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Company survival during inflation: A systematic approach to profit improvement
With such a background any book he writes must command attention. These boolm contain a collection of papers written over this long period. Book 1 starts with a paper published in 1938 on the B ~ trade cycle 1929 to 1937, and concludes on the problem of Britain's foreign trade, her bargaining power and notes on non-discrimination.Brave is the economist who publishes papers he wrote many decades ago, and it is a measure of the book that these reports make good reading today. The reader will however, be struck with the extent to which the economic problems we now face have been with us for a long time, The difficulties of the coal, steel and shipbuilding industries, the regional in-balance, the special problems of Scotland and Wales, are all too familiar. What comes as a shock is to see that in the eight years to 1937 the cost of living fell 6 per cent while wages for those in work rose 3 per cent. Sir Donald's public service started in 1940 when he was part of Churchill's Statistical Section, the fonmmner of today's 'think tank'. He comments that the value of such a unit can be considerable because 'a large collection of unduly cautious specialists of long standing might be of even less value than a few careless, tactless amateurs. A little irresponsibility is desirable in a section intended partly as an irritant'. The style of the books is semi-technical. Only occasionally when for example errors in the intercepts of the regression lines on equal quantity and equal price axes are examined does the book break into mathematical formula. Sir Donald, in the epilogue written in 1974, writes in praise of economics and economists. However, he once said in exasperation that if the people in the country do not have the will to succeed and progress, no economic policy will provide a salvation. The two books are a most valuable tour de force, often providing historical perspective to problems this country has been tackling for so long. Apart from serving the academic student of the subject areas, they offer first class background reading for the corporate long range pbmner. Having served both Conservative and Labour Governnumts, Sir Donald has continued his illustrious career by becoming Chief Economic Adviser to the Confederation of British Industry. He is thus in a unique position to see both sides of every problem. Undoubtedly his time must be in great demand and so this book could be put together based on work he has done over many years with the minimum of further work. This is not to denigrate the introductions to each volume and to many of the chapters. It is to be regretted that the publishers have not yet persuaded him to devote the time to write the book he, and he alone, could and should write. What the country needs is a new major work by Sir Donald reviewing how and why major economic decisions were made. It should examine where the economic policy has gone wrong and what lessons we can learn from our country's past dismal failure in economic performance. One suspects that all too frequently economic advice tendered has been ignored in the face of political necessity. If this is so, what a contribution Sir Donald could make! It is to be hoped his publishers will soon be able to persuade him to devote sufficient time to write the book he should now write. Such a book would deserve to be an all time best seller. H. F. R. Pmut~o P.A. Management Consultants Ltd. London (190/191)
Fuels, Mbaer~ and H,m,,m Sm'vival, by C. B. R s ~ , Ann Harbour Publishers and Wiley, Chichester (19759, 200pp. £6.40 t~tardback). The author, a geologist--~gineer, has ~refully pieced together the story of atomic energy to date, powerfully advocating the dangers which stem from the present methods
FEBRUARY, 1976
of radioactive waste disposal and may, in his view, seriously ~eopardise the fife and future of mankind. His arguments are strong, backed by a multitude of evidence quoted from ot~icial reports, public statements and expert studies. Although the 'other side' obviously ought to be consulted as well, the case against the proliferation of nuclear f'mion reactors, and for a moratorium on their future bulldinf until absolutely safe methods for the disposal of radioactive waste are found, is presented in a manner which seems c o n v i n ~ g enough to the layman. So, nuclear energy is 'out'---at least for the time being. Another view which is supported, albeit less powerfully, is that we must not deplete oil and gas reserv~ at an unduly rapid rate. Alternative energy systems are then surveyed; nuclear fusion and stmpower systems, which are considered the ultimate solutions, as well as others among which 'geothermal energy offers the greatest potential and the quickest promise' (p.100) to bridge the gap between fossil fuels and the ultimate systems--presumably in the USA. These alternatives, however, will not reach the stage of implementation for a long time to come. The layman's question therefore is if nuclear energy is 'out' and the oil and gas reserves must not be depleted at a rapid rate--what about the period until the alternatives can come 'in'? In this respect the book is less convincing or ~ . Some thirty major natural resources; minerals, metals and energy, are briefly surveyed in the second part of the book, with lifecycie diagrams and very useful statistics. These should be of interest to planners assessing the long range prmpects of crucial raw materials as well as ~ mm,ces. Similarly useful may be to some readers the technical details of the nuclear and other processes. The main message of this book is--anti-nuclear, insofar as this equals fission. It is important that the vital safety aspects have their champion even though he cannot offer fully satisfactory alternatives. (No art critic has ever been asked to paint a better picture than the one he dislikes... !) G. F. RAY NIESR London (197) Comlm,y Servbal d,rin~ Inflation: A S,~m,afle Al,l n a c h to Profit Inwowmmt, by J. Wrt~c~t, Gower Press, London (19759, 168pp. £4.75 (hardback). Inflatim and Badness Mamsemmt, by J. Mmu,.~L and R. A.m'roN, Economic Forecasts Publications, London (1974), 194pp. £8.50 (hardback). In some ways John Winkler's book reminds me of buying toothpaste. The packaging leads one to expect more than the tube actually contains, although the quality of what is there may be fully acceptable. The packaging of this book leads to the expectation of a balanced view of management problems and their solution under circumstances of hyper-inflation. In fact, what one gets is a good presentation of profit improvement, and little or no coverage of the many other aspects of inflation and the ways of counteracting it. The author takes the view in the first named volurae, that inflation is mused by raw material scarcity and will be ~ i a t e d with a zero-growth. His analysis is disappointingly brief and he discusses very little of the complex effects of inflation on strategic decisions or industrial relations. There is a s:anty analysis of fmandal problems and inflation accountancy which surprisingly omits mention of many of the e - ~ flow problems caused by repeated cost rises. The question of how to analyse capital e ~ projects under inflationary conditions is not disemsed; neither is the all important problem of forecasting inflation. This is what reminded me of the toothpaste box. Once beyond the floe, dust jacket and introduction, the reader will find something of value, although not all that he expected.
95
Winkler's survey of profit improvement--the systematic approach as he calls i t ~ i s sensible, readable and useful, and should stimulate both thought and action. He makes the point quite early on that paper savings are of no value until implemented, and his text is written with this in mind. Of course, the methods he des~hes can be important agents in counteracting inflation, although few of them will strike the exl~rienced reader as new. He claims that the systematic approach was first developed in 1971, although as described it closely resembles approaches used in companies suchas Proctor and Gamble and Union Carbide a good 10 to 20 years earlier. However, originality is less important than communication and the author scores well here. There are many ideas (112 states the dust jacket; 212 states the introduction: is this inflation?) which could well help companies to improve profits. Some guidance is given also on planning the product mix and on price planning, which at least scratched the surface of the problem although the relevant chapters raised more questions than they solved. As a book on profit improvement it can be recommended to corporate planners and other senior managers, particularly those who have made little or no attempt to plan for improvement. Morrell and Ashton's book, although on the surface covering a similar field, is quite different in treatment and scope. This concentrates mainly on two aspects of the problem--the economic and the accounting. As may be expected from a book bearing James Morrelrs name there is a careful and readable analysis of the history and muses of inflation. The book sets out to 'explain how businesses are affected by severe inflation, a n d to outline policies and methods,' which they should adopt to survive and prceper'. Part of the solution isseen in inflation accounting, and much of the book is taken up by a careful explanation of the main inflation accounting methods (it was published before the SandUand Report). Other recommendations for personal, business and government considerations are ca'ammed into one short chapter. This contain.q many useful ideas, but only begins to explore the parameters of the problem. • One brave chapter looks at the future of inflation, and maintains the argument that price rises will not be brought back to the average levels of the nineteen fifties for at least another deeade. There is a very clear message that businesses need to take positive steps to consider inflation in business planning and decision making. This implication of urgency is really the only message which the two books have in common. They are complimentary rather than competitive. Neither gives the complete answer to the problem which should be occupying the mind of every planner: each provides something to add to understanding and to lead to action. D. E. Hussrt Otis Ltd. London(202/207)
BOOKS RECEIVED
Pubfl¢ POIlcy Making Re-examine~ by Y. Dlto:~, Leonard Hill, Ayleslmry (1968 and 19753, 370pp (hardback). Received Au~,uat 1975 (192). Design for Policy Sciences, by Y. DgOR, Elsevier, New York & Barking (1971), 156pp (hardback). Received August 1975 (193).
9~
Ventares in POIicy Scienem, by Y. Dt~oR, Elsevier, New York & Barking (1971), 321pp (hardback). Received August 1975 (1~). Note: prices for the above three books will be given at review time. Interim Fimmdal RelTOrtin~ Institute of Chartered Accountants in England & Wales, London (1975), 40pp. £1.40 (softback). Received August 1975 (1953. World Energy StrategY: Facts, Issues and Opinions, by A. B. L o r r y , Wileyi Chichester (19753, 132pp. £5.60 (hardback) and £2.50 (softbaok). Received August 1975 (196). lntrnducing Poik-'y or C ~ t o Plmming into Local Governmeat: Report Neminr 1, A Basle ~ k , Editor H. F. R. P~gnq, P.A. Consultants, London (19753, 204pp. £4.00 (softback). Received August 1975 (198). Intredudng Policy or Corl~mta Planning into Local Govern. meat: Report Nmaber 2, Aids to Detailed Implementation, Editor H. F. R. PmuuN, P.A. Consultants, London (1975), 83pp. £1.00 (soflback). Received August 1975 (199). Greep Acenwts: Tbe Fundamental Principles, Form and Content, by g. M. WILKJNS,Institute of Chartered Accountants in England and Wales, London (19753, 255pp. £6.95 (softhack). Received August 1975 (201). The Conten~ of a Planning Agreement: A Disemston Decumeat, Department of Industry, London (19753, 17pp. On request (softback). Received September 1975 (203). Managnrlal Planning, issued bi-monthly by the Planning Executives Institute, Oxford, Ohio, July-August 1975, 4!p p (softback). Receded September 1975 (204). Cydleal Indieators for the Pint.War British Economy, by D. J. O'DeA, Occasional Paper XXVII of NIESR, Cambridge University Press, London (19753, 164pp. £3.50 (softback). Received September 1975 (205). The Social lmlmet of North Sea Oil Develolnents in Sentinnd, A Report from a Social Science Research Council Advisory Group, London (1975), 72pp. £0.50 (softback). Received September 1975 (206). How to Avoid the Futm'e, by G. g. TAYLor, Seeker & Warburg, London (19753, 340pp. £4.90 (hardback). Received September 1975 (208). Technological Change: Economk~ Management and Environmeat, edited by B. GOLD, Pergamon Press, Oxford (19753, 175pp. £6.00 (hardback). Received September 1975 (209). ~acflcafl Manimwet" Planning: by J. BgA~t~t~, Institute of Personnel Management, London (1975), 200pp. £1.50 (softhack). Received September 1975 (210). Developing Executive Talent, by T. FAmaswon~, McGrawHill, Maidenhead (19753, 162pp. £4.50 (hardback). Received September 1975 (211). Financial Asians of C ~ t a Planning, by T. LAw'row, Institute of Chartered Accountants in England and Wales, London (19753, 95pp. £4.50 (softhack). Received September 1975 (212). The Art of Anikipation: Vahm and Metheds in Foreeasth~, Edited by S. F.NC1K~P. K. MAnsTRAh~ and W. PAGe, Martin Robortson, London (1975), 286pp. £2.85 (softback) and £5.95 (hardback). Received September 1975 (213). A belated acknowledgement is now made of the receipt in June of: E4amomle Trends, No 258, April 1975, by the Central Statistical Office, 126pp., available from HMSO, London. £1.15 per issue and £16.64 per annum. The specimen received is one of the first in the revised and improved format. More than ever, this publication ranks amongst the 'musts' for long range planners in providing macro-econom'~c and related data in one of the must up-to-date and comprehensive forms available in the UK. •
LONG RANGE PLANNING
Fuels, Mbaer~ and H,m,,m Sm'vival, by C. B. R s ~ , Ann Harbour Publishers and Wiley, Chichester (19759, 200pp. £6.40 t~tardback). The author, a geologist--~gineer, has ~refully pieced together the story of atomic energy to date, powerfully advocating the dangers which stem from the present methods
FEBRUARY, 1976
of radioactive waste disposal and may, in his view, seriously ~eopardise the fife and future of mankind. His arguments are strong, backed by a multitude of evidence quoted from ot~icial reports, public statements and expert studies. Although the 'other side' obviously ought to be consulted as well, the case against the proliferation of nuclear f'mion reactors, and for a moratorium on their future bulldinf until absolutely safe methods for the disposal of radioactive waste are found, is presented in a manner which seems c o n v i n ~ g enough to the layman. So, nuclear energy is 'out'---at least for the time being. Another view which is supported, albeit less powerfully, is that we must not deplete oil and gas reserv~ at an unduly rapid rate. Alternative energy systems are then surveyed; nuclear fusion and stmpower systems, which are considered the ultimate solutions, as well as others among which 'geothermal energy offers the greatest potential and the quickest promise' (p.100) to bridge the gap between fossil fuels and the ultimate systems--presumably in the USA. These alternatives, however, will not reach the stage of implementation for a long time to come. The layman's question therefore is if nuclear energy is 'out' and the oil and gas reserves must not be depleted at a rapid rate--what about the period until the alternatives can come 'in'? In this respect the book is less convincing or ~ . Some thirty major natural resources; minerals, metals and energy, are briefly surveyed in the second part of the book, with lifecycie diagrams and very useful statistics. These should be of interest to planners assessing the long range prmpects of crucial raw materials as well as ~ mm,ces. Similarly useful may be to some readers the technical details of the nuclear and other processes. The main message of this book is--anti-nuclear, insofar as this equals fission. It is important that the vital safety aspects have their champion even though he cannot offer fully satisfactory alternatives. (No art critic has ever been asked to paint a better picture than the one he dislikes... !) G. F. RAY NIESR London (197) Comlm,y Servbal d,rin~ Inflation: A S,~m,afle Al,l n a c h to Profit Inwowmmt, by J. Wrt~c~t, Gower Press, London (19759, 168pp. £4.75 (hardback). Inflatim and Badness Mamsemmt, by J. Mmu,.~L and R. A.m'roN, Economic Forecasts Publications, London (1974), 194pp. £8.50 (hardback). In some ways John Winkler's book reminds me of buying toothpaste. The packaging leads one to expect more than the tube actually contains, although the quality of what is there may be fully acceptable. The packaging of this book leads to the expectation of a balanced view of management problems and their solution under circumstances of hyper-inflation. In fact, what one gets is a good presentation of profit improvement, and little or no coverage of the many other aspects of inflation and the ways of counteracting it. The author takes the view in the first named volurae, that inflation is mused by raw material scarcity and will be ~ i a t e d with a zero-growth. His analysis is disappointingly brief and he discusses very little of the complex effects of inflation on strategic decisions or industrial relations. There is a s:anty analysis of fmandal problems and inflation accountancy which surprisingly omits mention of many of the e - ~ flow problems caused by repeated cost rises. The question of how to analyse capital e ~ projects under inflationary conditions is not disemsed; neither is the all important problem of forecasting inflation. This is what reminded me of the toothpaste box. Once beyond the floe, dust jacket and introduction, the reader will find something of value, although not all that he expected.
95
Winkler's survey of profit improvement--the systematic approach as he calls i t ~ i s sensible, readable and useful, and should stimulate both thought and action. He makes the point quite early on that paper savings are of no value until implemented, and his text is written with this in mind. Of course, the methods he des~hes can be important agents in counteracting inflation, although few of them will strike the exl~rienced reader as new. He claims that the systematic approach was first developed in 1971, although as described it closely resembles approaches used in companies suchas Proctor and Gamble and Union Carbide a good 10 to 20 years earlier. However, originality is less important than communication and the author scores well here. There are many ideas (112 states the dust jacket; 212 states the introduction: is this inflation?) which could well help companies to improve profits. Some guidance is given also on planning the product mix and on price planning, which at least scratched the surface of the problem although the relevant chapters raised more questions than they solved. As a book on profit improvement it can be recommended to corporate planners and other senior managers, particularly those who have made little or no attempt to plan for improvement. Morrell and Ashton's book, although on the surface covering a similar field, is quite different in treatment and scope. This concentrates mainly on two aspects of the problem--the economic and the accounting. As may be expected from a book bearing James Morrelrs name there is a careful and readable analysis of the history and muses of inflation. The book sets out to 'explain how businesses are affected by severe inflation, a n d to outline policies and methods,' which they should adopt to survive and prceper'. Part of the solution isseen in inflation accounting, and much of the book is taken up by a careful explanation of the main inflation accounting methods (it was published before the SandUand Report). Other recommendations for personal, business and government considerations are ca'ammed into one short chapter. This contain.q many useful ideas, but only begins to explore the parameters of the problem. • One brave chapter looks at the future of inflation, and maintains the argument that price rises will not be brought back to the average levels of the nineteen fifties for at least another deeade. There is a very clear message that businesses need to take positive steps to consider inflation in business planning and decision making. This implication of urgency is really the only message which the two books have in common. They are complimentary rather than competitive. Neither gives the complete answer to the problem which should be occupying the mind of every planner: each provides something to add to understanding and to lead to action. D. E. Hussrt Otis Ltd. London(202/207)
BOOKS RECEIVED
Pubfl¢ POIlcy Making Re-examine~ by Y. Dlto:~, Leonard Hill, Ayleslmry (1968 and 19753, 370pp (hardback). Received Au~,uat 1975 (192). Design for Policy Sciences, by Y. DgOR, Elsevier, New York & Barking (1971), 156pp (hardback). Received August 1975 (193).
9~
Ventares in POIicy Scienem, by Y. Dt~oR, Elsevier, New York & Barking (1971), 321pp (hardback). Received August 1975 (1~). Note: prices for the above three books will be given at review time. Interim Fimmdal RelTOrtin~ Institute of Chartered Accountants in England & Wales, London (1975), 40pp. £1.40 (softback). Received August 1975 (1953. World Energy StrategY: Facts, Issues and Opinions, by A. B. L o r r y , Wileyi Chichester (19753, 132pp. £5.60 (hardback) and £2.50 (softbaok). Received August 1975 (196). lntrnducing Poik-'y or C ~ t o Plmming into Local Governmeat: Report Neminr 1, A Basle ~ k , Editor H. F. R. P~gnq, P.A. Consultants, London (19753, 204pp. £4.00 (softback). Received August 1975 (198). Intredudng Policy or Corl~mta Planning into Local Govern. meat: Report Nmaber 2, Aids to Detailed Implementation, Editor H. F. R. PmuuN, P.A. Consultants, London (1975), 83pp. £1.00 (soflback). Received August 1975 (199). Greep Acenwts: Tbe Fundamental Principles, Form and Content, by g. M. WILKJNS,Institute of Chartered Accountants in England and Wales, London (19753, 255pp. £6.95 (softhack). Received August 1975 (201). The Conten~ of a Planning Agreement: A Disemston Decumeat, Department of Industry, London (19753, 17pp. On request (softback). Received September 1975 (203). Managnrlal Planning, issued bi-monthly by the Planning Executives Institute, Oxford, Ohio, July-August 1975, 4!p p (softback). Receded September 1975 (204). Cydleal Indieators for the Pint.War British Economy, by D. J. O'DeA, Occasional Paper XXVII of NIESR, Cambridge University Press, London (19753, 164pp. £3.50 (softback). Received September 1975 (205). The Social lmlmet of North Sea Oil Develolnents in Sentinnd, A Report from a Social Science Research Council Advisory Group, London (1975), 72pp. £0.50 (softback). Received September 1975 (206). How to Avoid the Futm'e, by G. g. TAYLor, Seeker & Warburg, London (19753, 340pp. £4.90 (hardback). Received September 1975 (208). Technological Change: Economk~ Management and Environmeat, edited by B. GOLD, Pergamon Press, Oxford (19753, 175pp. £6.00 (hardback). Received September 1975 (209). ~acflcafl Manimwet" Planning: by J. BgA~t~t~, Institute of Personnel Management, London (1975), 200pp. £1.50 (softhack). Received September 1975 (210). Developing Executive Talent, by T. FAmaswon~, McGrawHill, Maidenhead (19753, 162pp. £4.50 (hardback). Received September 1975 (211). Financial Asians of C ~ t a Planning, by T. LAw'row, Institute of Chartered Accountants in England and Wales, London (19753, 95pp. £4.50 (softhack). Received September 1975 (212). The Art of Anikipation: Vahm and Metheds in Foreeasth~, Edited by S. F.NC1K~P. K. MAnsTRAh~ and W. PAGe, Martin Robortson, London (1975), 286pp. £2.85 (softback) and £5.95 (hardback). Received September 1975 (213). A belated acknowledgement is now made of the receipt in June of: E4amomle Trends, No 258, April 1975, by the Central Statistical Office, 126pp., available from HMSO, London. £1.15 per issue and £16.64 per annum. The specimen received is one of the first in the revised and improved format. More than ever, this publication ranks amongst the 'musts' for long range planners in providing macro-econom'~c and related data in one of the must up-to-date and comprehensive forms available in the UK. •
LONG RANGE PLANNING