Oxford Univ. Sitkin and Bowen: International Business :Long Tail Theory
Oxford Univ. Sitkin and Bowen: International Business - Extension material
Table of Contents
Chapter 1: Introduction to International Business
World trade outlook in mid-2009
Sectorial breakdown of international trade
Impact of the 2008-9 credit crunch on FDI
Value judgements of globalization
Chapter 2: National Cultures
Chapter 3: International Corporate Responsibility
Chapter 4: Theories of International Business
Chapter 5: Actors in International Business: States
Chapter 6: Actors in International Business: Global Governance
Chapter 7: Actors in International Business: Companies
Chapter 8: Modes of Internationalization
Chapter 9: Multinational Structure and Control
Chapter 10: International Corporate Cultures
Chapter 11: International Production
Chapter 12: International Marketing
Chapter 13: Foreign Exchange Management
Chapter 14: Multinational Finance and Treasury Operations
Chapter 15: International Human Resource Management
Chapter 16: Future Trends in International Business Chapter 1: Introduction to International Business
1.1. World trade outlook in mid-2009
1.2. Sectorial breakdown of international trade
1.3. Impact of the 2008-9 credit crunch on FDI
1.4. Value judgements of globalization
Copyright Oxford University Press, 2010
Long Tail Theory
A key modern marketing development is what has come to be known as 'long tail theory', developed by Chris Anderson, editor-in-chief of Wired Magazine (www.wired.com). Prior to taking over Wired in mid-2001, Anderson was with The Economist for seven years in London, Hong Kong and New York in various positions, ranging from Technology Editor to US Business Editor. He has a background in science, starting with studying physics and doing research at Los Alamos and culminating in six years at the two leading scientific journals, Nature and Science. Anderson wrote The Long Tail, which first appeared in Wired in October 2004 and then became a book, published by Hyperion on July 11, 2006.
The theory of the Long Tail is that modern cultures and economies are increasingly shifting away from a focus on a relatively small number of 'hits' (mainstream products and markets) at the head of the demand curve and toward a huge number of niches in the tail. As the costs of production and distribution fall, especially online, there is now less need to lump products and consumers into one-size-fits-all containers. In an era without the constraints of physical shelf space and other bottlenecks of distribution, narrowly-targeted goods and services can be as economically attractive as mainstream fare.
One example of this is the theory's prediction that demand for products not available in traditional bricks and mortar stores is potentially as big as for those that are. But the same is true for video not available on broadcast TV on any given day, and songs not played on radio. In other words, the potential aggregate size of the many small markets in goods that do not individually sell well enough for traditional retail and broadcast distribution may someday rival that of the existing large market in goods that do cross that economic bar.
Traditional retail economics dictate that stores only stock the likely hits, because shelf space is expensive. But online retailers (from Amazon to iTunes) can stock virtually everything, and the number of available niche products outnumbers the hits by several orders of magnitude. Those millions of niches are the Long Tail, which had been largely neglected until recently in favor of the Short Head of hits.
When consumers are offered infinite choice, the true shape of demand is revealed. And it turns out to be less hit-centric than we thought. People gravitate towards niches because they satisfy narrow interests better, and in one aspect of our life or another we all have some narrow interest (whether we think of it that way or not).
One can attempt to quantify the Long Tail in three ways, comparing data from online and offline retailers in music, movies, and books.
1) What's the size of the Long Tail (defined as inventory typically not available offline)?
2) How does the availability of so many niche products change the shape of demand? Does it shift it away from hits?
3) What tools and techniques drive that shift, and which are most effective?
The Long Tail theory is about the big-picture consequence of this: how the modern economy and culture is shifting from mass markets to million of niches. It chronicles the effect of the technologies that have made it easier for consumers to find and buy niche products, thanks to the 'infinite shelf-space effect'-the new distribution mechanisms, from digital downloading to peer-to-peer markets that break through the bottlenecks of broadcast and traditional bricks and mortar retail.
Anderson, C. (2004-06), The Theory of the Long Tail, Hyperion Press (available at www.wired.com)
Isaksen, S. & Tidd, J. (2006), Meeting the Innovation Challenge: Leadership for Transformation and Growth, Wiley.
von Stamm, B. (2003), Managing Innovation, Design and Creativity, Wiley.