Hamptons Effect

Describes how decisions begin at the end of control, just as control begins at the end of planning.

Author: Zezhao Fang
Zezhao Fang
Zezhao Fang
I hold a degree in Statistics from the University of Waterloo. As a graduate, my academic focus has equipped me with strong analytical and quantitative skills. While I currently do not have a specific profession or work experience, my education has honed my abilities in statistical analysis, data interpretation, and problem-solving. I am well-versed in various statistical methods and techniques, making me adept at deriving meaningful insights from data.
Reviewed By: Matthew Retzloff
Matthew Retzloff
Matthew Retzloff
Investment Banking | Corporate Development

Matthew started his finance career working as an investment banking analyst for Falcon Capital Partners, a healthcare IT boutique, before moving on to work for Raymond James Financial, Inc in their specialty finance coverage group in Atlanta. Matthew then started in a role in corporate development at Babcock & Wilcox before moving to a corporate development associate role with Caesars Entertainment Corporation where he currently is. Matthew provides support to Caesars' M&A processes including evaluating inbound teasers/CIMs to identify possible acquisition targets, due diligence, constructing financial models, corporate valuation, and interacting with potential acquisition targets.

Matthew has a Bachelor of Science in Accounting and Business Administration and a Bachelor of Arts in German from University of North Carolina.

Last Updated:January 2, 2024

What is the Hamptons Effect?

Hamptons Effect describes how decisions begin at the end of control, just as control begins at the end of planning. The American management scientist D.R. Hampton proposed this law. But, unfortunately, this law lacks relevance, and action is hardly proactive.

For example, as the holidays approach, people generally stay home and rest, causing the number of trades that occur to fall; however, as the holidays end and a large number of investors and traders get back to work, trading volumes begin to increase.

This effect is positive when the portfolio manager’s future consolidation of overall returns is traded at the end of the year, and this increase in trading volume bounces. 

If this effect is negative, it indicates that the manager has decided to take profits and does not intend to make a move to open or increase positions. This effect is a type of calendar effect that is based on statistical analysis and anecdotal evidence.

The Hampton effect is commonly cited in case studies of statistics. Slightly higher volatility is a characteristic of this effect. Depending on the time used, this effect may have a positive impact by using a market-wide measure.

Value investing is the most durable and proven method, but it is not the only method. No investment method will be the best in the long run. All investment methods always lose their effectiveness when they are most popular.

Management Insights from Hamptons Effect

American management scientist D.R. Hampton suggests.” Just as control begins at the end of planning, so decision-making begins at the end of control.” This sentence sounds obscure. If we analyze it carefully, it is not difficult to find. 

It is very enlightening that if the developed countermeasures are not targeted, we are afraid that the action will not be proactive.

From the point of view of the management process, the plan is preceded by control. Control is to check the effect of the implementation of the plan and feedback at any time so that the operation of things is in line with the expected results. 

Decision-making is the result of control: control is not in place and directly determines whether the plan can be achieved. If the plan is not targeted, the final result will not be optimistic, and the whole process of management action will not be very positive. 

As long as a targeted goal is determined, coupled with effective control, it will naturally work like a fish in business management.

At present, to improve managers’ ability to set goals in a targeted manner, management scientists have successively proposed a large number of techniques to analyze the actual situation of enterprises.

Such as PEST analysis to analyze the external environment, Porter’s five forces analysis to analyze the internal environment of enterprises, and SWOT analysis to combine these analyses, etc.

Hamptons Effect And SWOT Analysis

The following is a description of the famous SWOT analysis. This method is used to recognize a company’s strengths and weaknesses and discover the opportunities and threats faced by the company. 

Through such analysis, enterprises can recognize their actual situation, formulate scientific and reasonable countermeasures, and avoid the misconception of “target wandering” in management. 

In addition, the strengths and weaknesses analysis mainly focuses on the enterprise’s strengths and its comparison with competitors. In contrast, the opportunities and threats analysis focuses on the changes in the external environment and their possible impact on the enterprise.

SWOT analysis can be widely used in all aspects of a manager’s career. For example, in job hunting, SWOT analysis can clarify one’s strengths and weaknesses and discover opportunities. 

In marketing, SWOT analysis can enable an enterprise to discover market opportunities, avoid threats, or reduce losses. 

In strategy formulation, SWOT analysis can provide a deep understanding of the environment faced by an enterprise and lay the foundation for strategy matching.

Through the proper application of SWOT analysis techniques, companies can formulate scientific countermeasures, find the right target for management, prescribe the right medicine, and then control the entire management process.

Management Application of Hampton’s Law

Just as control begins at the end of the plan, the decision begins at the end of the control. This response is not focused, and the action is hardly proactive. 

In the face of fierce market competition, a SWOT analysis of China Telecom may provide a sober and objective understanding of the management application of Hampton’s Law.

strengths and weaknesses of China Telecom

Since the mid-1980s, China Telecom has experienced more than 20 years of rapid development and formed economies of scale

Although it has undergone a series of reforms during this period, China Telecom still has strong competitive and development advantages. 

Reforms include:

  • Separation of post and telecommunications.
  • Separation of government and enterprises.
  • Divestiture of mobile paging.
  • Splitting and reorganization.

This is mainly reflected in customer resources, network infrastructure, talent pool, service quality, etc.

Competition In China’s Telecom Market

After introducing the competition mechanism in China’s telecom market, China Telecom competed fiercely with operators such as China Mobile, China Unicom, and China Netcom. 

After the north-south split of China Telecom, while retaining most of its original fixed telephone network and data communication business, it inherited most of its customer resources. 

It maintained good customer relationships and occupied an absolute advantage in the market.

Quality Of China’s Network Facilities

China Telecom’s basic network facilities are relatively complete. 

Over the past 20 years of reform and opening up, China Telecom has built a basic transmission network, access network, switching network, data communication network, and intelligent network.

Those with high speed, large capacity, certain scale, and advanced technology cover the whole country, mainly with fiber optic cable supplemented by satellite and microwave.

Development Of China Telecom

China Telecom has cultivated and reserved many management and professional talents with strong telecom management, technical ability, and reasonable structure during its development.

China Telecom has also accumulated rich operation and management experience, with long-accumulated network management experience, good operation skills, and a complete service system.

The Service Quality Of China Telecom

The service quality of China Telecom has been improving day by day. China Telecom has set up a group customer service center to solve the needs of cross-provincial and municipal group customers to access the network. 

China Telecom has also established a one-point acceptance and one-stop purchase service system to facilitate users to the maximum extent. 

Immediately afterward, China Telecom launched the first-question responsibility system to solve the problem of mutual complicity and shirking of responsibilities in providing services to users.

Shortcomings and Developments In the China Telecom

This law inspires people that they will not have the initiative to act if they do not have a targeted response. China Telecom has abundant customer resources, perfect network facilities, and a large pool of talent. 

It lacks the strategic concept, innovative concept, human resources development and management, human environment construction, and institutional market environment necessary for the development of modern enterprises. 

At present, China Telecom’s disadvantages are mainly in the following aspects:

The Contradiction Of Enterprise Strategic Management And Development

On the one hand, the decision-making level of enterprises only pays attention to the current tactics and strategies, ignores the long-term strategy, annihilates the daily operation of things, and can not see the big picture. 

On the other hand, enterprises lack the complex and changing environment of business operations strategy planning talent.

The Contradiction Of Innovation And Development Within The Enterprise. 

The functional business process, management, and organizational model oriented to the planned economy have shown incompatibility with rapid development.

And these gradually become the main factors restricting telecom enterprises from participating in global competition.

China Telecom’s Existing Infrastructure's Inability To Provide Users With Distinctive Services

Although China Telecom has a relatively complete network infrastructure, most of this is not built according to the market’s actual needs but to meet universal service needs.

The Split Relegates China Telecom From The Main Telecom Company To A Regional Telecom Company

China Telecom’s main position will be fixed in the southern market, while the new China Netcom will occupy the northern market. 

Even though affected by the split, China Telecom is still strong but lacks a national network to carry out nationwide operations.

Future Opportunities For China Telecom

The rapid development of China’s national economy and its accession to WTO will provide unprecedented development opportunities for China’s information construction and communication development. 

The development also provides huge opportunities for China Telecom. The main manifestations are:

GDP

In 2005, GDP and social welfare income increased by 195.5 billion yuan and 159.5 billion yuan, respectively, accounting for 1.5% and 1.2% of GDP in that year.

Improvements

With the continuous improvement of laws and regulations in the telecom industry, the telecom industry will enter a new stage of legal management, creating a fair and orderly competitive environment for developing China’s telecom. 

With the soundness of the telecom industry’s legal system, the government’s economic function will undergo a fundamental change. 

The government will hand over the investment decisions and production and operation rights of enterprises to them so that they can stand the test of the market economy.

Government’s Strategies

The Chinese government’s strategic decision to vigorously promote the national economy and social information has created a historic opportunity for the development of China Telecom. 

The “Three Major Internet Projects” have created an information industry market with a strong consumption capacity in China. 

The projects create a favorable environment for China’s information industry market and make China one of the largest information industry markets in the world.

Accession To The WTO

China’s accession to the WTO and the gradual opening of the telecommunications market to the outside world will speed up the internationalization of enterprises. 

This accession also facilitates enterprises’ management, operation mechanisms, and personnel training in line with international standards.

Potential Developments

The telecom market has huge potential. However, China’s uneven economic development, regional differences, and consumption levels determine the multi-level and diversified demand for telecommunications. 

However, the rapid development of communication technology has facilitated network upgrades and new services for telecommunication companies. 

This technology also develops new business potential with the combination of a fixed telephone network and computer communication and stimulates new consumer demand. 

Thus, on the whole, China’s telecom market breeds huge demand potential.

Issuance Of Mobile Licenses

The issuance of mobile licenses. China will have four integrated telecom operators capable of operating fixed, mobile, data, and other basic telecom services. 

The mobile sector is the most promising and competitive communication sector and will be a must for all telecom companies. 

Once China Telecom gets a mobile license, the mobile sector will be another major business for China Telecom.

Potential Threats To China Telecom

Opportunities and threats go hand in hand. The impact of any event is relative, and China Telecom will face great threats while welcoming great opportunities, specifically in the following areas:

The Competition Pattern Of The Telecom Market

The competition pattern of the telecom market is shifting from local to comprehensive and simple to diversified. 

First, in terms of competition trends, domestic market competition will transition from price competition to core competence innovation competition. 

During the transition period, market share grabbing will become the market followers’ development focus. 

Secondly, the pressure of international capital competition will also gradually increase after the WTO. As a result, foreign telecom operators will achieve globalization of services through mergers, alliances, and acquisitions at an accelerating pace. 

Value-added services such as ICP, email, database, fax, and video conferencing in the Chinese telecom market will bear the brunt of the bigger impact on the stable growth of telecom companies.

The Talent Drain Of China Telecom Is More Serious

Many companies at home and abroad have adopted policies such as high salaries and benefits to attract Chinese telecom talents, resulting in a serious brain drain. 

This phenomenon has still not been solved. The flow of talent is the inevitable result of competition and is a key issue related to the survival and development of China Telecom. 

Therefore, how to reflect the value of talents and bring into play their potential is an issue that China Telecom must face squarely.

Hamptons Effect FAQs

Researched and authored by Zezhao Fang | LinkedIn

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