it comes to business? Perhaps one of the main reasons why we neglect to plan is because we have a limited understanding of what to include and what to leave out. Planning isnâ&#x20AC;&#x2122;t an exact science and can never guarantee total success, but there is enough research and anecdotal evidence to show that if we consider certain elements in the planning process, we can engineer out some of the risk of project or business failure. In this article we will take a light-hearted look at project and business planning and consider the seven deadly sins of planning that, if ignored, could lead to failure.

Loughborough University School of Business and Economics

Planning is an unnatural process; it is much more fun to do something. The nicest thing about not planning is that failure comes as a complete surprise, rather than being preceded by a period of worry and depression Sir John Harvey-Jones

deadly sin # Ineffective Market Research & Analysis of the project Doing your homework is an essential part what you are or business planning process. Looking at g to implement letting yourself in for before you start tryin t resources an idea is always a good starting point. Wha e it happen, do you need, how much will it cost to mak customers? who is standing in your way, who are your time – people are Gathering data is not easy and can take and analysing generally impatient! Reviewing the data ct/business it effectively is also vital to inform your proje that counts. strategy. It really is the quality of the data data. Not In the internet age we are overwhelmed with analysis can carrying out effective market research and time and lead to disastrous consequences, illustrated again throughout business history.

deadly sin # Not Having a Plan when you have Putting pen to paper is difficult especially time. You all of idea just dreamt up the most fantastic g long writin time e just want to get started. Why wast . In lible infal is idea documents, doing research? Your Even eed. succ to truth, most ideas are never going are still a long ideas that make it off the drawing board eurs will just pren entre e way from implementation. Som eed but succ e som do it and never commit to paper, be some May e. thes t many don’t – you never hear abou s, but for head their in entrepreneurs can plan effectively to commit idea to good a the mere mortals among us, it is and ghts thou our fy our ideas to paper. This helps clari ider cons us s help ng helps us think things through. Writi we that lls pitfa the on ct things in a logical way and refle on or r pape wall of t may encounter. Planning on a shee than r bette is !) done a beermat (yes - both have been go with your nothing. Just map out where you want to le! simp – there project and what you need to get

deadly sin # Not Taking or Delegating Ownership This is all about leadership, an enormous topic researched by many business academics. The person having the idea is not necessarily the one who should plan to take an idea forward and lead the project. The right leader can inspire a team, keep everyone on track, give the right people the right jobs, delegate and share success with everyone. The wrong leader does the opposite.

deadly sin # Ignoring Your Stakeholders Taking ideas forward involves more people than you may think. Many new projects and business ideas rely on a variety of stakeholders, whether they are employees, customers, investors, shareholders or suppliers. Knowing who your stakeholders are is essential, and considering their role is just as important. Disregard for any group can lead to the downfall of a project or business idea.

Loughborough University School of Business and Economics

You can’t build a reputation on what you’re going to do Henry Ford

# n i s y l d a e d Neglecting tion Implementa

plans make great o h w w o kn u nly the eople do yo Planning is o rs. As ? h g u How many p ro th e r carry them lan that matt only to neve tion of the p ta hat n w e n m o le n p o im reputati a ild u start, it is the b ’t tegy n id, “You ca entation stra Henry Ford sa o.” So write an implem you do, to d it. Whatever to k ic you’re going st d n at it again. es and try a d never look n a lf e with time-lin sh e plan on th n #1! don’t put the ll not bother - back to si e sw You might a

deadly sin # Being Insular The business environment is dynamic. When planning to take a new project to market or come up with a new strategy, it is important to understand what is going on around you. The microenvironment, comprising of individuals, business partners, competitors and suppliers, is often well understood by a project or business planning team. We know what effect they will have on our project or business. What is less well understood is the macroenvironment, the political forces and the general external trends (technological, demographic, political) that can influence how an organisation operates. For example, changes in the political balance of a country may not affect your new product idea straight away, but over time it may have a profound effect on sales. Considering the complex macroenvironment is an essential part of the planning process.

Dr Julie Holland Director of the Glendonbrook Centre for Enterprise Education. She can be emailed at j.holland@lboro.ac.uk

deadly sin #

Failing to Plan for Risk The airline industry is praise d for its safety. It’s a risky business putting a plane in the air. Industries like this employ tools to analyse and categorise severity of a particular risk. From this ana lysis, they can then put measures in place to elimina te or reduce that risk. Failing to consider risk can cause the downfall of a project or business idea. Evaluating the risks and including contingency measures can save the day in business if things don’t go exactly to pla n!

When analysing the BBC series, there are a few Dos and Don’ts that stand out, if you want to be successful on the show.

n Be focused on the goal of finishing your task, even if you make a loss. n Manage your team but don’t be a bully – and delegate tasks; don’t take it all on

yourself (this way you can lay blame if your team fails). n Take criticism from the Board graciously and learn from your mistakes. n Being male and a bit macho doesn’t hurt – In the eight series of the show, not only

have men won almost twice as much as females, but they have also stayed in business with Lord Sugar longer.

… SAY ERTS P EX WHAT OUR Antuela Anthi Tako Lecturer in Operations Research “I personally watch ‘The Apprentice’ with interest and believe that the series would be useful for our students as it provides a good example of real-life business projects from which students can learn about the skills, activities and requirements involved in delivering a business project. The tasks vary and cover a wide range of projects that can often provide students with practical insights about materialising a business idea. Students can also learn from the good and bad decisions made and can develop their critical thinking about what would be an appropriate decision.”

Regina Frank Lecturer in Innovation and Entrepreneurship “I tend to recommend it as some fun viewing which still will trigger thoughts and teach valuable lessons for my modules and beyond. In particular, the importance of cost control and sales (cash flow…) is often demonstrated quite clearly. Overall, series like the ‘The Apprentice’ or even ‘Dragons Den’ have raised the profile of entrepreneurial venturing. As much as the series are edited to increase high ratings, any lessons increasing the commercial spirit of our students are immensely valuable.”

Scott Taylor Reader in Organisational Behaviour “For me the show doesn’t reflect organisational life in two key ways: first, everyone is similar, in age, attitude, usually education and, apparently, how they think. Second, even when they are working in teams, the competitors are operating as individuals, aiming to beat each other. In terms of entrepreneurship, I guess it represents a particular kind of enterprise which is cost/price driven and uncaring about other stakeholders, e.g., the environment.”

Loughborough university School of Business and Economics

by Ilan Oshri

global

sourcing On-Shore, Near-shore or Offshore – Are You Sure? In 2011, the market for information technology outsourcing (ITO) worldwide was reported to be $270 billion and for business process outsourcing (BPO), $165 billion. And that’s just the start: recent estimates predict that ITO growth in the next couple of years will be 5 to 8 per cent per annum and BPO growth 8 to 12 per cent per annum, with BPO soon overtaking ITO.

Based on my research from 2011, more than 50 per cent of Fortune 250 global firms have offshored work by setting up their own subsidiaries to provide IT and business services from remote locations. And a recent KPMG study indicated that since late 2011 investments in shared services have exceeded those made toward third-party outsourcing. No doubt we are witnessing one of the most significant transformations in business in modern times: the disaggregation of the firm’s value chain in particular in the area of information technology and business processes. But what does this mean for business? Put simply (or maybe not): organisations can either outsource to a local vendor (domestic outsourcing), or to a near-shore vendor or perhaps to an offshore vendor. But firms can also set up their own captive centres in a near-shore or an offshore location. And firms can also establish their captives as shared services by consolidating several functions into one centre. Confused? So are the many firms that are considering to embark on outsourcing or offshoring. Their favourite question has been: where and how I start my global sourcing journey? Our extensive research into outsourcing and offshoring has attempted to offer some direction.

As in any journey the very basic questions are probably the most important ones. Our most favourable question to client firms has always been: Why would you like to outsource or offshore and what are you trying to achieve? Quite a few of the firms we have held conversations with about outsourcing have decided to outsource simply because other firms in their industry were doing so. Their strategy was ‘if others are cutting costs through outsourcing, so can and should we’. Unfortunately, there are quite a few horror stories about outsourcing projects that have proven to us that such a strategy is faulty. Success in outsourcing is often the result of good preparation on both sides: the client firm and the vendor. Client firms should prepare their IT or business processes for outsourcing by clearly defining their expectations from such partnership while vendors should investigate and realise the client’s level of readiness for outsourcing. Short cuts or over-confidence that things will be OK are just recipes for disaster. BskyB and EDS learned the hard way what they should not do in their outsourcing engagements! The subsequent question is about the client firm’s ability to manage vendors. While the potential cost saving is attractive and the promises to benefit from significant innovation made vendors often seem as an offer ‘one cannot refuse’, in reality much of the client’s ability to appropriate value from its vendors depends on the strength of its own sourcing management capabilities. Clients with a thin ability to manage vendors might find themselves struggling

to work with a single vendor, let alone trying to follow the current trend in which quite a few client firms put together a team of vendors with the hope to benefit from on-going competition between the vendors. Assuming that the client is capable of managing more than one vendor, the third question that pops to mind is: offshore, near-shore or onshore?

significant as they can be offshore. Also, access to talent is limited in scale in particular in the area of engineering. So what would you do if you have decided to outsource IT maintenance and software development? Consider Poland as a near-shore location for your IT operations or take the rather well travelled road to India?

In the current economic climate it would be politically correct to pursue an onshore setting. By contracting with an onshore service provider, client firms keep and sometimes even create jobs in the UK. Such an arrangement might not offer the scale that many vendors developed offshore or even near-shore, allowing them to offer bigger cost savings to their clients. Also, by relying on onshore vendors, client firms might restrict their ability to access talent they are after. And with governments tightening their immigration law, vendors might be struggling to develop a viable business case for operations onshore.

If indeed offshoring is the more appealing value proposition for your business, our next question is: Are you ready for the ride? Don’t get us wrong. Many firms have successfully offshored to India and other Asian, African or South American countries. But embarking on such a journey requires you to realise the challenges you will be facing and devise a plan to mitigate them, in most cases in a contingent manner. Some of the challenges are because of cultural differences while others are more operational. But all of them require attention as distance, time zone and culture differences will be posing significant challenges to you. If you find it hard to believe, ask Todd Anderson from the movie ‘Outsourced’.

So if not onshore, perhaps near-shore? Contracting with a near-shore vendor is an appealing proposition. Just imagine that your vendor is only an hour flight away, one hour time difference and some of its employees can even relate to your culture (say discuss last night’s football match). Cost savings should be more significant than onshore and access to talent that can carry out various IT and business process activities, such as programming and call centre operators, is relatively good; however, not as

Professor Ilan Oshri Professor of Technology and Globalisation. He can be emailed at i.oshri@lboro.ac.uk

Loughborough university School of Business and Economics

Everything you

wanted to know about

Low-Cost Airline pricing… … bu st e t t o …bu ne t st e t t ne ve d verr d arreed to …but neverrddared adarre to test d e r v ed d to e e n v t to test …bu t ne te st bu …

by Claudio Piga

…bu t n ev e r da r e d to t e st

st e t to d e …but neverrdared dar to test e ev n t …bu

If you’re anything like me, the recent weather has had you dreaming about finding that perfect winter holiday: somewhere warm, near the beach and not too expensive. And if you book that holiday based on price, you no doubt will be flying with a no-frills carrier with queues for seats and extra costs around every corner. But how do they afford their services at such a seemingly low cost to you?

The emphasis on cost-effectiveness does not necessarily imply a poor, unreliable service. Indeed, the most successful low-cost airlines, Ryanair, EasyJet and Flybe, feature prominently in the league tables of the most punctual airlines operating in the UK, based on Civil Aviation Authority official data.

Going back to the beginning, low-cost airlines emerged as the most notable effect of the liberalisation of the European Civil Aviation market. Airlines whose operations are based on a business model that is drastically different from the traditional full-service carriers. Their business model has several notable features: (i) using a simple pricing structure with one passenger class and fares only covering basic transportation (with optional paid-for in-flight food and drink); (ii) relying on direct selling through internet bookings with electronic tickets and no seat reservations; (iii) operating simplified routes to often cheaper, less-congested airports (with point-to-point rather than hub-and-spoke networks); (iv) employing intensive aircraft usage (typically with 25-minute turnaround times) and highly standardised fleets (with a maximum of two different aircraft types); and (v) having employees working in multiple roles (e.g., flight attendants cleaning the aircrafts and acting as gate agents).

One dimension of my research (which has been financed by a Leverhulme Research Fellowship grant) concentrates on the way the low-cost airlines carry out their yield (or revenue) management strategy – that is, the decision process whose outcome is the definition of a fare for each seat on a flight. One aspect of such a process has attracted popular attention. Anyone who has booked a flight with these airlines has been faced with the dilemma “Should I buy now or wait and see if a lower price is posted later on?”. While it is true that there is some value in studying how fares change over time, it turns out that there is a more fundamental aspect that determines how fares evolve over time...and time has nothing to do with it. Through a unique method of collecting the information posted on Ryanair’s website, I could track how many seats were available when the carrier posted its fare. By doing this at regular intervals over a two-month period, I could distinguish between fare changes induced by an increase in a flight’s occupancy from those purely due to the fact that the departure date approaches.

aircraft fills up. However, we also find that within a fortnight of the departure date, fares increase sharply regardless of whether extra seats are sold: there are no “last-minute” discounts. These results are important not only for the airline industry, but also for many other businesses that use yield management techniques (hotels, car rentals, cruise ships, etc). More details about this research can be found on the article “Combined Effects of Load Factors and Booking Time on Fares: Insights from the Yield Management of a Low-Cost Airline”. My research has also highlighted how the exclusive use of the internet as a sales channel has facilitated the use of innovative and previously unseen forms of customers’ segmentation and, consequently, of differential pricing.

intensifies competition among firms; on the contrary, the ample variability that characterises the fares expressed in different currencies on an airline’s website is an indication that the airlines enjoy extensive leeway in their fare-setting process, which in turn provides a strong foundation for their incredible success. Finally, my research shows that economics, as an academic discipline, can prove beneficial and relevant for businesses and consumers alike. The studies previously discussed can indeed help anyone realise some savings when booking online (and I have certainly done so). Firstly, to benefit from the possible discounts in the alternative currency, simply issue two queries for each leg, and check whether the return leg is cheaper than the one in your own currency. Secondly, it might be the case that you need to book for a party of four or more. Then I can guarantee you that with Ryanair, the total price paid for, say, four tickets in a single query may be higher than the total price of four single tickets, each bought making a single query.

In the article “Low-Cost Airlines and Online Price Dispersion” I present evidence of differing prices being posted by the same airline on its website at the same time for exactly the same seat on the same flight. The mechanism that enables the airlines to do so is simple. Take, for example, a Spaniard and a Briton who are both, at the same time, booking a Last time I booked a flight to Sardinia, I did the seat on a Madrid-London flight. The former will be following: I bought two tickets for my wife and child at generally shown a price in Euro, the latter a price a given price, and another pair of tickets (at a higher in British Sterling. For about 70% of the almost price) for me and our younger child. Overall, I saved 2 million prices that I analysed, the two fares are about 16% compared to the cost of buying four identical. In the remaining cases, the two prices tickets all at the higher price… The former result is certainly more important, since differ significantly by more than five pounds. In this Happy travels to everyone! no previous research has studied the relationship example, when the price in Euro is lower, the Briton between fares and a flight’s occupancy. I found that might avoid the higher fare by booking two one-way on average, each extra sold seat pushes the fare tickets, because the second leg (the Madrid-London up on average by about 2.5%. This mechanism is is presumably the return flight for a British resident) thus responsible for much of the increases that we is automatically priced by the airline’s website in Claudio Piga Undergraduate Programmes Director for observe over time: the driving factor is not due to Euro. This result challenges the notion that the Business, Economics and Finance & Reader. He can be time passing by, but to the fact that over time the internet enhances market transparency and therefore emailed at c.a.g.piga@lboro.ac.uk

Loughborough university School of Business and Economics

From the Real World to the Classroom:

Some of the companies that went into administration in 2012:

Lessons on Corporate Recovery

Comet JJB Sport Clinton Cards Game Group Blacks Leisure Peacocks

by Keith Pond In today’s tough trading environment, hardly a week seems to goes by without news of yet another household name going under. But why do businesses fail? And how can the Corporate Recovery Specialist help? For the past 12 years, Loughborough University’s Dr Keith Pond has led a final-year optional module that brings this complex area of law, finance and strategy together. While it may seem strange to focus on failure in a business degree programme, the reality is that businesses can – and do – fail, and the area of corporate recovery is a vital one to explore. Putting such a convoluted subject under the spotlight in the classroom isn’t easy, but it helps to put it into context with household names such as Glasgow Rangers, JJB Sport, Focus DIY, Comet and Leahman Brothers – companies that have all entered into administration as part of their attempts to survive as viable businesses.

Getting the legalities straight Administration is a legal procedure introduced under the Insolvency Act 1986 and augmented by the Enterprise Act 2002. In an administration procedure the priority is for the licensed insolvency practitioner (administrator) to rescue the business, preserving value in assets, jobs and economic activity in the interests of all of the company’s creditors. In 2011 almost 3,000 companies went into administration. This compares to over 5,000 at the height of the credit crunch and almost 17,000 going into liquidation. Administration is designed for those

companies suffering short-term cash flow problems where the underlying business is viable whilst liquidation awaits those failed businesses with few saleable assets. Inevitably, banks, as major lenders, are very interested in insolvency procedures as bad debt losses can be reduced by the careful management and timely intervention of the “Corporate Recovery Specialist” as insolvency folks prefer to be called. As serial lenders banks can profit from lessons learned even where loans go bad. In some cases they even replace the old “bad” loan with a new one to the buyer of the assets of the failed company, building new relationships when the old ones go sour. Administration is not without its critics, however, as it does give rise to the controversial “pre-pack” arrangement in some cases. In a “pre-pack” the ordinary creditors are informed (simultaneously with the notice of administration) that the business assets have been sold to another company. This often preserves the value of intangible assets, order books and goodwill as each of these would dissipate if knowledge of the business’ plight was made public. Whilst research evidence suggests that most

“pre-packs” do actually offer creditors a better deal than liquidation of the assets, they are necessarily shrouded in secrecy to protect asset values.

It may seem very strange to focus on failure in a business degree programme. but the philosophy here is to cover all aspects of business in our teaching

Bringing the real world into the classroom In his previous career, Keith spent two years with the “Intensive Care Unit” of Midland Bank (now part of HSBC). Clearly a formative experience, Keith went on to research insolvency when he came to Loughborough and has built on the existing subject areas of banking, accounting and law to deliver this unique module. “It may seem very strange to focus on failure in a business degree programme,” says Keith, “but the philosophy here is to cover all aspects of business in our teaching. We don’t want our students to be caught napping when the next recession strikes.” The module is innovative and uses a “live” case study each year augmented by unique access to the administrators of the selected company. Using real cases allows students to grapple with the concept that in real life there are sometimes no right or wrong answers. The module is also supported by a wealth of academic research into UK insolvency, including some from Keith himself.

Every summer, Keith approaches a local insolvency practitioner with a request to provide a case study based on the public and court documents that accompany any insolvency. In recent years, BegbiesTraynor in their Birmingham, Leicester and Nottingham offices, have provided some cases, plus they send an administrator and an insolvency manager along to participate in the students’ fact-finding question and answer session. Often the administrator comments that the grilling given by the students was tougher than that given by the original set of creditors!

then losing the revenues required to support loan repayments or leases. Running out of cash is the definition of insolvency and the end game for many failed firms. How they got there and how they could have avoided failure form the nucleus of this module.”

Over the years, the class has participated in Q&A sessions with the administrators of a number of local and regional businesses going through administration. Businesses as varied as a bakery, a football club, a manufacturer of door closures, a hotel company, a train operating company and a manufacturer of fairground simulation rides have all featured as cases in the module.

Unfortunately, all too often administration comes too late to rescue the company, although profitable parts of the business can be sold, rescuing jobs and trade. Luckily, every case gives creditors, banks insolvency practitioners and students lessons to learn for the future.

“The causes of corporate failure studied by the students via the cases have also been varied and often very basic,” explains Keith. “Failing to collect debts and to invoice debtors, loss of market to cheaper foreign competitors, over-borrowing and

Keith Pond Associate Dean (Teaching), Senior Lecturer in Banking and Economics, Director of Learning and Teaching. He can be emailed at k.pond@lboro.ac.uk

In feedback, students often note that they appreciate the practical nature of the study, working in groups to research not only the foundations of the business failure, but also the alternative strategies open to the insolvency practitioner on appointment.

Loughborough university School of Business and Economics

by Alistair Cheyne & Sandy Ritter By Ilan Oshri

The Worldwide Web:

the school goes global Research

Operating more than ever before in a mature market for business education, the School of Business and Economics is evolving to satisfy a more complex environment with the demands from students, their employers and those who make use of our research. Rising to the challenge of operating in a global environment, we recognise the need to continue to develop a strong network of strategic partners in all parts of the world. This is essential for the relevance of our programmes. Our main focus is to help our faculty and students develop international communities of research, scholarship and professional practice. As well as being an area of particular focus, the development of our international activities is also integrated as a key part of all of the School’s strategic goals.

In the most recent UK research assessment exercise, 60% of business and management research in the School was deemed internationally excellent or world-leading. Our internationalisation agenda includes finding new ways to support staff to develop international research collaborations. Developing partnerships with like-minded groups and institutions will be key to this, and using pump-priming funding to encourage those individuals and groups with good ideas to take them forward.

Student Experience

all business undergraduates can choose to take their third year as either a year studying abroad at one of our worldwide partners or on a salaried placement, many of which are at international companies – this is also now being rolled out to our economics undergraduates as well.

While fully integrating international activities is undoubtedly a challenge, we already have a strong base to build upon. The School’s international reputation is built upon the expertise of its staff and their research. Staff are encouraged to pursue opportunities for involvement in the international academic community through participation in conferences and joint research projects, and we promote international research within the School through the appointment of leading academics to visiting positions.

While we have already made a good start, we recognise that there is more to be done. Determined to make some solid advances in this area, the School appointed a member of academic staff, Dr Alistair Cheyne, as Director of Internationalisation in 2008. More recently, the School created the new post of Senior International Development Officer to work closely with Alistair on developing a portfolio of international activities and initiatives to support our strategic aims. Sandy Ritter was International Relations Manager at the University of York before joining the School.

Similarly we have a history of outstanding programmes with international content and satisfied students. All of our programmes have a strong international element, and this is increasing. This can take a number of forms, either specialised modules with an international focus, or the use of global case studies and examples to illustrate issues. In addition,

Alistair and Sandy are determined to create more opportunities to internationalise the experience of students and staff, and will work with partners overseas to build novel research and teaching collaborations that can address some of the major global issues and ensure that our programmes are fit for the 21st Century.

WHERE WE ARE This brings a number of obvious benefits across the School, including: n enhancing the learning experience for students (and for staff!); n

contributing to the School’s research profile, and providing further opportunities for research with real impact in the global environment;

n increased revenue, for example research funding, fee income; and n overall enhancing our reputation and building our brand.

We have already prioritised a few areas to focus our initial efforts: Partnering Key to achieving many of our aims is the need to develop meaningful partnerships with a range of overseas universities. Our strategy is to partner with carefully selected institutions that share our goals and values and with whom we will work to develop a portfolio of activities, ranging from joint teaching and research activities to mobility and internship opportunities for students. We are already partnered with some of the best schools in Europe, and over the coming two to three years we will prioritise South East Asia, China and South America as our key regions for building further partnerships.

For students unable to spend a whole semester or year abroad, we will be exploring more shorter, intensive programmes as part of their degree. One approach is to send groups of students to important business and economics centres – e.g., in Europe or China or Brazil – to learn more about the region’s economic role and its business and wider cultures. Summer schools for undergraduates are well established in the US and Europe but are still a relatively recent idea in the UK (although we have been offering the ESSAM Summer School module on our MBA for the last decade). They are also a means of providing immersion in other cultures for those students unable to take advantage of a whole semester or year’s study abroad. At SBE, where the highly prized third year placements compete with study abroad places, this could provide students with an additional achievement to help their CV to stand out in the crowd. One important strategic initiative over the next two years will be to establish our own summer school programme for our undergraduates. Planned for summer 2014, this will focus the key areas of strength for the School and will allow us to welcome many more students to our campus. In the longer run we will be able to exchange places on our summer school for places at partner institutions, which will allow more of our students to benefit from an immersive learning experience abroad.

WHERE WE NEED TO BE In practice this means that we need to see improvements in: n the student experience, including programme content and the diversity of the student cohort; n

the global reach of our research and collaborative research programmes, including engagement with business around the world;

how we engage with our alumni, both at home and overseas, to develop vibrant groups that play an important in supporting the School; and

n the range and nature of our partnerships with international institutions and corporate bodies.

Our goal of becoming more international is not unique to the SBE, as most business schools now operate in the global arena, but it is indicative of the School’s willingness to grow and thrive and in the end, to better serve our students and research communities. We are all part of this experience; we all help to shape the SBE and, in turn, the world. Let us know what you think of our internationalisation goals, and if you wish to participate in any way, please do not hesitate to get in touch.

Dr Alistair Cheyne Director of Internationalisation and Accreditation, Senior Lecturer in Organisational Psychology. He can be emailed at a.j.t.cheyne@lboro.ac.uk Sandy Ritter Senior International Development Officer. She can be emailed at s.ritter@lboro.ac.uk

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52587 D&P Nov 2012

School of Business and Economics Loughborough University Leicestershire LE11 3TU UK T: +44 (0)1509 222701