Monday, August 26, 2019

Abstract

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ABSTRACT


Despite continued advocacy since the turn of the century, there has been negligible adoption of combined heat and power (CHP) for district heating (DH) in Britain. This paper summarises the treatment of the option and suggests a framework for explanation. The long neglect of CHP/DH can be explained neither as the result of a conspiracy among existing energy institutions, nor in terms of an unfavourable but rational assessment of its economic potential. It requires instead a historical and structural analysis of the context the energy sector and its broader social and economic role. The activity on CHP/DH that can be traced must be situated in the development and relations of key organisations - the electricity industry and central and local government. The paper thus addresses both the apolitical and technocratic character of much energy policy writing, and acontextual accounts developed in certain recent contributions to a new sociology of technology.


Introduction


It is inherent in the process of producing mechanical and hence electrical energy from a heat engine that much of the energy input is released as relatively low temperature heat. By various techniques it is possible to produce reject heat at a temperature useful for space heating or industrial process heating, giving a much higher overall efficiency of conversion and saving fuel over separate production of electricity and heat. Heat from combined heat and power plant, or from another central source, can be piped in the form of hot water or steam to users premises, in district heating networks.[1]


The basic techniques of CHP and DH were devised at the end of the last century. Many of the technical and economic problems, the economic and social merits and disadvantages, and the different ways of assessing them, were rehearsed by early this century.[] It is well known that large scale DH with CHP sources is used extensively in other Northern Hemisphere countries, notably in Scandinavia, Eastern Europe and the USSR.[] Yet in Britain, only a limited number of mostly small heat-only DH schemes are found, and CHP/DH is virtually non-existent. Electricity production and the provision of heat are almost entirely separate activities, physically and institutionally.


This paper explores the social processes which have led to the virtual absence of CHP/DH in Britain. It has two objectives first, to give a brief account of the treatment of the CHP/DH option in the country; and second to argue for a particular approach to explaining this absence.


Before the study on which this paper is based[4], no comprehensive account of the history of the option in Britain existed. That reflects a general tendency in historiography and contemporary depiction to rationalise actual social arrangements as somehow natural and inevitable, and to ignore alternatives which remained undeveloped. For similar and more specific reasons an even stronger determinism operates in accounts of technological developments.[5] Thus CHP/DH has been almost entirely written out of histories of the British energy sector.


CHP became topical again in Britain in the 180s, and indeed found itself at the intersection of a number of debates and advocated by a variety of groups. Yet there has still been little attempt to understand and learn from the long and sorry history of its neglect, and implicit explanations remain inadequate. Advocates of the technique, frustrated and unable to understand why such an obviously sensible technology has not been taken up with enthusiasm, have often resorted to accusations of a deliberate plot on the part of the energy industries and related sections of government to suppress it. On the other hand, government and the electricity industry have taken the line that they have never been opposed to the option, but that its economics has been assessed rationally and that if there is little in existence, that is nonetheless the economically optimum level; particular circumstances in the country must mean that it is unsuitable.


There are valid elements in both views, but, as we shall see, they do no more than scratch the surface. Neither a positivistic view of economic rationality, nor a conspiracy theory, are adequate. I shall try to demonstrate that an explanation of the neglect of CHP/DH requires instead a historical and structural analysis of its context the energy sector and its broader social and economic role. The little activity on CHP/DH that can be traced must be situated in the organisational and technical development of the key institutions - the electricity industry and central and local government - and developing relations between them. These characteristics and relations must in turn be linked to the specific character of the British economy and state. Somehow CHP seems to have found only a limited role and precarious existence in very specific circumstances in the interstices of the sector - or simply fallen in the gaps between the existing institutions. That it should have been left to such a fate and never established a firm institutional base, itself needs explaining.


A number of points could be drawn out of this account and argument for energy policy and for political action to achieve change in the sector. The relation between the institutional structure of the sector and the fate of alternative technologies and other initiatives, should have been an important focus for research in the wake of the 170s energy crisis. It ought to become such again as countries try to tackle the implications of the greenhouse effect. For this audience, however, I want to concentrate on the framework of analysis.[6]


The history of CHP and DH in Britain falls reasonably neatly into four periods up to 140; the 40s and 50s; the 60s and up to the mid 70s; and from the mid 70s onwards. The character of activity in these four periods was markedly different, and this was in turn dependent on sharply differing conditions in the sector.


I Early History


British technical journals around the turn of the century carried discussion of American experiments in DH and accounts of the early US city steam networks. Some British engineers had visions of combined heat and electric lighting stations capable of supplying whole neighbourhoods, and expressed frustration at the lack of opportunities and the perceived reluctance of local authorities or property owners to take up the general idea or specific proposals.[7] Some pressed their case to official bodies like the Royal Commission on Coal Supplies in 10.[8] There are scattered references in journals and public records to proposals and occasionally to actual schemes for heat supply using either engine waste heat or live steam taken from boilers at times of low electrical load. Thus in 117, St Marylebone Electricity Department in London was supplying the Public Health Committees disinfecting baths for verminous persons with steam from its power station boiler house, the former finding the arrangement remunerative and the latter saving itself considerable expense and trouble.[] But such schemes remained curiosities - notable because they were exceptional.


Manchester Corporation developed the earliest significant supply scheme, providing steam from its city centre power stations to nearby office blocks and factories from 111, first taking live steam from the boilers and later bleeding steam from the first condensing turbines installed in WW1. The use of the stations declined in the 0s, particularly when none were selected for inclusion in the Central Electricity Boards national coordinated generation scheme; supply was nonetheless maintained for some years by live steam, and in the case of Bloom Street, for several decades with special heat-only boilers.[10]


Manchester also experimented early on in the suburbs of Blackley and Gorton with central supply of hot washing water, as the provision of working class dwellings grew rapidly in the 0s. Beset by technical problems and with disappointing economics, these schemes were abandoned after a few years in favour of individual boilers.[11] Local authorities housing programmes in the 0s might also have been expected to provide opportunities for early attempts at networks for space heating. But the single coal fire was the rule, and the one significant example of DH, the exception. Dundee Council installed two schemes in its first housing estates, providing an unusually high standard of heating and hot water.[1] But the economics of the schemes came in for criticism early in their life, and the controversy continued for decades. They were virtually the only examples to which people interested in DH could turn for operating experience and actual costs, while they arguably had permanently to bear the consequences of mistakes in planning. A case could have been made that the economics, if itself marginal, was promising for other schemes, and that they had been technically reasonably successful. But the Dundee experience did not persuade other local councils to follow its lead.


Fuel shortages and rationing after WW1 produced a spate of interest in CHP among British engineers and government officials. Efficiency of fuel use was the dominant concern of government inquiries in the sector in the interwar years.[1] While in industry the practice of utilising engine exhaust heat grew, and a number of small group heating schemes were introduced in hospitals, military bases and other institutions, little was done to encourage them; instead the widespread view was that private electricity generation would probably and rightly disappear in favour of supply from the growing public system. The cooperation necessary between authorities which might supply heat and those with a potential use for it, seemed difficult, and success rare and short-lived.


Clues to the failure to take up CHP more seriously can be gleaned from the deliberations of engineering institutions, with distinct divisions apparent by the 10s.[14] Electrical engineers, most in the employ of electricity undertakings, argued strongly and almost exclusively for the trajectory of increasing electrical efficiency through larger turbines with improved steam conditions. Many small generating stations were being scrapped and supply consolidated into larger public stations, a process encouraged during WW1 and which underlay the approach of the committees tackling the reorganisation of the supply industry.[15] Some engineers professed sympathy for the idea but stressed practical problems and doubtful economics; others explicitly regarded CHP as a retrograde policy.[16] Many felt they had enough problems without taking on a dubious second function, incidental to their main activity. The Electricity Commission, an agency set up in 11 to coordinate and attempt to rationalise the chaotic structure of the industry, with its multitude of small private and local government undertakings, barely ever mentioned it.[17]


A handful of heating engineers and a few remaining general engineers questioned the wisdom of the dominant trend and continued to advocate CHP throughout the 10s and 0s, by lobbying central and local government and through the professional institutions and the press.[18] They stressed the advantages to be gained fuel saving, labour-saving, smoke abatement, and improved living conditions, and they were able to publicise the early experience of US, continental and Soviet schemes. They continued their efforts through the war years and beyond. They finally began to make some impact through participation in central government advisory bodies, which relied heavily on outside expertise for many subjects, and in acting as consultants to local authorities in their planning for postwar reconstruction.


II The 140s and 150s


The period of planning for reconstruction, from the mid war years on, provided the context for both widespread interest in CHP/DH in Britain and good opportunities for its introduction. Support had grown for greater state intervention in the economy, and to provide better living conditions. Wartime controls and planning mechanisms accelerated long-term trends in the growth of state powers and responsibilities. 145 saw the return of a Labour government committed to a programme of building a mixed economy and welfare state. Physically, the destruction of city centres, slum clearance programmes, and plans for new towns and suburbs, presented opportunities to introduce innovative and improved infrastructure and services. In addition, severe fuel shortages made efficiency in energy use a major concern.[1]


To trace the treatment of CHP/DH we need to follow the actions of government departments, especially the newly constituted Ministry of Fuel and Power, small but initially keen to take on coordination of the energy industries, and the Ministry of Health, with overall responsibility for the new housing programme; the electricity supply industry and other energy industries; local authorities, responsible for public housing and for the implementation of much of the welfare state apparatus decided and directed centrally, and with new planning powers and duties; and advocates of CHP and DH among heating engineers, who catalysed early efforts to introduce the option. And we need to focus on several arenas, overlapping and to a great extent containing the same groups and often the same key individuals and variants of the same arguments. These were expert committees; legislative processes; professional and public debate; negotiations over specific schemes; and importantly, since none of the major actors were monolithic in their approach, internal debates and processes in each organisation.[0]


In advance of government initiatives on CHP and DH, major ambitious proposals were put forward by local authorities, for London - three schemes, for the City, the South Bank, and the north bank area of Pimlico - large new suburbs of Birmingham and Manchester, and the centres of Bristol and Coventry. The schemes ranged in maximum demand from 5 to 400 MWh. Likewise usually prompted by heating engineers acting as consultants or serving on advisory committees, another seventy local authorities elsewhere at least considered schemes for specific areas between 140 and 155.[1] Many were stimulated by initially positive pronouncements from central government in 146. Of these about 5 reached the stage of preliminary plans and costings. Several - such as those at Swindon and Darwen as well as the major city plans - originally envisaged CHP sources, often because of the proximity of a power station but in some cases involving building and running their own, and others anticipated an eventual link up to a larger CHP/DH scheme. Schemes were considered for six new towns.[]


Each of the major schemes ran into criticism as costs escalated, and underwent major revisions in an attempt to keep them afloat. They hit difficulties with the electricity supply industry over CHP sources. One by one, for a variety of contingent reasons, they were cut back to more modest pilot ventures. With local authorities still rather weak planning powers, city centre schemes were crucially dependent on decisions outside their control on major commercial and institutional heat loads.


Since local authorities had no general powers for DH or for generating electricity, they had to promote Local Bills in Parliament. Some 0 councils had obtained powers by 155. Though standard provisions were worked out over the first few examples,[] the process remained long and discouraging. The end result was a reasonable compromise in terms of the demands of the contending interests, but in effect a further deterrent it included provisions for strict accounting to prevent any hint of subsidy (largely at the insistence of the gas industry, which vigorously opposed the Bills, and arguably far more stringent than the energy industries themselves were ever subject to), central sanctioning of the scheme and control of technical specifications, and often restricted and fragmented areas of supply, ironically pressed for by neighbouring authorities.


The precarious economics of all the schemes was reflected in marginal political support in the councils as each came up repeatedly for reevaluation. The local authorities sought stronger guidance from central government and guarantees against losses, but failed to obtain either. Most schemes were abandoned, and it is debatable whether they were killed off from within or outside.


While some of the earliest initiatives on CHP and DH came from central government, especially from Fuel and Power, its role was characterised by ambivalence - reflecting conflicting interests and opinions within government and among advisers - and a steady retreat from any idea of a strong coordinating role in the sector.


A committee set up by the Department of Scientific and Industrial Research in 14 started a major study looking at the national potential of the option and intensively investigating technical and economic details. The final report could have been an important stimulus to pursuing the adoption of CHP/DH in a truly national instead of piecemeal programme. But with long delays caused in part by differences between electrical and other engineers in the group, it did not appear till 15. By that time most of the major proposals had already been shelved, including those it took as models. Though impressive in technical analysis, the report lacked any sense of strategy, and its exhortation to push ahead urgently with pilot schemes must by then have seemed to different parties either painfully ironic or quaintly anachronistic.[4]


Signals on DH from the Ministries to local authorities were inconsistent. The Ministries weak support, and all sorts of actions and inactions on their part, contributed to the difficulties of the plans and pioneer schemes - like their lack of technical guidance as the DSIR deliberations dragged on, their refusal to underwrite the ventures, their acceptance in Local Bills of strictly separate accounting, their reluctance to promote general legislative powers, and later cutbacks in the housing programme. Early pronouncements from the Ministry of Fuel and Power and to a lesser extent the Ministry of Housing actively encouraged proposals. But government records show that Housings enthusiasm for DH declined sharply as shortages of materials, money and labour bit hard in the late 40s. After sanctioning a dozen schemes by 147, it then decided to stick to that number as a limit, and by 148 had an unofficial policy of actively discouraging further proposals. The Ministry of Town and Country Planning, in control of new towns, dropped its support for DH in 150.


The newly nationalised electricity supply industry initially had open-minded discussions at the highest level on the possibility of its own CHP stations, but had no time to formulate an explicit policy before it was caught up in responding to local authorities proposals and their Local Bills. The British Electricity Authority did its own feasibility studies, and genuinely pursued a few promising possibilities, albeit as a side show. As late as 157 it evaluated, at first very favourably, a major scheme from Bankside on the south side of the Thames. Publicly the BEA remained mildly pessimistic but was prepared to consider ideas brought to it. Privately, its attitude slowly hardened as the implications of CHP stations outside its ownership, or of CHP operation of its own stations, became clear. Its action became consistent though it never declared a firm policy; it treated each proposal on its merits - essentially, however, physically and in policy terms as an adjunct to its main activities and strictly without subsidy. It could thus argue that it had discharged its responsibility under a weak and ambiguous provision under its establishing Act to investigate CHP.[5] It was able to depict poor progress on CHP, usually quite legitimately, as a result of poor economics, but ignoring of course the context and difficult conditions surrounding such projects and its own role in setting those.


Interest in CHP, and increased pressure to introduce it, came at a time of fundamental rationalisation and reorganisation of the industry, and the option suffered because it got caught up in three overlapping issues of major importance to electricity supply development in Britain coal shortages and conservation; the need for an urgent programme to build generating capacity, after inadequate construction and maintenance in wartime and with rapidly increasing demand; and above all the process by which the BEA, like the other nationalised industries, worked out its terms of operation and particularly its working relation to its nominally controlling Ministry. It sought to flesh out the vague mandate of the Electricity Act on its own terms to establish its independence, a pattern of increasingly commercial terms of operation, and freedom from socially defined obligations.


Central government showed a reluctance to interfere with BEA plans and negotiations, part of a general retreat from around 148 from what had been envisaged as an active planning, policy setting and coordinating role. This policy of non-intervention found more open expression after the election of a Conservative government in 151. The extent of this reluctance actively to plan and coordinate the sector - indeed antipathy within the permanent bureaucracy - can be seen most clearly in its dilution and avoidance of recommendations in the already ambivalent and inconsistent Ridley report of 15.[6]


Thus a joint BEA / Ministry of Fuel and Power working party on CHP which operated from 15 to 155 steered completely clear of questions of national potential or policy.[7] It carefully considered the few proposals still alive by then, and costed some of its own. When the BEA did come under some pressure from the Ministry - partly because of the eventual release of the almost forgotten DSIR report on CHP/DH - to embark on a handful of industrial schemes, like the CHP turbines eventually installed at Spondon to supply steam to British Celanese, it reacted with annoyance. Chairman Walter Citrine handed back to the government a decision on policy - whether the BEA should be subsidised to run operations which might be justified in terms of coal savings for the nation but were uneconomic for the organisation. Such a decision never came; indeed the Ministry finally withdrew from active promotion and subsequently deferred to the BEA on the matter. The BEA was able to continue to handle CHP case by case with the sort of stringent economic appraisal that was not applied to its mainstream activities till years later. CHP was seen as marginal to the main thrust of the growth and operation of the supply industry in large centralised condensing stations, increasingly remote from major heat loads. As that paradigm became entrenched, CHP could only be contemplated or accepted if it did not interfere with the main business - to the extent that such alternative forms of generation could exist in the physical and organisational interstices of the growing industry, in a specific combination of conditions that became ever more unlikely.


The eventual outcome of the visionary plans for heat networks in major cities and the many smaller proposals around the country was a pathetic handful of DH schemes. Many were much reduced from their planned size. They were fated to run into severe technical and financial problems, criticism for their somewhat paternalistic mode of operation and lack of consumer control, and escalating costs to operating authorities and users. Few further schemes were contemplated in the 50s and 60s, and fewer installed. The coal and gas industries which had opposed the schemes, anticipating competition in the domestic market, were little affected. A few small networks were installed by the Ministry of Works at military bases and in public building complexes; ironically one of the most successful economically was an 11MWh scheme serving government buildings in Whitehall itself.[8] The electricity supply industry ran a couple of industrial heat supply schemes. Of the major city plans the only remnant was the Pimlico scheme, supplying a set of housing estates across the Thames from a small back-pressure turbine tacked onto Battersea power station. Completed in the 60s, it was, as one observer suggested, best regarded as the seizing of a convenient opportunity rather than a typical development.[] For years the only CHP/DH scheme to which those interested could turn for experience, much studied and visited, Pimlico was actually a continuous headache for the BEA and its successors, committed as it was to a 0-year supply. Both the Authority and the controlling Westminster City Council were reluctant to provide operating costs or otherwise discuss its merits in public.[0]


III The 160s and Early 170s


The mid-60s saw a revival in the fortunes of district heating in Britain, remarkably in a period of little concern over energy conservation or socially defined objectives in the sector.[1] The reasons for the resurgence of interests can be found in two developments. The first was a new wave of housing construction, often as system-built and high-rise blocks, as well as planning for a further batch of new towns and expansions of existing towns to accommodate city overspill. DH seemed to fit the times it appealed to architects and local authorities as part of rationally designed services; it offered the higher heating standards being widely advocated; would help combat air pollution; it could alleviate pressing refuse disposal problems; and it promised cheaper heat after poor initial experiences with, for example, electric underfloor heating. The second factor was the changing pattern of the competitively structured domestic energy market - providing commercial incentives largely within the existing organisational structure - and here we find the attitudes and roles of some of the fuel industries markedly changed. There was little political impetus and none of the upheaval in the sector which characterised period II.


There was indeed little central government involvement except in cooperating to remove some minor financial and administrative obstacles and tidying up the legislative framework. The Ministry of Public Buildings and Works gave something of a technical lead and again evaluated DH for new towns; Housing and Local Government responded to demand from local authorities with advice; and Power made favourable noises. The spread of DH had little to do with the primary concerns of government energy policies at the time. It was indeed a time of optimism - so misguided as it turned out - with an exclusive emphasis on the production side, to ensure ample efficient and cheap supplies of fuel for continued economic growth and prosperity. The main problems anticipated were in adjusting the mix of four fuels to exploit the new opportunities of cheap natural gas, oil and nuclear power to the greatest benefit of the country,[] and in avoiding social dislocation - particularly from the run-down of the coal industry.


DH this time was caught up in the manoeuvring of the energy industries over the domestic market, among the competitive advertising, discriminatory tariffs and connection charges, or threats and accusations of such, which as some commentators observed, verged on the absurd and produced irrational results.[] Once again, the chances of the option succeeding, as with other marginal projects, were crucially dependent on the particular terms of appraisal applied, and hence on the detailed financial conditions of the industries operation. These relied increasingly on economic theory but at the same time were manipulated by government in trying to tune the economy in ways which often conflicted with that theoretical basis.


The National Coal Board, worried about the loss of its dominance of the domestic market, helped rekindle discussion on DH in the mid-60s, and started offering heat services to large consumers - designing, installing and managing solid fuel based systems. The oil companies quickly followed suit, and from 166 a spate of heat service companies competed to offer local authorities and other institutions a complete and tempting package.[4] The revival was helped by technical developments particularly in piping which reduced heat losses and improved reliability.[5] Between 156 and 17 a further 1 authorities obtained DH and electricity generation powers in Local Acts, including the Greater London Council to cover all the outer London Boroughs, and in 176 the government finally passed general powers superseding these.[6]


Some of the early schemes were sizeable, like the 14MWh Billingham centre project on Teesside, and the Nottingham scheme, a prototype joint public sector venture which used coal and refuse sources totalling 75MWh and included a small CHP component.[7] Several university and hospital schemes had loads of over 50MWh. Besides these, there were several hundred district or smaller group heating networks. The rate and extent of DH introduction is difficult to estimate, mainly because contemporary accounts often optimistically mixed proposals with actual installations, and little reliable data was produced on the latter. Many plans were cut and some abandoned. Introduction peaked in the mid-70s.[8] For the coal industry DH barely made a dent in the steady fall in its domestic sales.


Many of the multitude of scattered schemes ran into problems, in terms of both technical performance and operating costs and charges, often attributed to limited experience and cost-cutting in design, installation and maintenance.[] With cheap natural gas as an alternative, the conditions in which DH remained truly economic were again probably exceptional, but a dearth of systematic data on performance makes this hard to assess. Unreliability, technical failings and costly repairs; high charges and accumulating debt; the additional tasks and problems for housing managers in administering the only utility not vested in another state body; and lack of consumer control and of an acceptable heat meter; all combined to engender widespread dislike of DH among consumers and authorities. It produced, as one observer commented, equally fervent opponents to match the advocates of the technique.[40] The resurgence of the technique in Britain had declined by the early 80s. The worsening economics and unfavourable reputation turned local authorities away from it - ruling out further schemes and dismantling some existing ones - just at the time that the idea of city-wide CHP/DH of a national scale was revived in the wake of the oil crisis of the mid-70s.


The electricity supply industry again found itself under pressure in this period to consider CHP. Set in its ways of building large remote stations, now often nuclear, the CEGB never seriously considered CHP as more than a sideline. It made few initiatives of its own. It was sometimes dismissive, but on the whole it dutifully, if cautiously and conservatively, considered proposals brought to it from outside. Stung by its experience with Spondon and Pimlico, it saw itself perfectly justified in continuing to insist on strict and demanding economic criteria which it found few schemes could meet. Few ideas reached the stage of detailed evaluation, and fewer still were published.[41] For schemes to be run outside the public supply system and exchanging power with it, the Board was keen to avoid any extra cost, and its terms of buy-back were often perceived as discouraging and unfair; while it insisted that its offers had not significantly worsened the already shaky economics, critics maintained they had tipped the balance.


The English and Welsh Area Boards, which might have found specific local opportunities for CHP, generally showed little interest in their powers to generate under the 157 Electricity Act. The exceptions were the London and Midlands Boards, where particular economic circumstances stimulated an active, if defensive, interest. The MEB sought possibilities for industrial and residential schemes, which carefully tailored could help it avoid peak charges in the tariffs for its bulk purchase of power from the Generating Board. One of the outcomes, achieved despite strong scepticism elsewhere in the industry, was a small industrial scheme at Hereford based on diesel engines.[4] The LEBs interest was stimulated by concern that the growth of private total energy schemes in major buildings would hit its electricity sales, and it found it could offer a mutually advantageous package for large customers in which it built and ran appropriately sized CHP plant in parallel with the grid. Moving on to more ambitious CHP ideas, it then had a disastrous experience. It planned and started laying the pipes for a 100MWh scheme to cover the South Bank with heat from the CEGBs Bankside power station. As costs rose, and planning and commercial problems severely curtailed and delayed construction of the complex, the LEB pulled out, with large losses.[4]


Thus the electricity industry remained pessimistic about economic CHP supplies, let alone considering taking on heat distribution itself. It argued it had treated the option fairly and dispassionately, and pointed to other means by which it could save fossil fuels for less expenditure. And thus the resurgence in DH passed it by, so that all but a negligible amount of the new supplies came from heat-only sources.


IV From the Mid-70s On


The latest round of activity on CHP/DH in Britain started with the energy crisis of the mid-70s. It divides conveniently into two periods either side of 17, partly because the emphasis moved from assessment of the national potential of the option to a programme of implementation, and partly because of a change of government and a significant change in approach to energy policy. The account still focusses on the same major actors, in slightly different guises, but in greatly changed circumstances.


The revival of the idea of large scale CHP/DH had its origins in the wide-ranging and fundamental reappraisal of energy provision which followed the shock of the oil price rises of 17-74. Though it now seems that the debate on resource limits and energy efficiency has changed depressingly little within the sector and business continues largely as usual, it did at least for a while reopen many possibilities, and we can trace two important outcomes for CHP/DH back to this general upheaval in thinking. First, the Marshall group investigations of the national potential of CHP/DH came from a recommendation in a Central Policy Review Staff report on energy conservation in 174.[44] Second was growing support for the option outside official policy circles, so that it has been incorporated as a significant part of alternative thinking on energy futures.


Despite what some interpreted as a strong influence of the electricity supply industry in its assumptions and calculations, the Marshall group was fairly optimistic on the prospects for introduction of widespread CHP/DH on the basis of costs to the nation, and urged a start to a national programme.[45] Activity since the groups final report in 17 has been channelled into a series of site-specific evaluations of several lead cities and subsequent attempts by joint public-private consortia to produce economically attractive prospectuses for each.[46]


The first casualty of the change of government in 17 was Marshalls idea of a National Heat Board to coordinate activities and presumably try to hold its own in the sector against the existing industries. Thus CHP was denied a firm independent institutional base and was left in the hands of existing organisations. Local authorities were invited to participate; given their experience with DH, not surprisingly reaction was mixed.[47] As later economic appraisals appeared to improve and enthusiasm for the option grew among local authorities and consultants, so the government backed further away from involvement. The Department of Energys approach became widely perceived as one of procrastination and repetition, with unnecessary competition between cities for limited places in the programme, based on unwillingness to give significant funding or policy support. It was attacked in scathing terms by a Parliamentary Select Committee on Energy, which in its first review could do little more than express frustration, but in when it returned to the subject in late 186 considered CHP would be prevented from significant introduction until fundamental reform of the sector took place.[48]


It was likely that Ministerial intervention in line with Cabinet policy increasingly overrode the impetus provided by the efforts of Department officials. CHP became a testing ground for the Thatcher Governments approach to new energy opportunities and its plans to reintroduce private sector involvement on a large scale if the market would accept CHP/DH it would flourish; if it was not taken up, then it was by definition unworthy. Problems in obtaining adequate private sector investment were apparent early on, and not the least was the contradictory signals from the government - trying to encourage involvement but showing a lack of commitment itself. The effect of the whole approach has been to narrow down the activity from a national programme to a handful of individual schemes, and to delay introduction well beyond the schedules envisaged and advocated in assessments. The terms of reference of appraisal have shifted steadily away from the social objectives which inspired the involvement of many local authorities - energy savings, cheap warmth for low income consumers, regeneration of local industry, employment opportunities, and maintenance of housing stock[4] - through the national cost-benefit analysis of the Marshall reports, through its viability in the existing framework of public sector energy organisations, and finally to whether it can offer a return attractive to private investors.


Again the electricity supply industry has avoided taking what some argued could have been a leading role in the activity. Critics have been increasingly frustrated at the lack of progress, at the industrys defensive justification of its role, and at its seeming continued insulation from criticism and lack of accountability. Even inquiries which failed to uphold specific accusations of misconduct remained uneasy.[50]


Challenges to the industry have come in the form of increased attempts to establish CHP outside the public supply system - like the boom in mini-CHP plant for small sites;[51] to improve the conditions for such schemes insofar as the industry has control over them, particularly through changes in arrangements and tariffs for buying electricity from outside the grid; to involve the industry in specific projects; and to change its framework to induce greater activity.


For much of the time the industry has taken a neutral and non-committal, if somewhat pessimistic, line. Because of its near monopoly on expertise and resources, and with the Governments rejection of a national authority for CHP and DH, the CHP side of the lead city work increasingly came to be put in the industrys hands and the assumption gained strength that it would build or convert and operate the stations.[5] It had to move from assessing small schemes which might have fitted expediently and peripherally into the technical and economic conditions dictated by the existing system and its projected development, to investigating and planning for CHP of an altogether different order. That at least allowed the industrys ideas to develop, and did seem to change its view of the possible scale of the option. But assumptions about heat sources which suited the industry could be incorporated without challenge, and a large CHP plant would in any case have to coexist with the main generating system and its configuration be as much determined by the economics of connection with the grid as by the technical needs of the scheme itself. The industrys choices were indeed clearly determined by its present and projected future generating system, taken as given. There has never been serious suggestion of designing the future of the system with CHP as an integral part of it, rather than as an adjunct.[5]


The industrys sharpest and most negative reactions to CHP have come when the technology has been involved in challenges to its independence and to its basic programme in the attempt by a Labour government in 178 to reorganise the industry along the lines of the Plowden report[54]; in the provisions of the Energy Act 18 for private generation and better terms for connection to the public system; in disputes around that Act and elsewhere over buy-back tariffs; and in the Greater London Councils case to the public inquiry into a proposed pressurised water reactor at Sizewell, Suffolk, which put forward investment in major CHP/DH for London as an alternative to further nuclear stations.[55] The industry emerged from all these challenges with little effect on its practices or the main thrust of its programme, but they nonetheless served to increase the credibility of the option, develop more concrete ideas for its eventual adoption, and thereby chip away at the industrys ability to avoid it.


While much effort and attention was channelled into the increasingly narrowly defined official lead city programme, and possibly partly because of the delay and frustration with progress from that, the idea of widespread CHP/DH which had taken root in the energy consciousness of the late 70s gained support from a variety of sources. It found a central place in the ideas, strategies and practical programmes of groups campaigning locally and nationally on energy issues. A coherent and politically important axis of support emerged around metropolitan local authorities; prompted by community and union activists, they responded to the Department of Energy proposals, helped to maintain and broaden the programme, and increasingly sought to by-pass it, as the government tried to narrow it down and squeeze out the public sector.[56] Thus CHP/DH found itself at the intersection of a number of debates in Britain on energy strategies, the environment, conservation, and alternatives to nuclear power; on the role of coal, the maintenance of markets for it, and the defence of the industry against run-down; on fuel poverty, living conditions and degenerating housing stock; on problems of the nationalised industries, alternative forms of public ownership and in particular the devolution of centralised state functions to regional and city levels; and on criticism of the electricity supply industry over its nuclear programme, over-forecasting and excess capacity. Alliances around CHP/DH have sometimes been strange support has come not only from the Left and Green parts of the political map, but also from sections of the Right which see the roots of the neglect of CHP/DH in centralised state control of energy and lack of competition. The concrete results of this gathering of interest have so far been fragmentary; but the extent to which CHP/DH has been woven firmly into alternative strategies for local government and energy provision should not be underestimated.


CHP/DH and the Energy Sector


Much of the story of CHP/DH in Britain falls into two parallel parts the treatment of CHP by the electricity industry, and the development of DH networks, usually involving local authorities. Then added to these are attempts at coordination or national initiatives, focussing on the role of central government. In part this split arises from the technical nature of the system, with its twin products. But it also corresponds to the pattern characteristic of much energy sector politics - interests organised around production and consumption processes, and relations between them as regulated and mediated by the state. The division indicates the importance of the different approaches and priorities in energy provision on each side; the different groups of actors, including technical professionals and sections of government, aligned with each; and their differing abilities to secure arrangements to suit their objectives, whether commercially or politically.


Producer industries have generally sought to consolidate and maintain the structure of the sector in vertically integrated chains, with competition over common conversion or end use, strictly commercial terms of operation, and a commodity relation with consumers. They have sought to minimise users political influence, so that only the market nexus of pricing and demand, with a limited choice of delivered energy forms, remains. Most state policy and action has been concerned with primary energy supply; intervention in energy use and conservation has been weak, and mostly achieved through prices. This structure, reinforced by relatively closed decision-making and a powerful and coherent ideology, I would argue first has acted in a number of ways against energy efficiency, and second has provided only contingent and partial fulfilment of socially defined needs for energy.


My account of CHP and DH activity supports the general contention that the dominance of producer interests has been maintained even when the state has intervened, whether expediently to modify the relations in the sector for the specific purpose of encouraging adoption of the technology, or more fundamentally to restructure the sector in response to externally imposed or internally generated crisis.


DH could be, and has been, administered like other energy forms - with heat sold as a commodity. The only inherent technical difference is the coordination needed for the distribution of two products if CHP is used, and in some cases for the use of heat from multiple sources. What sets DH apart, and has given it a peculiar political character, derives rather from two sets of objectives with which it is identified. First is its possible value in energy saving. Second, it has been associated with socially defined objectives for energy provision. CHP and DH have thus always been linked with a critical stance towards existing patterns in the sector. Political demands and much state intervention on CHP and DH, then, have been concerned either to relieve in a limited way the imbalance between objectives for production and consumption, or more fundamentally to integrate them.


The nature of the activity in the four periods was markedly different, with strong similarities between periods II and IV. In period III, the growth of DH was produced by a fortuitous coincidence of interest between local authorities and fuel suppliers. There was no strong motivation in terms of national energy objectives, and central government intervention was limited to some expedient tinkering with the detailed conditions which operated against DH.


By contrast, in II and IV economic upheaval centred on the energy sector prompted state action and created political conditions in which an attempt could be made to overcome the division between production and consumption. In the early post-war years the economic incentive of acute energy shortages was combined with political and ideological support for improved living standards as well as for the reorganisation of the energy industries for the benefit of the rest of the economy. In period IV, the immediate incentive of energy price rises was reinforced by concern for global resource limits. At both times there was fundamental questioning of the patterns of energy use and the organisation of the sector. Both had a fluid phase in which possibilities existed for significant introduction of CHP/DH and for broader changes conducive to it. The nature of political activity in these periods, and the means by which producers maintained their position, were quite different to those in I and III.


Changes in the organisation of the sector did emerge, but they tended to preserve its basic relations and the dominance of producer industries, to weaken political control and accountability, and to make coordination more difficult. The failure of reforming political action in II and IV has striking similarities a withdrawal from active planning, and a reassertion of commercial objectives for the industries; a change of government, giving more open expression to tendencies already growing; and a shift from shortages and problems of supply to the possibility of expanding supplies to overcome the crisis, and hence a retreat from action to improve conservation and end use efficiency.


In both periods the attempts at national initiatives on CHP/DH fragmented into individual schemes, constrained, as always, by the existing organisational framework and accommodated only in contingent and unusual circumstances.


Explaining the Outcomes


In the analysis developed in this paper, I have implicitly been addressing and criticising two bodies of literature. First, much writing on energy policy and options since the 170s has had a disappointingly apolitical and technocratic character. Social considerations in energy books are often relegated to a somewhat disconnected chapter at the end on policy implications, after an exhaustive examination of the technical and sometimes the economic details of sources and technologies. Even much writing critical of existing patterns of energy provision - for their profligacy, inflexibility, neglect of energy conservation and renewable sources, environmental impacts, and failure to achieve social objectives of adequate and equitable distribution - has showed a common failing to assume that the shortcomings of current patterns are caused by irrationality, short-sightedness and anachronistic ideas, and hence that such errors can be corrected by exhortation and what are essentially technical arguments for alternative systems.


By contrast, the argument here is that past and present arrangements correspond to and support certain economic and political interests in the sector and beyond.[57] That conflicts of interests in the sector are often channelled through technical debates does not mean that facts determine policies; rather it underlines the need to understand how competing knowledge claims are constructed and deployed, and how they come to be aligned to institutional interests - how policies may determine the facts. The inadequacies of government policies and actions in the sector are likewise derived from its location and character, and inherent limitations on state intervention, rather than simply, or even significantly, from incompetence and mistakes.


The view developed here rejects the technological determinism prevalent in energy literature, much of which depicts the history of energy technologies as a logical progression in a natural order and with increasing size as technical economies of scale are achieved. Rather it attempts to show the complex interaction of economic, political and social forces that shape development and adoption of technologies in particular forms and with particular features, and propel them along particular trajectories of advance. It implies that certain courses of action and technological options may be more or less systematically excluded or actively resisted because of the challenges they represent to established interests within the sector and beyond. It indicates in particular that, despite incentives operating on individual energy end users, structural features of the sector act systematically against energy savings. It supports the general contention that some basic features of social and economic organisation in capitalist countries mean it is intrinsically incapable of promoting efficient use of resources.


The second literature which this paper is intended to confront is certain contributions to a new sociology of technology. These have sought to develop a framework and set of concepts for analysing the actions and interactions of individuals and groups involved in technological development, and in particular the strategies and actions of central figures - heterogeneous engineers or system-builders - who attempt to enlist other actors in their projects and thus build up actor networks around the development.[58] The critique to which I have contributed elsewhere[5] acknowledges the value of an adequate account of the detailed actions surrounding a development, and an openness to the complexity of the processes and the unpredictability of outcomes. But an account of these interactions cannot by itself provide an adequate explanation why we have particular technologies. In their keenness to distance themselves from other frameworks for analysing the social shaping of technological development, actor-network theorists have not only ignored concepts appropriate to understanding broader social structures and processes, and many existing analyses which successfully use them, but have denied their relevance to the endeavour. In the face of such claims, I have found it necessary to reassert the importance of the macro, and to argue the need for several different levels of analysis of the social systems within which technological development is situated, and for concepts and methods appropriate to each. An understanding of broader structures and processes is necessary, both as a level of explanation in itself of the general characteristics of a societys technology, and also as an essential part of a full explanation of detailed actions and outcomes, providing the context which fundamentally shapes them. This study was intended further to demonstrate that it is possible to reconcile the macro and micro without collapsing one into the other to have different forms of analysis which are nonetheless consistent.


How did the broader conditions which I have sketched shape the detailed action on CHP/DH - or indeed bring about its virtual absence? Conversely, what does the explanation lack if we simply follow the interactions and negotiations of the key actors without providing a context for that action? Such connections run throughout the account as I have constructed it. I want however to draw out a few aspects to make the point more explicitly.


The first concerns the origins of support for CHP and interest in it, in times of upheaval in the sector. Unless we have a more general account of the fortunes of the sector, it is impossible to explain the periodic resurgence of interest in the technique - what with the perspective of a historian now seems like repeated reinvention.


The second aspect is the necessity of understanding the institutional structure of the sector. The key absence in Britain has been an organisation with national responsibility for heat supply or even conservation, so that CHP and DH have been left to organisations with other major responsibilities, for which they would be additional and marginal activities with precarious financial and political support. The obvious contrast is with nuclear power and the UK Atomic Energy Authority.


Closely related is the form of appraisal used. Economic judgements usually decided the fate of DH projects, and as that viability was often so marginal, it is necessary to examine their fine detail to know what tipped the balance. But there was no single method or universal set of criteria. The terms of appraisal were clearly dependent on the performing institution and the precise constraints on it. It is not sufficient to ask whether the option was economic. We need to ask for whom its economics was assessed, and why narrowly defined economic criteria were used and whether they were appropriate. We should consider why they were applied with such rigour and demanding parameters, when another option like nuclear power was forced through when its economics was at best dubious and at times recognised even by the nuclear industry as an inadequate justification by itself. That DH was a responsibility of local authorities, always subject to close financial control by central government and always with limited resources and competing demands, is behind the failure of many individual proposals.


Another feature of the story which is difficult to explain without an account of the other activities and conditions of the organisations involved is their contingent and often changing stance towards the option. The British coal industry, for example, was hostile in the 140s, and yet was behind the revival of DH in the 160s. Because of changes in the industrys general fortunes and in competition for the domestic market, DH turned from a threat into an opportunity. The electricity supply industry was not always actively opposed to CHP; but nor was it ever a strong supporter. We need first a broad picture of the major objectives and programme it had defined for itself, and its evolving relation as a nationalised industry with government and with the rest of the sector. That must be combined with a quite detailed analysis of the different circumstances in which it was confronted with proposals for CHP, and of the other, often more serious, challenges with which the technique was bound up. Only then can we explain the strength or indifference of its reactions.


Above all, a contextual analysis of the sort I have attempted is necessary if we are to understand whether the exclusion of this technology has, in Offes terms, been accidental - that is, a different outcome could have been realised without significant changes to the institutional structure and procedures of the sector and the wider society - or systematic, in the sense that it is characteristic of that social formation.[60]


It is clear that relatively minor changes in, say, the criteria or parameters for economic evaluations, or organisational attitudes and mandates, could have permitted substantially more CHP or DH schemes to go ahead in Britain within essentially the same institutional structure. The systematic character of its exclusion was first in the structuring of the balance of power of the actors so that these minor changes were not made, and second and more fundamentally in the setting of constraints such that few schemes did make progress and that the success of these was so critically dependent on these details. The option was excluded in part through the normal operation of institutions going about their main business, and to that extent unintentionally. In part it was kept out through active resistance, because of the challenges which its introduction would represent to established interests in the sector and more widely, the political demands with which it was associated, and the economic and organisational changes its adoption would require. The structuring of the sector in largely separate vertically integrated chains, with competition, commercial terms of operation and commodity allocation; the maintenance of these arrangements by powerful producer organisations and the failure of government coordination; supply-side policies and the political weakness of most consumer interests; and the mediation of social evaluation by narrow economic assessment; all have been identified as important features of energy provision in Britain which militate against options put forward as solutions to the continuing inadequacies of that pattern.


The story of CHP/DH in Britain is still unfolding. With preparatory work continuing on several major city schemes, the extensive privatisation of the energy sector, and the possibility of a change of government, the events of the next few years should continue to make CHP an intriguing window on the social processes behind energy provision. Watch this space. [1] On the technics of CHP and DH, see e.g. RME Diamant & D Kut, District Heating and Cooling for Energy Conservation (Architectural Press, London, 181); or


AF Postlethwaite, Combined Heat and Power, in D Merrick (ed.), Energy Present and Future Options (Wiley, London, 184). Much activity and debate on CHP is also concerned with its application in industry for process heat. This study does not deal with privately installed industrial CHP except where there were policies or actions affecting both.


[] For remarkably prescient contributions, see GL Thayer, Utilisation of Exhaust Steam, Electrician , Sep 187, 617; FH Prentiss, The Distribution of Steam from the Central Station, Electrician 7, 4 Sep 181, 508-.


[] For international reviews see e.g. IEA, District Heating and Combined Heat and Power Systems A Technology Review (IEA/OECD, Paris, 18), ch.8 and apps.-10.


[4] A full account of the treatment of CHP and DH in Britain, a longer development of the theoretical framework advocated in this paper, and full details of sources, are contained in The Political Shaping of Energy Technology Combined Heat and Power in Britain (unpublished PhD thesis, Technology Policy Unit, Aston University, 186). Only key or representative references are given here. The account finishes abruptly at 185, when a handful of big city CHP/DH schemes had reached the planning stage and seemed to have some prospect of going ahead. I intend to update the account shortly in order to complete a book based on the thesis. The study required access to government and electricity industry files not then released; I am grateful to the CEGB, the Electricity Council and the Departments of Environment and Energy for permission to use material from them. The help of many individuals in the study is acknowledged in the thesis; here I should also like to thank John Schuster and Brian Martin for comments on this paper.


[5] On technological determinism, see e.g. D Mackenzie and J Wajcman, Introductory Essay, in The Social Shaping of Technology (Open University, Milton Keynes, 185).


[6] This paper does not, then, consist directly of an argument for CHP/DH, and some readers may be frustrated by this lack of a direct advocatory stance. Its normative orientation is rather in the form and conceptual basis of the analysis, and the commitment both to understanding technology as a social product and opening up processes of technological development to sections of society normally denied access to them. Its implicit support for the option or any other concrete technical or organisational option follows from an alignment to the interests served by them.


[7] e.g. The Utilisation of Central Station Exhaust Steam, Electrician , 15 Jul 18, 7; Steam Heating from Central Stations, Electrical Review 6, 1 Jun 108, 74.


[8] WN Haden, Evidence on Economies in Consumption of Fuel for the Heating of Buildings by the Introduction of Central Heating Appliances, 6 Aug 10, in Second Report of the Royal Commission on Coal Supplies, vol II (HMSO, London, 104), 4-51.


[] St Marylebone Electricity Committee, Minutes, 1 Aug 117.


[10] Manchester Corporation Electricity Committee, Minutes; BEA/CEA files; DVH Smith, District Heating and its Relation to Housing and Town Planning, Heating & Ventilating Engineer 14, Jun 141, 461-71; The Bloom Street District Heating Scheme, Industrial Heating Engineer 17, Jan 155, -5.


[11] HLG series files; Manchester Corporation Electricity Committee files.


[1] DVH Smith, District Heating, Heating & Ventilating Engineer 1, Apr 18, 84-7 & May 18, 0-1; Smith, 141, op.cit.; HLG series files. At least two Southwark estates also had DH schemes in the 10s.


[1] Ministry of Reconstruction, Coal Conservation Committee Final Report (HMSO, London, 118); Board of Trade, Report of the National Fuel and Power Committee, Cmd.01 (HMSO, London, 18).


[14] e.g. IEE/IHVE Joint Discussion, London, Jan 1, reported in Electrical Review 0, 7 Jan 1, & Manchester, 1 Feb 1, in Electrical Review 0, 1 Mar 1.


[15] L Hannah, Electricity Before Nationalisation (Macmillan, London, 17), 54-6.


[16] HM Sayers, The Utilisation of Waste Heat, Electrical Review 0, 7 Jan 1, 115.


[17] Electricity Commissioners, Report, annual; POWE series files.


[18] e.g. Smith, 1, op.cit.; O Faber, District Heating, Heating & Ventilating Engineer 8, Apr 15, 401-4; SB Donkin, Industrial, Agricultural, and Domestic Heating, with Electricity as a By-Product, J Inst Civil Eng I, 15-6, 404; AE Margolis, Experiences with District Heating in Europe and the USA and its Future Development, Heating & Ventilating Engineer , Oct 15, 14-6.


[1] See e.g. DN Chester, The Machinery of Government and Planning, in GDN Worswick & PH Ady (eds.), The British Economy 145-50 (Clarendon, Oxford, 15), 4; H Pelling, The Labour Governments 145-51 (Macmillan, London, 145), 166.


[0] This account is based on files from the POWE, HLG and DSIR series, from BEA/CEA and local authority records, as well as published reports and press items.


[1] Russell, The Political Shaping of Energy Technology, app.4.


[] Stevenage, Newton Aycliffe, Hemel Hempstead, Harlow, Glenrothes and East Kilbride.


[] Especially the London County Council (General Powers ) Bill of 146-47. The Local Acts are listed in Russell, The Political Shaping of Energy Technology, app.5.


[4] The committees work was finished in 148. Government records give no clue as to why the report was not released for over four years. DSIR files; DSIR, Interim Memorandum on District Heating (HMSO, London, 146); Ministry of Works, District Heating, Report by the Heating & Ventilation (Reconstruction) Committee of the Building Research Board of the DSIR (HMSO, London, 15)


[5] Electricity Act 147, s.50.


[6] Report of the Committee on National Policy for the Use of Fuel and Power Resources, Cmnd.8647 (HMSO, London, 15); POWE series files.


[7] BEA/CEA files; POWE series files.


[8] District Heating in Whitehall, Heating & Ventilating Engineer 6, Nov 15, -0.


[] A Egerton, Note, in Ministry of Works, op.cit., iv.


[0] CEGB and Westminster City Council records.


[1] This account relies on CEGB records, news items and articles from Heating & Ventilating Engineer, Municipal Journal, Solid Fuel and other journals, District Heating Association and other conference proceedings, and interviews.


[] Ministry of Power, Fuel for the Future (HMSO, London, 167); see also MoP, Fuel Policy (HMSO, London, 165); PL Cook & AJ Surrey, Energy Policy Strategies for Uncertainty (Martin Robertson, London, 177).


[] Cook & Surrey, op.cit., -6.


[4] See e.g. H Roper, The Development of Heat Management in this Country, paper to DHA South Wales and South West Branch conference, Heating for the Community, Bristol Sep 16.


[5] See e.g. AE Haseler, District Heating, Municipal Journal, 1 Jul 170, 1715-16. A major drawback remained till the mid-80s, however the lack of a cheap, accurate heat meter. Thus flat-rate charging stayed in common use.


[6] Local Government (Miscellaneous Provisions) Act 176.


[7] e.g. WGE Rowe, The Nottingham Combined Refuse and District Heating Scheme A Review of its Development, paper to DHA rd National Conference, A National Plan for Heat, Apr 17; District Heating for Billingham Town Centre, Surveyor 1, 11 Apr 164, 5-5.


[8] One survey has identified over 400 non-military schemes of over 0.MWh, and estimates that 1.5-% of the UKs 0 million dwellings are on DH/GH, nearly 100,000 of these in London. Orchard Partners, Present State and Future Development of the Heat Market in Member States District Heating in the UK, 66/1/R1 (Orchard Partners, London, 18).


[] e.g. GLC Economic Policy Group, The Energy Economy, Strategy Document 5, May 18, 4-5; A Crewe, District Heating A Political Football Bounces Back, Energy in Buildings, Mar 186, 0-1.


[40] H Ryding, Alternative Appraisal, Building Services 4, Oct 18, 5-7.


[41] CEGB, Peterborough Development Corporation & Eastern Electricity Board, Peterborough District Heating for Castor (Dec 176); CEGB, Central London District Heating Scheme (Feb 177). The SSEB published the Central Glasgow District Heating Study April 175 - March 176 (May 176).


[4] See e.g. correspondence and papers, in Select Committee on Energy, Minutes of Evidence, 4 Nov 181, HC 60-i.


[4] PP Hartley, London Electricitys 100MW Heat Distribution Scheme, Electrical Times 16, 16 Mar 17, 5-4; CEGB files.


[44] CPRS, Energy Conservation (HMSO, London, 174), p.6.


[45] District Heating Working Party of the Combined Heat and Power Group, District Heating Combined with Electricity Generation in the United Kingdom, Energy Paper 0 (HMSO, London, 177); Department of Energy, Combined Heat and Electrical Power Generation in the United Kingdom, Energy Paper 5 (HMSO, London, 17).


[46] WS Atkins & Partners, CHP Feasibility Programme Interim Report (Dec 180); Department of Energy & WS Atkins, Combined Heat and Power District Heating Feasibility Programme, Energy Paper 5 (HMSO, London, 184); P Millbank, Cities Jostle for Heat and Power Cash, Electrical Review 15, 4/1 Aug 184, 5.


[47] Survey in Russell, The Political Shaping of Energy Technology, app.7.


[48] Select Committee on Energy, Third Report, 18/, Combined Heat and Power, vols., HC 14-1 & - (HMSO, London, 18).


[4] See documents produced by Newcastle and Sheffield local authorities, e.g. City of Newcastle upon Tyne, Gateshead MBC & Tyne & Wear CC, Submission to the Department of Energy, Nov 18; D Lawrence, Developing a CHP Scheme in a Local Authority Area, paper to IEE Conference, Energy Options, London, Apr 184, 80-84.


[50] e.g. Select Committee, Third Report ..., HC14-1, 6-8, 41.


[51] See e.g. G Rufford, Small Scale Combined Heat and Power Systems, Heating & Ventilating Engineer 5, 186, (675) 10-1, & (676) 0-4.


[5] See e.g. JF Dart & JW Talbot, The CEGBs Role in CHP Development, Atom (4), Apr 185, -14; CEGB, Combined Heat and Power at Six English Cities (CEGB, London, 18).


[5] Lucas has analysed the differences in the optimal level of CHP which comes from these different frameworks NJD Lucas, The National Case for Local Production of Heat and Power in Parallel with the Public Supply of Electricity, Applied Energy , Jul 176, 5-6; Lucas, The Case for Combined Heat and Power in the UK, Energy Research , 178, -4.


[54] Department of Energy, The Structure of the Electricity Supply Industry in England and Wales Report of the Committee of Inquiry, Cmnd.688 (HMSO, London, 176); Department of Energy, Reorganisation of the Electricity Supply Industry in England and Wales , Cmnd.714 (HMSO, London, 17); Select Committee on the Nationalised Industries, Ninth Report 177/8, Reorganising the ESI Pre-Legislative Hearings, HC 66 (HMSO, London, 178).


[55] J Macadam, The Development of Combined Heat and Power with District Heating in London, Sizewell Inquiry Proof of Evidence GLC/P.


[56] Particularly at Newcastle and Sheffield.


[57] ... even though pervasive contradictions and unintended consequences of actions ensure that this correspondence is by no means simple and consistent.


[58] e.g. B Latour, The Prince for Machines as Well as Machinations, in B Elliott (ed.), Technology and Social Process (Edinburgh University, Edinburgh, 188), 0-4; J Law, The Anatomy of a Sociotechnical Struggle The Design of the TSR, in ibid., 44-6;


M Callon, The State and Technical Innovation A Case Study of the Electric Vehicle in France, Research Policy , 180, 58-76.


[5] S Russell, The Social Construction of Artefacts A Response to Pinch and Bijker, Social Studies of Science 16, 186, pp.1-46; S Russell and R Williams, Opening the Black Box and Closing It Behind You On Micro-Sociology in the Social Analysis of Technology, paper to British Sociological Association conference, Science, Technology and Society, Leeds, April 187; Russell, Interests and the Shaping of Technology an Unresolved Debate Reappears, paper to AAHPSSS Conference, Robertson, NSW, September 18.


[60] C Offe, Structural Problems of the Capitalist State, in K von Beyme (ed.), German Political Studies 1 (Sage, London, 174), 6-7.


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Friday, August 23, 2019

Technogym, the wellness company. A critical evaluation

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International Business Strategy of Technogym®, The Wellness Company


A Critical EvaluationBuy Technogym, the wellness company. A critical evaluation term paper


Table of Contents


THE FITNESS EQUIPMENT MARKET 4


EUROPEAN FITNESS MARKET 5


TECHNOGYM®, THE WELLNESS COMPANY 7


INTERNATIONAL, MULTINATIONAL OR GLOBAL? 10


CULTURAL DIVERSITY 1


MISSION IM-POSSIBLE 14


"THE IMPORTANCE OF BEING ERNEST" 1


(BRAND AWARENESS IN A BB CONTEXT) 1


CONCLUSIONS... 1


...AND IMPROVEMENTS 1


IN DETAILS


APPENDIX 4


REFERENCES 5


WEBSITES Vladimir "You should have been a poet."


Estragon "I was." (Gesture towards his rags.) "Isn't that obvious?" S. Beckett


ABSTRACT This article is the result of an analysis of the International Strategy of an Italian fitness equipment company. It starts providing information about the popularity of fitness activities and lists reasons why people are attracted to them, in order to better set Technogym® in a business environment in which it operates.


Technogym®'s strategy has been analysed through a deductive method, comparing the firm to its main competitor and pointing out what the company actually did to become a leader of the European Fitness Equipment market.


Furthermore this paper will attempt to highlight the choice of the Italian company, as a small/medium business, for going global, analysing the main literature on globalisation concepts, and on small Italian manufacturers.


The conclusions have been dedicated to the potential gaps into Technogym®'s International Strategy to be eventually improved in order to enlarge their market share and built entry barriers in new markets such as China and East Europe.


The Value Chain model by Porter has been deliberately neglected since considered a traditional way to run a business. Such model is based on the company's core competence and the product is its starting point (Bugatti & Di Martino, 00). Hence it is no longer suitable for a customer-oriented company as Technogym®. The Value Chain lacks of problem solving and network value. Instead a CRM and Kratzman's models (see appendix) have been used to discourse on gaining strategic and competitive advantage.THE FITNESS EQUIPMENT MARKET


The most important thing is to forecast where customers are moving and to be in front of them. P. Kotler


According to the IHRSA report (001), in this past decade there has been a growing emphasis on the holistic or mind/body approach to exercise and this has effectively redefined the concept of fitness as people's interest in adopting an active lifestyle extends beyond the physical benefits. The Wellness Industry is more luckily to be cited, where individual wellness is a continuum that aims not only at staying healthy and capable but also at extending one's active life span and scope of life.


Among those who exercise regularly, the payoff is great, both physically and psychologically. At least half of 1,00 interviewees suggest that exercise has a positive impact on the following aspects


Source IHRSA, 001


In 000 and 001 gender needs and ego, key factors for preference of exercise, were replaced by the need to be healthy (Tekes report) hence the relationship between health and fitness (= wellness) is the key to the industry's future.


Sources CENSIS, 00


1 17 00 007 01


EUROPEAN FITNESS MARKET


In 001 the European Market for Fitness Equipment reached a value of 1,116 million Euros (www.interconnectionconsulting.com), which is an increase of 4.8%, comparing it to 000 when the value was about 1,065 million Euros.


Prices of equipment have basically decreased as a result of market competition.


In details, Germany represents the biggest Fitness Equipment market, with a value of 5 million Euros, but Italy has the highest growth rate with 6.5%, followed by Spain (6.4%). The above table shows the trend of people who will exercise regularly in the future (in Italy).


UK and Ireland represent the second largest market in terms of value 1.% and quantity 0.5%. The European market is dominated by two big fitness equipment companies LifeFitness (the first company in the world) and Technogym®, the first in Europe.


It is interesting to notice that Spain is some years behind the other European countries,


Italy presents a strong growth potential market; USA, UK and Germany are somehow mature markets for fitness (Giusti & Scamper, 00).


Could this happen as Germany and USA are between innovation and wealth-driven stage and UK is in the wealth-driven one? It would mean that the industries have no longer motivations to invest and they begin to lose their competitive advantage. On the other hand, Italian companies should be willing to create new technology and methods through innovation, since Italy is supposed to be in the innovation-driven stage (Porter, 10).


The final part of the fitness puzzle is demography people in the world are living longer. From 01000, the population of elderly aged 6584 is expected to grow 80%, the under 65 population will grow just 7%.


Fitness manufactures are or should be aware of the changes. They know that the consumer is in control. Manufactures do not define market trends, consumers do. TECHNOGYM®, THE WELLNESS COMPANY


There are three kinds of companies those who make things happen; those who watch things happen; and those who wonder what's happened. Anonymous


Technogym® was established on the 0th of October 18 by Nerio Alessandri. It is the European market leader in the fitness and biomedical rehabilitation equipment fields, the world's second-largest fitness equipment company and the only one of the top six not US-owed.


• It employs more than 800 people in Italy and abroad, 100 or more of whom are employed in research and development;


• It has subsidiaries in the US, Brazil, Hong Kong, Great Britain, Germany, Benelux, France, Spain and Switzerland;


• It exports to over 60 countries worldwide;


• Its products have been chosen by over 5,000 Fitness Centres and 0,000 privates homes in 60 different countries;


• It now controls a share of 80% of the Italian market and this is its financial situation


YEARS 001


REVENUES + 0%


EBITDA + 16,4%


CASH FLOW + 8%


Source Il Sole 4 Ore, 00The key factors for the company's growth are


The implementation of the company was unplanned . Nerio Alessandri, a young man of years old, due to his love for sports and physical activity, joined a very poorly equipped fitness club. He immediately realized he could do something for that place. His first piece of fitness equipment, a Hack Squat machine, was designed and assembled in his own car shed. It was no long before a complete line of strength equipment had been conceived and produced. Since then, Technogym® has created an international network of subsidiaries and distributors, becoming a reference point for the whole industry, as of Nerio Alessandri's commitment to incorporating continuous technological advancement with innovative product design. (www.technogym.it).


Technogym®, being initially a small business in any respect number of employees, capital invested, turnover, and also being owner managed, independent and lacking stock market quotation (cf. Agarval, 17), did not have the power for a price-based competition; therefore, it adopted a strategy of continuous product innovation based on design and, by incorporating high-quality functional characteristics, could increase its international competitiveness (cf. Bonaccorsi, 1).


In the first stage the company was centred on the domestic market and it had no intention to go international (www.smau.it). Subsequently, having the domestic market as a core market, it started to look for opportunities outside (Keegan, 15). As to an immature market, highly fragmented and without a leadership, Technogym® can be considered a pioneer of the fitness industry in Italy. It is worth to point out that when Body Building was a core exercise for gymnasiums, Technogym® was already talking about Fitness and when people started to take into high consideration the fitness concept, Alessandri came out with the Wellness idea. Therefore "Wellness" is its banner and Vision (Foa, 001). INTERNATIONAL, MULTINATIONAL OR GLOBAL?


National developments have [...] driven changes in the global economy; even more than a so-called 'globalisation' has driven national evolution. J. Zysman


Alessandri considers his company as global (Foa, 001) note that, in Italian, global means "che riguarda, interessa l'intero globo (=concerning/including the whole world)".


According to Bartlett and Ghoshal (18), having a "Global Mentality" means to create standard products, assuming that customers have standard tastes. Products or services, or both are not supposed to meet local requirements. Main and strategic decisions are managed from the centre and subsidiaries are very much subordinate to the headquarters. "The same thing, the same way, everywhere." (Levitt, T., 18) is this a keystone to become a successful company?


From my point of view, academic models are too much remote from reality so I would rather interpret 'Globalisation' in a much more flexible way, than crystallizing on such positions. Ohmae (18) argued "Globalisation is about thinking global and acting local" or, even less specific, Robertson (1) stated that it was a phenomenon fostering awareness of the world.


Lazear (1) confirms that there is no firm truly global and as a model for his studies on 'Globalisation', chooses multinational firms provided that are in more than one country.


Zysman, (16) claimed that "Globalism is only an emblem. The suddenly pervasive intrusion of the notion of globalism is an effort by governments and companies to apply a label to a diverse package of changes that they do not understand". Thus, a label for an era. At the beginning, these 'labels' or code words to devise an era have always a negative meaning. Later, a positive acceptation supersedes the negative one and, after a while, the code word becomes neutral. Figure A is a chart representing the "Code-Word Cycle"


Figure A At the beginning code words to define eras have negative meanings to become neutral as the time passes.


Another viewpoint is that the 'global era' began when (due to) Japanese, Korean and Taiwanese firms entered Western and mainly US market, in a dramatic competitive way (Dertouzon et al, 18). Such a tough 'global' competition required that firms urgently internationalise their operations (Palich & Gomez-Mejia, 1).


Especially culturally related 'global' firms had (still have) to adapt somewhat to maximize their performance over their markets (Palich & Gomez-Mejia, 1). Other studies have showed that adapting policies and practices, to make them suitable for contexts in which they do business, is a must for multinational firms (Brewster, 15; Dowling, Schuler & Welch, 14; Forster & Whipp, 15). Hence adaptation and flexibility are characteristics of global companies. From this perspective, Technogym® is 'global' it required world scale to realise its value, but the sources of its development remained internal. Product quality, price and reliability in delivery are its success factors (cf. Bonaccorsi, 1). The company's approach to flexibility allow them to modify their product to cope with customer requirement. This is a "product adaptation to individual foreign customer requirements" (cf. Bonaccorsi, 1, p. 55). CULTURAL DIVERSITY


Vulgarity is simply the conduct of other people. O. Wilde


In a country where a cornerstone of its industry (FIAT) seems to be about to verge on bankruptcy and one of the reasons is the lack of R&D investments (for more than 10 years they invested less than 1%), Technogym® employs 10 people in R&D, including 50 electronics engineers and 0 software specialists and they invest 7% in Research, this is why they are always up to date, particularly when it is about technology (as it will be explained further on).


Furthermore, Italy is a large power distance and individualist country (Hofstede, 180), that is


• authority (managers) is obeyed with no questions;


• the number of levels in the hierarchy should match the power distance of the culture (Snodgrass & Sekaran, 18);


• the communications may create "one-up" situations as they go top-down;


• people tend not to be involved with groups and teams.


Within this context, Technogym® appears to be different. Cooperation is a strong element of its strategy and people working for them are called 'collaborators', thus, they are fully committed to the company and its vision. For two consecutive years (001 and 00) it was on the list of "Great places to work" companies (Vitale, 00). Thus, Trust is the "essential ingredient for the primary workplace relationship between the employee and the employer. MISSION IM-POSSIBLE


If it works, it is obsolete. N. Alessandri


Technogym® started as a small business , with less than 500 employees but sales greater than $500,000 (Baird, Lyles & Orris, 14). It focused on strength equipment rather than CV equipment, quickly changing and innovating the products (Cooper, 17).


When they first entered the international market they had to face a harsh reality; LifeFitness (Technogym®'s main competitor) was an industrial colossus, it had good margins to play with, reflected in a very competitive price plan. It was in the market for the long term and had deep pockets to survive the possible price war.


They started out with the great idea of Technogym® Training Institute and added tangible value to their products, ensuring that gym owners perceived their brand as strong and of great quality. To look at product development they went for a vertical integration backward and forward, creating a quality network in terms of relationship marketing as "the quality of relationships [...] differentiate[s] and define[s] the boundaries of the network organization" underlines Achrol (17).


Alliances have been considered an important option for small firms to penetrate foreign markets (Lyles, 10). They defy the well-known theory of market-entry barriers of Porter, since "Companies not even aligned today may prove to be tomorrow's biggest rival" writes Jordan Lewis .


A collaborative relationship goes from one extreme that is 'arm's length' to the other one which is the 'vertical integration'. In between there is the partnership. Lambert et al (16) claim that there are three degrees and types of partnership integration


• Type I (short term, limited coordination);


• Type II (long term, from coordination to integration of activities);


• Type III (permanent, each party is an extension of the other one).


Technogym® has chosen the third type, adopting a concept of integrated product . They establish partnerships with every fitness club they deal with, helping them to open. They sell them all the equipment they need with 10% discount (Virgin Active, 00) and they offer a lifetime guarantee, that is technical assistance for free anytime and anywhere. Technogym® agrees with each of its clients 'sole selling right' from the outset of the initial sale. Replacement of obsolete machinery or new equipment is arranged through Technogym only.


"[...] the imaginative application of 'partnership' can contribute substantially toward customer acquisition, retention and value-enhancement objectives". (Cornell, 00). Among the crucial elements for partnership to succeed (Barr, 16), leadership, innovation, risk taking and problem solving seem to better suit Technogym®. In a partnership, Technogym® always stays in a position of leadership and, innovation (one of the first company at using CAD Pro/ENGINEER software) has made them stop being follower. Furthermore this year Alessandri has become a new member of the Capitalia board (Calderoni & Serafini, 00). This will certainly mean a better financial availability, so even a stronger positioning for the company.


Concerning distribution, it is a company's key factor "success will not follow unless this is correct, strong and solidified." (Kratzman, 00). Direct distribution is the most common way of selling fitness equipment. 51% of the total European market value is realized by direct distribution (www.interconnectionconsulting.com), especially due to the lower costs. An increasing tendency towards direct selling can be expected since the fitness equipment market has high growth potential "Even in difficult economic times, people tend to hang on their health club ticket", says Byrne (00) so manufacturers achieve critical mass. This growth in sales has made direct distribution vital in such a competitive market this is also a way for big international companies to conquer new markets and establish their brand. Technogym® used distribution agents for foreign markets until 14 (Sumner Smith, 18), then changed over to direct distribution because it is cheaper, provides better service for the customers, is easy to control and "makes no sense using a dealer that sells multiple brands.", said LifeFitness (18), the American supplier of fitness equipment.


It seems as there has been a Flank attack from Technogym® and a consequent Flank defence (Kotler, 00) carried out by LifeFitness.


Flank attacks are used by challengers with fewer resources and when Technogym® decided to penetrate the US market (17), they had to limit their ambitions, implant a branch and a show room in Seattle but hold back with investment into a production plant, due to lack of financial support from ICE . ICE could not sponsor the enterprise Fitness was considered a too innovative market segment and ICE knew not enough to invest money in it. Thus, they had to set up a joint venture with a local manufacturer, to produce under their brand and to assist clients in their behalf.


Technogym® identified the weak points of its main competitor within a product and a geographical strategic dimension. The American company only focused on a segment of the market producing big volumes; Technogym® went for a wider range of products taking into consideration several niche markets, to satisfy smaller sets of customers who have more defined and/or peculiar combination of needs (Kotler, 1). They spotted the area where the competitor was under-performing, areas neglected by LifeFitness and implemented branches there as follows


EU Italy (headquarter), Germany, Spain, France, UK and Benelux


EAST ASIA Hong Kong


MERCOSUR Brazil (production plant)


NAFTA USA


Also showing to be aware of new geography of FDI being affected by global economy (Dunning, 18) .


For instance Brazil has become a 'desirable' market for foreign investors by overcoming both chronic inflation and repeated backsliding over the past 40 years (McCrary, 001). Firstly they pursued a political solution and later an economic one, said Paulo Ferraz .


Technogym® also worked on effective export strategies (Namiki, 188) such as technological superiority and customer service. In point of fact, the use of computers in the Fitness sector is growing fast and it is a way to add value to the basic exercise machine, getting a competitive advantage on the product/service.


People like to exercise but for some it is tedious and customers can feel lost in a gym if they are not supported by professional staff and frustrated when there is a continuous pattern for insufficient staffing Aware of these problems Technogym® tried to make the workouts on its machines more varied and enjoyable (Clafton, 18), including built-in computers that monitor the user's workout and keep the user entertained. As for the strength machines, the procedure is 1) work out a fitness regimen with a trainer; ) have it transferred to a key. Drop it into a Technogym® machine and follow the customized instructions for the workout. Technogym® machines are


• user-friendly,


• provided with biofeedback to pace the workout.


The technology they adopted, certainly supports the needs of the markets. Customers receive a personal program, they are not frustrated by using difficult machines to handle and downloading the workout information from the key onto a PC, they track their progress, thus, they are kept motivated.


We gather that the company's functions have been coordinated from the customer's point of view as suggested by Kotler (00, p.) (see figure B), while a policy of adaptation to foreign markets is considered of less concern. In actual fact, the most successful companies are the ones that change their strategies to meet consumer needs and expectation. Currently, 18% of the business strategies revolve around consumer needs; it is anticipated that soon 50% will focus more on customer needs and retention issues (Andersen, 00).


Figure B Traditional Organization chart versus Modern Customer-Oriented Company Organization chart. (Kotler, 00, p. ). "THE IMPORTANCE OF BEING ERNEST"


(BRAND AWARENESS IN A BB CONTEXT)


+=5-ism Caving in to a target marketing strategy aimed at oneself after holding out for a long period time. "Oh, all right, I'll buy your stupid cola. Now leave me alone".- D. Coupland


In bb markets buying behaviours are a lot more complex than in bc ones. This is due to many factors larger size of the market, low number of customers but with a high average spends. Therefore there would also be two different marketing communication strategies for the two contexts.


In a bb environment communication is characterised by personal selling and very little use of advertising that is also the case of little financial resources and/or a target consumer unreachable through advertising. Hence a below-the-line approach is necessary (Fill, 00). Therewith, many surveys show as advertising is not being considered an important success factor by Italian SMF (Bonaccorsi, 1). Technogym® works in a bb environment and its brand name is aligned with its primary function, so that the consumer perceives both content and positioning of the company (Fill, 00). Their products have turned to be advertising materials they are in corporate colours and contain the logo. They have been promoting their visibility by means of sponsorship; the use of it has become very popular (Miller, 17). They are the official supplier for Ferrari in Formula 1 racing, in the sailing of Prada challenge for America's Cup and a range of football teams. They were also the Official Supplier of Strength and Cardiovascular Equipment at Olympic Games, Sydney 000. Especially the last one is an effective strategic move, able to strengthen their competitive position in the global market, raising the brand awareness. This way they narrowed down customer choice becoming quite a compulsory option for fitness clubs.


A research, which has not been proved by empirical studies, highlighted as Technogym® had been considered an American company for several years. Even some owners of fitness clubs in Italy, England, Spain and France did think of Technogym® as an American maker. Consumer researches have shown that costumers' behaviour is affected by intrinsic (product design) and extrinsic (brand name) information cues (Olson & Jacoby, 17). The CO of a product is of great importance as consumers display a preference for products made in some countries more than others (Schooler, 165, 171; Hampton, 177; Baumgartner, & Jolibert, 178; Bannister, & Saunders, 178; Papadopoulos, et al., 187; Samiee, 14).


This could be a key factor as Schooler, (165) demonstrated that identical products in any aspect, except for their CO were evaluated differently by customers . No doubts that "the reputation of some countries appears to enhance the credibility of product groups for which the country is known" (Samiee, 14, p. 5). America has a positive country-image for its fitness equipment, additionally it is a developed country, thus, American products are perceived in a more favourably way than others from other countries (Schooler, 171; Tongberg, 17). On the other hand "industrial buyers tend to be better informed about their purchases than consumers and their decision processes are typically policy-driven and rationalised." (Samiee, 14, p. 51). The big thing is industrial buyers' experience with manufacturers and their sourcing countries. In the light of what it has been said, it is wondered how much the presumed "America fame" of Technogym® has affected their brand awareness. Unfortunately no research has been carried out to support either one or the other assumption.


CONCLUSIONS...


The great Tragedy of Science-the slaying of a beautiful hypothesis by an ugly fact. T.H. Huxley


Technogym® has overcome the problems that small enterprises face in their development, so much that it is able to compete with large enterprises on economies of scale, increasing in importance over the last few decades and aligning with the global phenomenon of small business growth.


Nerio Alessandri's entrepreneurial aspiration, his willingness, intentions and motivations have been determinant keys not to allow various infrastructures factors to affect its expansion plans (cf. Liao, J., Welsch H.P. & Pistrui, D., 001) such as lack of information on foreign markets, financing and bureaucracy which have been considered the three main obstacles faced by Italian SMFs to exporting.


...AND IMPROVEMENTS


It is unlikely that the fitness market would decline, since "wellness", once considered a fad, is becoming a way of life. In 00 an estimated 85% of fitness machine sales were in the well-established markets of Western Europe and North America. While some areas are still considered to offer good growth prospects, the previously fast expanding markets of US and UK are showing signs of slowdown, which is why the fitness machine makers will probably gear up to do business elsewhere.


It would be advisable for Technogym® to consider emerging markets such as China (several US-based sports club are moving into China), Eastern Europe and South America. LifeFitness is likely to open a new plant in Hungary. The new factory could position the company for an assault on consumers in the potentially promising region of Eastern Europe (Marsh, 00) this way they may build up entry barriers, conquering the market.


IN DETAILS


China with its 1. billion inhabitants is an inexhaustible source of long-hour working people for low pay (Anon., 00). It is a cheap place to manufacture machines (this is its comparative advantage), therefore consider its potential as an export market and not merely satisfy its internal demand.


Russia has always been a country devoted to sport, the fitness industry is growing and U.S. fitness equipment companies have a low market share; autochthonous manpower is not expensive in a country tried by the long communist experience. Due to a high political risk or, maybe, little knowledge of the market, it would be recommendable to find local partners to work with. They may select local agents (they already used this distribution channel, in the past) or think of join ventures, making sure to be in control and assure the leadership.


Mexico is another lucrative market for exercise equipment. The overall mentioned market is expected to increase at an average annual rate of 5% over the next three years. Imports are expected to grow by 4% by the end of 00 (source Banco Nacional de Comercio Exterior, 1). Domestic production of exercise equipment is almost limited to simple mechanical appliances, so it is not able to supply the market demand (Campos, 1).


Strictly concerning their new product line it has been conceived from a biomechanics point of view. Their safety has been emphasised, on the other hand, some fitness machines are so far away from the 'imperfect' physical frame of human beings to be paradoxically unusable (the military press machine and the last generation fitness benches are two eloquent examples).


Moreover, they should improve their CV equipment. LifeFitness has invented a new system for running machines called "FlexDeck® Shock Absorption System". The shock absorbers allow the deck to flex downward with the force of the user's foot and then gently upward as the foot is lifted.


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