In 2000, telecom companies in a majority of European countries were animated to bid for 3G licences by the stock market, since market analysts and the media had the opinion that this technology represented the future for mobile telephony, even though everybody had a lack of knowledge on the actual product and how costs might be recovered. After the telecom companies had inflicted themselves with debt, even though 3G handsets were still in developmental stages, the market took fright and demanded debt reduction in businesses that were already seen bland at that stage.
In the UK, BT was forced to demerge mmO2, its mobile phone division, amid fears that 3G might be no better than other existing technologies and could struggle to produce adequate returns on the i?? 10 billion spent on the purchase of the 3G licence ( Froud et al. , p. 44 ). In spite of everything a lot of old economy companies conducted smart investments into new technologies. They benefit from the internet as the platform to increasingly carry out activities from purchasing over production, marketing, sales and service.
Siemens for example uses the aid of standardised processes and software in order to reduce costs in sequences of operations. One of the fundamental ideas of the new economy was online retailing. During the end of the 1990s thousands of enterprises were selling products such as books, groceries and clothing over the internet. Not many survived. Barring the meanwhile profitable firms such as online-bookseller Amazon and eBay, the majority of dotcom-firms did not stay in business ( Schuetze, 2003 ).
It has to be mentioned that most of the revenue in e-commerce was achieved in “business to business” ( B2B ) transactions. In B2B new technologies are claimed to be by far more successful compared to end customer business. Volkswagen carries out around 80 per cent of its acquisition volume approximated i?? 50 billion via B2B-platform. The primary advantage is considered to be the enormous expedition of processes, partly up to 80%. The greater market transparency additionally leads to decreasing cost when it comes to ordering and buying procedures, as well as lower price costs ( Schuetze, 2003 ).
Conclusion: This essay demonstrates how manifold the ways are in which investor behaviour affected the performance of companies in the 1990s, also featuring examinations in how far investor behaviour affects performance generally and the underlying reasons for that. One given fact is that based on the large shares institutional investors own of certain companies, therefore also have crucial influence on corporate strategic decisions, as happened in the 1990s when old economy firms were required by shareholders to invest in new technologies.
Many companies invested successfully in technologies such as the internet or software, which contributed massively in speeding-up business processes. The results were satisfied customers and therefore improved performance. Logically that leads to an improved shareholder value as well. In contrary, other companies like BT allowed themselves being pressured by shareholders to invest into underdeveloped technologies, which eventually turned out to be uninteresting to customers.
Mediocre managers and CEOs often tend to downsize labour or get rid of business units which seem unprofitable in order to boost ROCE in the short term and with that increase shareholder value. A difficulty consists in the fact, that all entrepreneurs are investors, but most of the investors are not entrepreneurs. Therefore they often have a limited understanding of the market and how to boost performance ( Malik, 2001 ).
That is why companies need skilful CEOs and managers and realistic mission statements so that performance can be maximised and eventually shareholder value can be created ( Malik, 2005 ). This is the reason why successful companies like Porsche and Graph c: The Johnson & Johnson Credo Johnson & Johnson renounce putting shareholder value as their top priority, instead they focus on satisfying their core stakeholders, namely their customers as their priority. By doing that they found out that shareholder value resolves naturally.