Big Business
Industrial Record : 1919-1939. Review by Cadbury Bros. (Pitmans. 8s. 6d.)
THIS is an outstanding work which should be carefully studied, not only by business men but by politicians of all parties. At the coming General Election, British industries and British business men will be at the bar of public opinion, and here at least is one business which is not afraid to say what it has done, and be proud of it. I know of no other work in which, in so small a space, there is so much factual information imaginatively handled, and so many current political and economic fallacies pierced through. It indi- cates, for example, why a private business, however large, can plan and carry out a policy which the State would find difficult, if not impossible, and it is made abundantly clear that the difference lies in the measure of flexibility, and thus ability quickly to alter or scrap.
It may be thought that Cadburys quote a two-edged example, in the case of the saw mills used in the manufacture of wooden boxes. Originally they made their own boxes in their own up-to- date saw mills, but they came to the Conclusion that it would be sub- stantially cheaper to import these from overseas in the form of :tit wooden box parts, and accordingly scrapped the whole of their saw- mill plant in the interests of long-term economy. Had Cadburys been a State concern, it is difficult to believe that such policies result- ing in added efficiency could have found acceptance. One can well imagine the pungent comments of the Opposition.
But it is also an important point of Cadburys policy in the case of ancillary activities, such as printing, to limit the capacity of their own department to meeting not more than 50 per cent, of their needs. In this way they ensure that the activities in which the firm is not especially expert, or primarily concerned, shall be kept up to the mark by the keenest outside competition.
The relation between increased efficiency of the machine and the resulting problem of short-term unemployment is clearly brought out. We see how Messrs. Cadbury vastly increased the mechanisation of
their works in the late twenties, and as a result the number of em- ployees, which reached a peak in 1925, fell steadily for ten years until the great expansion of sales following the reduction in price of the product through mechanisation made it possible again to achieve peak employment. This book points out that it is the duty of employers to be as mechanically efficient as possible, and to pass on the results of that efficiency to the consumer in the form of reduced prices, and that it is as consumers that the workers should expect to reap the benefit.
There is a revealing chart on page 41 showing that the cost of materials in the production of a block of chocolate only accounts for 55 per cent, of the price the public pays. Of the remaining 45 per cent., 12 per cent, is accounted for by the selling, advertis- ing and transport costs of the manufacturer himself, leaving 33 per cent, for the cost of wholesale and retail distribution- of the product. Here is a veritable cri du coeur from what is clearly a most efficient manufacturing organisation, anxious to get their goods to the con- sumer at the lowest possible price, complaining of the costly inefficiency of the retailer compared with themselves. The fact remains, however, that it is the manufacturer who, if he wishes to brand his goods, fixes the price to the public. Only Cadburys themselves are in a position to reduce their fixed retail margin if they feel it is practicable, or equitable.
The deciding factor is not so much that the cost of distribution should be substantially less than one-third of the selling price of the product, but that_an efficient retailer should be able to make a reason- able living at whatever working margin is decided upon. And, as this book points out, the vast majority of small retailers of the sweets, tobacco and newspaper character do not do so at present, partly, no doubt, because they know little about the technique of retailing, par- ticularly buying and stock-control, and partly because they do not find out before opening a shop whether, in fact, one is necessary in the area they choose.
Messrs. Cadbury found, what I know to be true, that there is a remarkable preponderance of shops of this character in the busy shopping streets, and very few of them in the new housing estates. Even so, if I were going to open a shop, despite what our planners might say, I should choose the busy shopping street, and not the new housing estate. The British public is illogically gregarious in its shopping and prefers to go where there is a market, even for branded lines in which they can obtain no price advantage. The book has interesting things to say on training for promotion. A clear division is drawn between vocational and general training, with particular reference to the latter for management. The com- plete scheme shows how there is virtually an industrial field- marshal's baton in every new entrant's knapsack, and this is borne out by the fact that in 1943 three members of thg senior management
staff joined the board as managing directors. .
Where there is so much to commend it may seem churlish to dis- agree. One cannot but feel, however, that the writers are at their best when on their own ground, and are least happy- when dealing with the province of others, as in retailing. Whatever may be the solution of the problem of the small shopkeeper, for instarce, and in particular of the new entrant, I am certain that it will not be assisted by any process of licensing.
F. C. HOOPER.
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