general The iPhone Versus the iPhone By strategystreet.blogspot.com Published On :: Mon, 07 Feb 2011 22:31:00 +0000 After nearly four years, AT&T has lost its exclusivity on Apple’s iPhone. It has been a great run. Now AT&T faces the formidable competition of Verizon, who started offering the iPhone in February of 2011. Market shares are about to shift. Let’s look at how they might change.Market shares among established customers shift for one of two reasons. (See Audio Tip #40: The Components of Market Share Change" on StrategyStreet.com.) First, a competitor may “win” market share by offering a benefit that more than half of the market suppliers do not offer. On the other hand, market share may shift away from a competitor if it “fails” its customer relationship and opens that relationship to other competitors. A company “fails” a customer relationship when it refuses, or is unable, to offer something that half the other competitors in the market can or will offer. AT&T garnered much of its share gain over the last four years with a “win.” That “win” was due to its exclusive offering of the Apple iPhone. While it won business with the iPhone, it developed a reputation for problems in the quality of its services. iPhone users tended to overwhelm the AT&T network and cause interruptions and dropped phone calls. AT&T’s customer service has been suspect as well. Still, its market share has grown with the iPhone, primarily at the expense of the smaller carriers. Its market share growth due to the exclusive on the iPhone offset its “failures” in its network and customer service. Now Verizon enters with its own version of the iPhone. Today, any customer who wants an iPhone can choose either the largest competitor in the market, Verizon, or the second largest competitor, AT&T as his or her carrier. So, Verizon can “win” market share against the smaller competitors as well. These competitors, such as Sprint, Virgin Mobile and others like them, do not offer the iPhone and are unlikely to do so soon. Verizon should also be able to gain share at the expense of AT&T. Here’s how. iPhone-using customers who are dissatisfied with their current service with AT&T now have a viable, high quality competitor offering an equivalent service with the same phone. Some of these customers will leave AT&T because they perceive that AT&T’s services are not up to the standard of the other competitors, especially Verizon’s, and migrate to Verizon. This is a phenomenon we call “flight to quality.” This “flight to quality” is also an example of a “weak win,” where a competitor gains share only after an incumbent supplier has “failed” the customer relationship.This “flight to quality” is unlikely to be dramatic. A company can “win” share quickly with a unique Function. On the other hand, a “flight to quality” usually brings share gains in dribs and drabs. It produces share gains slowly, over time, because of inertia in the customer relationships. This inertia allows AT&T time to get its house in order before it suffers a great deal of customer immigration. (See Video #36: Probable Priorities for Innovation in Hostile Markets on StrategyStreet.com.) Full Article ATT competitor success and failure customer analysis customer purchase decisions market share volatility product innovation Verizon
general Direct Edge: A Transformer Next Leader Product By strategystreet.blogspot.com Published On :: Thu, 10 Feb 2011 22:29:00 +0000 A Next Leader competitor is in an extremely fortunate position. A Next Leader is a competitor or product that offers much better than industry standard performance for a low price to a specific subset of industry customers. While offering better benefits to some customers, it may reduce benefits for others. But all Next Leaders offer low prices. The Next Leader can do this because it has a very low cost structure. (See “Video #22: Definition of Next Leaders” on StrategyStreet.com.) Next Leaders do not appear in many industries. When they do appear, they can change an industry, whether the industry is in manufacturing, retail or service. For example, Toys R Us invented the Toy Retailing Category Killer, a Next Leader product. Home Depot has done much the same in hardware retailing. Other Next Leaders include the early Apple personal computer, Intuit personal financial management software, Jiffy Lube in auto services and Domino’s Pizza.We have studied many Next Leader competitors. Our study has suggested there are two kinds of Next Leaders products: Reformers and Transformers. A Reformer product is a type of Next Leader that reduces the benefits for the user while increasing benefits for the buyer, compared to the industry’s Standard Leader product. Jiffy Lube and Domino’s Pizza would both be Reformer Next Leader competitors. The second type of Next Leader competitor, Transformer products and companies, increase the benefits for the user of the product but offers, at least initially, fewer buyer benefits than the Standard Leader product. Toys R Us and Home Depot are two examples of Transformer Next Leader competitors.Direct Edge is an example of a Transformer competitor. It offers its customers very fast securities trading on virtually any platform, from computers to smart phones. It is a young electronic stock exchange and it is having a big impact on securities trading. Its first noticeable impact is in market share. As recently as five years ago, the New York Stock Exchange accounted for 70% or more of the trading in the stocks listed on its exchange. Today, the stock exchange handles 36% of those trades. (See “Audio Tip #85: Evaluate the Company's Success in Penetrating each Price Point in the Market” on StrategyStreet.com.) Twelve other public exchanges, several electronic trading platforms and many “dark pools” command the rest of the market share in NYSE listed stocks. Direct Edge came into existence during 2010. Several brokerage firms and other financial players formed Direct Edge to offer a counter veiling power to the New York Stock Exchange and Nasdaq. Direct Edge now owns 10% of stock trading in the United States.Direct Edge is not only big and fast-growing, but inexpensive as well. It has ready access to the share trading of its brokerage house and hedge fund owners. It operates many banks of state-of-the-art computers in warehouse-type facilities in New Jersey rather than in more-expensive New York. And, despite its size, it has fewer than one hundred employees.The evolution of these non-traditional exchanges has resulted in declining trading costs and much faster trading times for all customers. Next Leaders do that. Full Article competitor success and failure Direct Edge market share new product development price points
general Constrictions in Components Supply Support Higher Prices By strategystreet.blogspot.com Published On :: Mon, 14 Feb 2011 21:54:00 +0000 Years ago we were doing some work in the roofing business. In one study, we were working on the asphalt shingle roofing manufacturing business. At the time, this was a terrible business. Returns were low, growth rates were modest, at best, and there was a good deal of overcapacity in the industry. Then the industry caught a break. A shortage in asphalt developed. This shortage of asphalt rolled through the asphalt shingle plants and restricted their output. Immediately, prices jumped, returns became attractive and industry participants breathed a sigh of relief. Unfortunately, this asphalt shortage did not last very long. The industry shortly returned to its previous hostile condition. (See the Perspective, “What Ends Hostility?” on StrategyStreet.com.)A shortage in any component, or labor, will restrict industry capacity and tend to raise prices. A labor shortage is, in part, responsible for some of the high prices in mining today. Miners work in areas that are often hard to reach. They also are skilled employees. The run-up in commodity prices, especially those related to ores such as silver, gold and copper, has increased the demand for these skilled miners. In addition, the mining industry faces competition for skilled workers from the oil and natural gas industries, which are also growing. Mining companies are now going to great lengths to attract and retain these skilled workers. Some of these miners are now earning 25% more in compensation than they were a year ago. Some companies are flying workers to and from remote mines. For example, BHP Billiton plans to fly 500 workers from Brisbane, about 500 miles away, to a coal mine site that they are opening and then fly them back home after a couple of weeks. If this commodity boom continues, the industry’s total capacity will be determined more by labor availability than by its more traditional measures of capacity. (See “Audio Tip #117: Capacity Constraints and Pricing” on StrategyStreet.com.) Full Article BHP Billiton change in capacity pricing productivity improvement
general Apple Gets Crossways with App Developers By strategystreet.blogspot.com Published On :: Thu, 17 Feb 2011 22:52:00 +0000 Recently, Apple rejected a digital book application from Sony. The disagreement here is over how and when Apple collects for its services. Apple is playing a dangerous game.In theory, Apple has the right to insist, under its terms for developers, that any app, which offers customers the ability to purchase books outside of the app, offer the ability for customers to purchase within the app at the same time.Here is the rub. In its application, Sony sends customers to its own web site where they complete the purchase of a book. By routing the customers to its own web site, Sony is able to avoid a payment of 30% of revenues to Apple.Others, including Amazon, with its Kindle, and Barnes & Noble, with its Nook, have been able to sell e-books by sending users to the companys’ own web sites. Apple simply was not enforcing its policy requiring developers to use its in-app purchasing feature to buy new content.A 30% charge on revenues is a high price to pay Apple. Apple may be setting itself up for future loss of market share by enforcing this policy. If the Android platform does not put the same requirement on its app developers, the developers will have a strong incentive to avoid the 30% charge by encouraging customers to purchase using an Android device rather than an Apple device. Alternatively, the application developers may charge a higher price for purchases through Apple.Apple’s unique strength has been its superior list of available applications. Apple’s enforcement of this requirement to purchase inside the app so that Apple can collect 30% of the revenues puts at risk its major advantage. Apple needs to compromise here by charging a lower price or no price at all. After all, it already makes high profits on its hardware and software product combination. It also makes profits on many of the downloaded apps. The application developers are customers too. Why make their life difficult? Does the benefit Apple provides a seller justify 30% of revenues? Sounds pretty rich. Full Article Amazon Apple Barnes and Noble competitor success and failure customer segmentation industry leader pricing strategy product innovation Sony
general But Can You Control Other Entrants? By strategystreet.blogspot.com Published On :: Wed, 23 Feb 2011 20:01:00 +0000 The United Autoworkers (UAW) is on a new campaign. The union plans to organize workers in hither-to non-union foreign-owned automobile plants in the United States. This campaign may or may not work, but in the long run it will prove futile unless the union can compete in the international market, against all international auto workers. There are 575,000 autoworkers in the U.S. Nearly 20% work for foreign-owned plants. All of these plants are non-union. The foreign-owned plants were intentionally placed in right-to-work areas, many in the South.The UAW is likely to have some difficulty succeeding with this campaign. The non-union workers already earn highly competitive wages and benefits. To date, these U.S. workers in plants owned by Toyota, Volkswagen, Hyundai and Honda have shown little interest in unionization.Why would the union be so interested in this initiative? To preserve its membership. The traditional problem with unions is less the rate of wages they demand and more about the work rules they impose. These work rules reduce the productivity of the unionized plants. That has certainly been the case in the U.S. auto industry. As a result, the UAW is losing membership as UAW auto plants in the U.S. close under the onerous costs the UAW plants carry. If the union can succeed in unionizing the domestic foreign-owned auto plants to the same extent they have unionized the domestic manufacturers’ plants, they will be able to impose the same work rules and produce roughly the same productivity. The result should, in the union’s eyes, be a reduction in the rate of jobs lost in the union.But there is a problem here. The UAW has already seen that it was unable to stop new non-union plants in the U.S. How will it stop future non-union domestic plants? O.K., let’s say they can do that. Will they also be able to stop all foreign non-union plants from becoming established and growing? Certainly not. Unless the union membership can compete on an international basis with competitive costs and productivity, this unionization effort is wasted money. If it succeeds, the U.S. loses more plants to plants located offshore. Union membership still falls.It seems that one of the problems for unionized employees is one of definition. Union members often call their compatriots in competing companies “brothers and sisters.” These are certainly not brothers and sisters. In a marketplace they are competitors. Union employees have to be able to beat, or at least stalemate, these competitors or lose their jobs. This is true as long as the UAW can not control the entrance of other less expensive competitors, either in the U.S. or elsewhere.The long history of the DRAM semiconductor market illustrates this. The U.S. manufacturers of DRAM semiconductors faced intense competition from the Japanese in the 1980s. The domestic industry succeeded in slowing the Japanese by using the International Trade Commission. Then arose new and equally troublesome problems. These problems were DRAM semiconductor facilities in Taiwan and Korea. Eventually, the U.S. industry evolved to the point where it had only one domestic producer of DRAM chips. Intel was one of the early competitors to get out of that market to focus its resources in the more complex, and much more profitable, domestic micro-processor business. SX4MBURBCAJQ Full Article business skills Honda Hyundai Toyota UAW Volkswagen
general The Japanese Pay the Price By strategystreet.blogspot.com Published On :: Tue, 01 Mar 2011 00:34:00 +0000 The figures are in for U.S. auto sales in 2010. The biggest winners in percentage growth were Hyundai, at 24%, and Ford at 20%. Toyota lost .4% and Honda grew a mediocre 7%. The Japanese struggled in 2010.Earlier we wrote a blog about Ford’s ascendency and Toyota’s problems (see Blog HERE). Toyota is paying the price for failing its customers. Honda appears to be getting painted with the “failure” brush, though I doubt its punishment is deserved.I am actually using the word “fail” to mean something specific here. A company fails its customers when it is unable or unwilling to do something that at least half of its competitors can, or will, do for customers. Toyota’s troubles with accelerators, floor mats, and so forth, received extensive media coverage. This coverage clearly has had a negative impact on Toyota this year.Toyota’s struggles illustrate the win and fail dynamic. In our terms, a “win” occurs when a company is able to do something that the majority of its competitors either can not or will not do. Wins account for a good deal of market share growth in a fast-growing market, but are less important in more mature markets. In a more mature Stable market and, especially, in all Hostile markets, failure moves a significant amount of market share.Here is what this means. The decision to change a supplier is really two decisions. The first is the decision to leave a current supplier and the second is the decision on which new supplier to take on in your relationship. In the average Stable and Hostile marketplace, more market share moves on failure than on wins. This means that before an established customer will change suppliers, its current incumbent supplier must “fail” the relationship in some way. This failure, then, opens up the customer’s relationship to competition among other potential suppliers. Whichever supplier gains this customer’s volume really did so only after the incumbent failed. We call this gain a “weak win.” The “weak win” would not have happened on a straight-up comparison of performance and price of the new supplier versus the old. The gain only happened after the incumbent clearly failed the customer and then opened the relationship to someone new.Toyota’s failure was largely a failure of Reliability. It clearly lost share. The companies that gained this share from Toyota, Ford and Hyundai among them, enjoyed some degree of a “weak win” in the domestic automobile market. They may have “won” market share as well, but my guess is that most of their share gains from Toyota fell to them from Toyota’s “failure.” Full Article competitor success and failure customer analysis Ford Honda Hyundai industry evolution market share market share volatility Toyota
general Cost Reduction by Redesigning the Product By strategystreet.blogspot.com Published On :: Thu, 03 Mar 2011 23:53:00 +0000 Over the last several years, we have studied many examples of cost reduction initiatives to improve productivity and create economies of scale. In simplest terms, there are four actions that improve productivity and economies of scale. First, reduce the rate of cost you pay for an input. Second, reduce the inputs that do not produce output. Third, reduce unique activities or components in products and processes by redesigning the products and processes. Fourth, spread fixed cost activities over new product output. The cellular telephone carriers are introducing measures to reduce their costs by redesigning the product.The wireless carriers use cellular towers to broadcast their signals. The cellular product design offers signals traveling long distances, primarily for voice and for relatively low data speeds. A cellular tower is expensive but capable of sending a signal for several miles. This cellular technology worked well until the evolution of the smart phone. The growth of the smart phone has put very high demands on the cellular tower infrastructure because of the heavy data usage it brings to the market. Since 2010, data has taken over the majority of network traffic from voice communications. Now the carriers and, in particular, AT&T with its Apple iPhones, is having difficulty keeping up with the growth in demand. AT&T today and, likely a few others in the future, has found a potential innovative solution, adding Wi Fi access points. These Wi Fi access points are ideal for heavy data traffic sent at high speeds over relatively short distances. Wi Fi access points transmit signals over a few hundred feet. The Wi Fi access points are smaller, easier and cheaper to install than are cellular towers. This low-cost approach appears to make sense in areas with high density of users. AT&T has placed them in New York’s Time Square and Rockefeller Center, in downtown Charlotte, North Carolina, in neighborhoods surrounding Chicago’s Wrigley Field and in San Francisco’s Embarcadero Center. But there are some drawbacks to Wi Fi access points. Sometimes, a user has to take several steps to connect to a Wi Fi access point. Signals from the Wi Fi access points may interfere with one another, if signals come from multiple networks. Some smart phones do not have Wi Fi capability. These disadvantages have, so far, held back Verizon Wireless’s adoption of this apparently low-cost approach to providing service.AT&T is leading this cost-saving innovation experiment. Their network strains force it to be creative and experimental. AT&T saves costs by redesigning the product itself using a less expensive technology with some shortcomings. If the AT&T experiment proves both cost effective and acceptable to cellular customers, every other wireless carrier will be forced to adopt it. And since a Wi Fi access point is largely a fixed cost, the wireless carriers with the highest density of membership within the Wi Fi area will have the lowest cost per unit. In most areas of the country that is likely to be either Verizon or AT&T. They will end up getting a unit cost advantage over their smaller competitors…if this works. Full Article ATandT cost management cost reduction economies of scale industry leader productivity improvement Verizon Wireless
general The Advent of the F-commerce Evolution By strategystreet.blogspot.com Published On :: Mon, 07 Mar 2011 21:21:00 +0000 Don’t look now, but we are entering the world of F-commerce. What is that, those of you older than thirty will ask? F-commerce is selling through a Facebook page. The trend is early yet, but likely to turn into a stampede. JC Penney and 1-800-Flowers.com both have established full E-commerce stores within their Facebook page. The stores include check-out and other features you typically find on an E-commerce web site. Facebook claims that twenty-five of the largest retail sites are already integrated with Facebook, as are seventeen of the twenty-five fastest growing retail sites. Think of Facebook as a virtual mall. There are all kinds of people wandering around there, talking to one another. Facebook offers a nice opportunity for a company to interact with customers and allow them to bring their friends into the conversation to evaluate styles and colors and so forth. If a company integrates its storefront with the Facebook page, its Facebook “friends” will never have to leave the virtual mall in order to purchase. This is an important product innovation.Product innovations reduce customers’ effective costs in one of three ways: add information about the product and how it is to be used, reduce the resources the customer must use with the product, or improve the customer’s experience with the product. This innovation improves the customer’s experience with the product by increasing the customer’s sense of security in using the product. It allows the customer to get her friends’ opinions on what she is purchasing. Secondarily, the Facebook store reduces the customer’s resources used with the product by reducing the time the customer must spend in using the product. The innovation reduces the steps the customer must take to make a purchase and it places the company’s product closer to the customer’s location.This is going to be a train to the destination of millions of customers. Every mainstream retailer has to get on board. Full Article competitor success and failure customer purchase decisions customer segmentation Facebook JC Penney management skills new product development
general The Long and Arduous Journey of the Airline Industry May be Reaching an End By strategystreet.blogspot.com Published On :: Thu, 10 Mar 2011 22:50:00 +0000 The government deregulated the airline industry in 1978. Since that time, the basic pricing in the industry, as well as airline fortunes, have been more or less continuously on the downward slope. It has been a very long trip down. The industry may be heading up again, though. In the third quarter of 2010, the average domestic airfare was 11% higher than a year earlier. Profits returned to the industry in 2010 behind higher prices. In some part, these higher prices were the result of the additional fees that most of the domestic carriers charged passengers for checked baggage, better seating, rerouting and so forth. Still, the industry was able to hold its higher prices.These prices are holding because the major industry players are less enamored of discounted flying. All of the big airlines are finding ways to extract prices from industry customers. Now that airline capacity utilization is high, the industry is more careful about capacity additions. Higher prices are here to stay.The consumer still is far ahead. Even at these higher prices, ticket prices are a bargain. In fact, ticket prices, adjusted for inflation, are 20% below the levels of 1995. The industry has continuously stripped benefits from the base product in order to save costs. In 2010, the industry added back a few of those benefits (for example, economy plus seating) for an additional charge. We may see more of that over the next few years. Full Article change in capacity customer segmentation hostile market overcapacity pricing strategy
general News Corp Responds to the Market for “Free” By strategystreet.blogspot.com Published On :: Mon, 14 Mar 2011 23:15:00 +0000 The newspaper industry has faced a mighty challenge over the last few years. There is so much “free” content to complete with them. Newspaper revenue continues to plummet. Internet users are reluctant to pay for content. All the free content, supported by advertising revenue, has decimated the newspaper industry. The industry’s cousin, the magazine industry, is not far behind.This trend can’t continue forever. Already, many people are asking themselves how much they can trust the information on the internet. The need for Reliability drives the demand for Snopes.com. How many “free” web sites can earn enough from advertising to pay all their bills? An effective industry answer to “free” may be forthcoming in the News Corp online newspaper called “The Daily.” The Daily will cover general news, sports, arts and opinion in a format dedicated to the Apple iPad. In addition to the written content, the product will carry high definition video and 360 degree photos. The same product will be available in a few months for the Android-based tablet computers. The Daily will sell for $.99 a week, or $39.99 a year, a very low price compared to newspapers. With this model, the product receives revenues both from the subscribers and from advertisers. Subscribers have the Reliability benefit of knowing that the content producer cares about facts, accuracy and readable writing style. Advertisers pay for eyeballs that follow a Reliable product.The Daily is what we call a Next Leader product. This is a product that offers much better than industry standard performance for a low price to a specific subset of industry customers. The Next Leader can offer the very low price because it has a much lower cost structure than is typical in the industry. There are two basic types of Next Leaders. The first are Reformer products. This type of Next Leader product reduces the benefits for the user (usually Function benefits) while increasing the benefits for the buyer (usually Reliability and Convenience benefits) compared to the industry Standard Leader product. The second of the two types of Next Leader products are Transformer products. These products increase the benefits of the user but offer, at least initially, fewer benefits to the buyer than the Standard Leader product offers. The Daily is a Reformer product. It offers the Convenience of formatting fit for a tablet computer so it provides easier access for a segment of the industry’s customers. Its low cost structure results from its elimination of printing presses and distribution costs.If this new tablet-based product offers a quality read, it will hasten the day when virtually every newspaper and magazine is offered first online and only secondarily in hard copy. The online versions will come at a fraction of the cost of the hard copy versions. Readership is certain to grow. Full Article competitor success and failure customer segmentation industry evolution low-end competitor new product development News Corp price points
general Whirlpool and Electrolux Blink By strategystreet.blogspot.com Published On :: Wed, 23 Mar 2011 21:16:00 +0000 The home appliance market has been a difficult place to compete during several periods over the last thirty years. It is tough again today. Sales of large appliances have fallen steadily since 2007. Competition is intensifying with the pressure of the South Korean competitors, LG Electronics and Samsung Electronics, on Whirlpool Corp and Electrolux AB. Whirlpool and Electrolux are suffering from rising costs for steel, copper, plastics and other raw materials. To offset these cost increases, the two companies plan price increases of 8% to 10% in the spring. The problem: the Koreans aren’t playing ball. The two South Korean firms are pricing aggressively and have been doing so since Thanksgiving 2010. The South Koreans are formidable competitors. At one time, LG was known as Lucky Goldstar, a seller of low-end, cheaply made, products. Today, it has a much better brand name and sells quality products. Samsung does as well. It is a leader in the large screen TV market. The products that the South Korean companies are pricing aggressively are not the low-end products. They are the mainstream, heart-of-the-market, products. The domestic U.S. market is slow growing. So is the market in the rest of the world. The North American market is growing 2% to 3% a year. Europe is growing 2% to 4%, while Latin American and Asia grow in the 5% to 10% range. Large appliance companies will have no trouble supplying all the capacity the market needs at these demand growth rates. The industry is likely to have excess capacity for the foreseeable future.If the two Western competitors institute their price increases without the two South Korean companies in a lock-step march, they will be in a Leader’s Trap. A Leader’s Trap occurs when one or more of the leading companies in an industry hold its prices high in the mistaken belief that customers will stay loyal despite the lower prices of competition. Leader’s Traps rarely end well. Either the Western competitors will lose market share or they will ultimately rescind their price premiums. These four giant large appliance competitors are peers of one another. The only way to stop the Koreans from discounting against the Western competitors is to have a cost structure that scares them out of the discounts. The discounting competitors have to see that their discounts will only cost them margins because the other peer competitors in the market will match their low prices since they have equally low cost structures. Full Article competitor success and failure cost reduction Electrolux leader's trap LG Electronics market share price umbrella Samsung Electronics Whirlpool
general Amazon's Blockbuster Innovation By strategystreet.blogspot.com Published On :: Wed, 30 Mar 2011 19:25:00 +0000 In 2005, Amazon introduced its Prime Free Shipping program. This yearly subscription program promised free two-day shipping on any purchase the subscriber made from Amazon. Five years later, 13% of Amazon’s 130 million active users are Prime members. More significantly, 20% of the subscribers who purchased products from Amazon in the last twelve months are Prime subscribers. These Prime subscribers purchase two to three times as much as non-Prime subscribers over the course of a year. This Performance innovation removes an impediment to purchasing on Amazon. In fact, it increases the odds greatly that online purchases will be made on Amazon rather than on a competitive site. This has been a blockbuster innovation for Amazon. The innovation holds a special appeal to the larger customers in the market. The Prime subscribers may also offer Amazon an entry into a business that it has longed to gain, for several years, subscription video rentals. It appears that Amazon will introduce a streaming video product for its Prime subscribers. This new product will not cost the Prime subscribers any more than their normal subscription. Netflix’s Watch Instantly service cost about $96 a year so Amazon may have a price advantage on Netflix. Of course, Convenience and Price are only important provided Amazon offers equivalent Function, that is, streaming video content. We don’t know about that yet. Still, Amazon has proven to be an innovative company who can find ways to build a business in non-traditional ways. It continues to grab market share in the retail business. Full Article Amazon Blockbuster competitor success and failure customer analysis market share new product development pricing strategy
general The NYSE Stumble Offers a Lesson for All Leaders By strategystreet.blogspot.com Published On :: Thu, 07 Apr 2011 00:00:00 +0000 Recently, the New York Stock Exchange agreed to sell itself to the German exchange, Deutsche Boerse. For generations, the NYSE was the place to trade equities of the finest companies in the U.S. Its sale to a German exchange is a sign of how desperate its market situation has become. The NYSE’s fall offers some important lessons for a market leader in any industry. The NYSE’s market share has fallen out of bed. Six years ago, 75% of the traded shares of companies listed on the New York Stock Exchange traded on that exchange. Today, only 35% of those shares trade on the NYSE. This precipitous fall came because the NYSE fell behind in both service and price. The market changed and new competitors emerged. First, the market changed. High frequency traders, using computerized trading algorithms, do two-thirds of share trades today. These market-dominating customers demand the highest speeds in their transactions and the industry’s lowest prices. The New York Stock Exchange struggled to meet these requirements. Second, new competition emerged. There are roughly fifty trading venues which will provide these high-frequency traders with fast services and low prices. The majority of these venues did not even exist ten years ago. They sprang up using relatively inexpensive computers in low-cost outlying and suburban locations. These new trading venues offer newer, faster technology and lower prices than the NYSE. The NYSE held a price umbrella over these emerging firms. The new firms grew and became ever more capable. Today, they can compete and win in competition for even small trades. The New York Stock Exchange was a dominant market leader. Its precipitous fall holds lessons for all market leaders in any market. Among these lessons are these: 1. Always protect your relationships with the industry’s heart-of-the-market customers. These are the key, primary and secondary relationships with the industry’s large customers, those purchasing 80% of the industry’s unit volume. These key relationships usually hold 65% or so of the total industry sales. 2. Avoid consistent failure with these heart-of-the-market relationships, especially failures in function and price. Customers generally will not leave an established relationship until their supplier fails them. Any failure, especially consistent failure over time, opens the customer relationship to other competitors. 3. Parry fast-growing competitors at any price point. The fast growth of these competitors tells us that customers like what they offer. Their growth in share will not stop until the market leader itself puts an end to it. The NYSE has allowed many new competitors into its marketplace. It would have been much easier to stop them when they were much smaller or, indeed, even before they entered the market. This market will consolidate again into far fewer competitors. But now it is going to be a bloody fight. 4. Fix the products that are losing share in the heart-of-the-market. Customer retention is important in any market, but it is critical in markets where prices are falling. The first demand of product innovation is to fix problems that cause the company to lose customer relationships. 5. Cover any price point your heart-of-the-market customer purchases. Companies often have price point biases, either against a low price point because it pulls down margins, or against a high price point because it makes operations less efficient. If the heart-of-the-market customers are buying the price point, you have to cover it. 6. In a falling price environment, develop pricing that discourages competition. This pricing can, and should, involve more than simple reductions in list prices. There are several components of a price. The NYSE can use these components to beat back many of these competitors. In a low, or falling, price environment, the only real function that price serves is to discourage competitors from competing for your customers. Ultimately, low prices push competitors out of the marketplace. This takes a long period of time when there are as many competitors as the NYSE faces today. 7. Develop and exploit economies of scale to support the falling prices the company faces and to maintain the best returns in the industry. The NYSE is still the largest competitor in the market. It no longer enjoys dominant share, but it is still large enough to create a more productive cost structure, especially by matching benefits and overhead costs to customer segments and eliminating benefits that customers do not need. Full Article New York Stock Exchange
general Another Creative Pricing Scheme By strategystreet.blogspot.com Published On :: Wed, 20 Apr 2011 23:29:00 +0000 It is not often that you see companies using really unusual pricing to build future business. Here is one that I like. Every price has three and, usually four, components: the Benefit Package, the Basis of Charge, the List price and usually some Optional Components of price. The Benefit Package includes all of the Function, Reliability and Convenience benefits associated with the main product. The Basis of Charge is the way the company quantifies the unit of sale that it prices with the List Price, which is the stated price per unit of product sold. The Optional Components of price enable the company to leave the List Price unchanged, but to alter the value the company offers the customer by changing Functions, Reliability or Convenience benefits beyond those of the main product. The most creative pricing schemes usually involve the Optional Components of price. Recently, we described one of these Optional Components of price, a Call, offered by Continental Airlines. In this blog, we will describe a “Put” offered by Best Buy. A Put is an Optional Component of price that enables the customer to sell back a product to the seller at a stated price in the future. Best Buy recently introduced the Buy-Back program for various electronic gadgets it sells. This program adds a fee to the original List price of the product. In return for that fee, the customer gets the right to bring the product back for up to two years for a return value of a stated percentage of the original List price of the product. These percentages run from 20% to 50%, depending on the time of the return. The value of the return itself comes in the form of a Best Buy gift card. Best Buy hopes the customer will use this gift card to purchase an upgrade on the product that the consumer returns. This Put may be attractive to consumers concerned about the speed of technological innovation in electronic gadgets. The Put effectively reduces the future price of purchasing a new electronic gadget. It leaves the current List prices and future List prices unchanged. It also increases the odds that Best Buy will be the retailer who delivers the new technologically-advanced product. Full Article Best Buy business skills Continental Airlines customer analysis customer purchase decisions pricing strategy product innovation
general A Squeeze at the Top By strategystreet.blogspot.com Published On :: Tue, 26 Apr 2011 23:12:00 +0000 The very highest end of Parisian hotels includes such names as the Crillon, the Plaza Athenee and Le Bristol. There are four of these highest prestige hotels in Paris. Their prices start at Euro 750 a night. Average room prices run around Euro 1000 a night. These are among the highest prices for hotel rooms in the world. Still, occupancy rates run around 80%. Even in the doldrums of 2008 and 2009, they fell only to 70%. Something new is happening, though. The high end of the market is about to see a doubling in capacity as four new luxury hotels open over a three year period. Two are already open and two more will open over the next two years. There is a prospect for even more coming beyond this next two year window, as other competitors mull a market entry. Many experts believe that prices will hold steady despite the massive influx of new capacity. They cite an increase in demand to support their beliefs. This demand is to come from Chinese tourists upgrading from luxury boutique hotels and from the growth of major conference events. Really, though, it isn’t the price that is at issue with this new capacity. It is margins. This new capacity, despite being at the very high end of the market, is coming faster than demand is growing. As a result, margins, if not prices, will fall. This margin squeeze has already started. The existing high-end hotels are spending money to upgrade their current offerings with celebrity-chef restaurants, branded spas and upgraded hotel rooms. Even if prices stay the same as they are today, margins will fall until demand fully catches up to this new capacity. While it is always margins that suffer when the growth of capacity outstrips the growth of demand, I would not want to bet on prices holding as steady as these analysts expect. My guess is that industrial conferences who can afford to place their attendees at the highest end hotels will also be able to negotiate room price discounts over the next couple of years. Full Article
general Cable T.V. and Customer Retention By strategystreet.blogspot.com Published On :: Wed, 04 May 2011 18:46:00 +0000 Recently, I decided to test the waters for a less expensive television experience. I have been a loyal cable subscriber for thirty-five years, but friends have told me that other systems, especially satellite, are cheaper. I went online to DirectTV.com to check their packages. We have been spending about $112 a month. The equivalent package from DirectTV appeared to be about $81 a month. I was shocked at the size of the price difference. DirectTV was more than 25% less expensive than Comcast, my cable supplier. Given the size of these price differences, I did some investigation in what is happening in the market. Today there are four potential television service suppliers: cable, telephone companies, such as AT&T and Verizon, satellite and internet companies, such as Netflix and Hulu. The cable companies command 60% of the market. Phone companies have less than 15% of the market. The satellite firms, including DirectTV and Dish, control most of the rest. The internet firms are still small, though they may become larger in the future. Over the years, the cable companies have held a high price umbrella over the satellite companies. Now the phone companies are getting under this umbrella as well. The cable companies lost two million subscribers last year. The phone companies picked up most of that loss, while the satellite firms picked up a bit. The combination of the phone and satellite companies took virtually all the growth there was in the market. Customer retention is a big deal. Even in fast-growing markets, you would like to be able to retain your customers when competitors seek them out. The cable companies have sought to retain customers by emphasizing more services to higher spending customers. These customers tend to be less price-sensitive. It appears that the cable companies are going to have to alter their courses. They simply can not afford to let their competitors take away their market share. Eventually, the competition will be as big and as strong as they are. They will lose the market leverage that a leader enjoys. For examples see GM in autos, IBM in the PC market and U.S. Steel in the steel market. The T.V. market is speaking in clear tones. The phone and satellite companies offer a better value proposition. The cable companies have to listen soon. Full Article ATT Comcast Cable competitor success and failure customer segmentation DirectTV Hulu industry evolution Netflix price umbrella pricing strategy Verizon
general The Kindle with Special Offers…not your typical low-end product By strategystreet.blogspot.com Published On :: Mon, 16 May 2011 22:26:00 +0000 Amazon has introduced a low-end Kindle product, the Kindle with special offers. This Kindle sells for $114 compared to the standard $139 Kindle with Wi-Fi. This is not a typical low-end product. Low-end products offer fewer benefits than industry-leading products (we call these Standard Leader products) for either the buyer or the user of the product in return for a lower price. We call these low-end products Price Leaders. There are two kinds of Price Leaders. The first, called Strippers, strip out benefits for both the user and the buyer of the product in order to achieve a very low price. The second, Predators, offers the user equivalent benefits to the industry’s main product but fewer benefits for the buyer. On average, Price Leaders cost about 33% less than Standard Leader products. You will note that the Kindle with special offers does not fit easily into either of these two Price Leader categories. It reduces the user benefits by delaying the use of the product until the customer has viewed advertisements. There is no change to the benefits offered the buyer of the product. The Kindle with special offers deviates from the norms of Price Leader products with its level of discount. The Kindle with special offers sells for about 18% less than the standard Kindle product. The Kindle with special offers varies from the Price Leader pricing norm in another interesting and important dimension. Some of these “special offers” are really good deals for the average Amazon customer. In one particularly interesting offer, Amazon will sell an Amazon Gift Card worth $20 for just $10. So, an avid fan of the Amazon web site receives additional user benefits with this new low-end product. In many cases, these special offers may more than offset the disadvantage to the user of a delay in using the product while the user views an ad. This new Kindle with special offers is a very creative product innovation. Congratulations to Amazon. Full Article Amazon customer analysis low-end competition new product development pricing product price points
general Cable T.V. and Customer Retention By strategystreet.blogspot.com Published On :: Wed, 25 May 2011 23:02:00 +0000 Recently, I decided to test the waters for a less expensive television experience. I have been a loyal cable subscriber for thirty-five years, but friends have told me that other systems, especially satellite, are cheaper. I went online to DirectTV.com to check their packages. We have been spending about $112 a month. The equivalent package from DirectTV appeared to be about $81 a month. I was shocked at the size of the price difference. DirectTV was more than 25% less expensive than Comcast, my cable supplier. Given the size of these price differences, I did some investigation in what is happening in the market. Today there are four potential television service suppliers: cable, telephone companies, such as AT&T and Verizon, satellite and internet companies, such as Netflix and Hulu. The cable companies command 60% of the market. Phone companies have less than 15% of the market. The satellite firms, including DirectTV and Dish, control most of the rest. The internet firms are still small, though they may become larger in the future. Over the years, the cable companies have held a high price umbrella over the satellite companies. Now the phone companies are getting under this umbrella as well. The cable companies lost two million subscribers last year. The phone companies picked up most of that loss, while the satellite firms picked up a bit. The combination of the phone and satellite companies took virtually all the growth there was in the market. Customer retention is a big deal. Even in fast-growing markets, you would like to be able to retain your customers when competitors seek them out. The cable companies have sought to retain customers by emphasizing more services to higher spending customers. These customers tend to be less price-sensitive. It appears that the cable companies are going to have to alter their courses. They simply can not afford to let their competitors take away their market share. Eventually, the competition will be as big and as strong as they are. They will lose the market leverage that a leader enjoys. For examples see GM in autos, IBM in the PC market and U.S. Steel in the steel market. The T.V. market is speaking in clear tones. The phone and satellite companies offer a better value proposition. The cable companies have to listen soon. Full Article ATandT Comcast Cable competitor success and failure customer segmentation DirectTV Hulu industry evolution Netflix price umbrella pricing strategy Verizon
general Nestlé’s Cost Reduction in the Coffee Business By strategystreet.blogspot.com Published On :: Thu, 02 Jun 2011 02:47:00 +0000 Nestle is the world-wide leader in the coffee business. They offer coffees at virtually all price points. They invented instant coffee in the 1930s. After the buffets of the commodity markets over the last few years, the company has created a global push to reduce its costs and to increase the quantity and quality of the coffee it buys. We have found four generic approaches to reducing costs. • First, reduce the rate of cost of a cost input. • Second, reduce the cost inputs that do not produce output. • Third, reduce unique activities and components in processes and the product • Fourth, spread fixed cost activities over additional product output Nestle is using the first three of these approaches in its world-wide investment in cost management. First, Nestle redesigned part of the process. Its scientists developed a new generation of Robusta and Arabica coffee plants for Mexico. The Robusta beans are relatively inexpensive and make up the bulk of the beans in instant coffee. The Arabica beans are more expensive, harder to grow and go to the higher end coffees. Today, Nestle has planted 100 thousand coffee trees in Mexico using its newly designed coffee trees. Once this experiment is complete, the company plans to distribute 220 million plants to coffee growers world-wide over the next ten years. The use of these new plants will enable Nestle to reduce its rate of cost for the beans it buys. The new plant design increases yields so it eliminates some inputs that do not produce the output of coffee beans. Many long-term coffee farmers are using older trees, which yield fewer beans and lower quality beans. Many of these farmers are leaving the industry since they cannot compete. This magnifies the commodity price problem Nestle faces. Nestle’s new trees fit the region’s climate. They resist disease and allow for larger and easier harvests. These trees will make coffee beans more consistently and predictably available. Nestle will give these trees to the farmers without asking for a firm long-term contract or ownership of any part of the farm. But it should be obvious that Nestle will engender a great deal of farmer loyalty with this program. Nestle also expects to reduce the rate of cost it pays for its beans with two other cost reduction initiatives. It will offer farming and investing advice to up to ten thousand farmers world-wide. As these farmers become more efficient, Nestle’s costs will drop. In addition, Nestle will also increase the amount of coffee it buys directly from the nearly 170 thousand growers who produce its coffees. This kind of foresight and innovation suggests why Nestle commands its market leadership. Full Article business skills competitor success and failure cost reduction Nestle productivity productivity improvement
general A Likely End Game to Hostility By strategystreet.blogspot.com Published On :: Wed, 22 Jun 2011 22:06:00 +0000 The hard disk drive business has been a lousy place to compete for nearly twenty-five years. It has been the graveyard of many competitors. Twenty years ago, there were eighty disk drive manufacturers. By the mid-90s, there were only fifteen. By 2001, there were eight, and today it appears there are only four. But the fact that we are at four competitors, especially the size of the leading competitors, means that the industry is likely to come out of its recurring bouts of overcapacity and hostility. As 2011 began, there were five hard disk drive manufacturers. Western Digital led the market with a 31% market share, followed closely by Seagate with a 29% market share. Hitachi enjoyed an 18% market share, while Samsung and Toshiba shared the remaining 22% of the market. Recently, Western Digital agreed to purchase Hitachi. This acquisition would bring Western Digital’s potential market share to 49%. The top two of the remaining four competitors would then have a potential market share of 78%. The top three would have more than 85% of the market. Hitachi was not just any other competitor in the market. It had a well deserved reputation for being the most aggressive price discounter in the market. Hitachi was the major reason that pricing stayed under pressure in the hard disk market. Western Digital’s acquisition removed the major discounter. In the past, acquisitions among the hard disk drive manufacturers brought somewhat better margins to the remaining players, but not as much market share as the acquisition would suggest. The reason was customers rotating other strong suppliers into their relationships to maintain low prices. With only four players left, and a dominant leader in the market, there is little purpose for the three followers to discount against Western Digital. A discounter might pick up some temporary share in a market saturated with “last look” arrangements, but it might face a very aggressive pricing response by one or both of the remaining leaders in the market. No, rather than discount, the economics for all the players would argue for firm industry pricing. That is the most likely outcome of this acquisition. Over the years, we have studied many industries in overcapacity. Overcapacity produces a hostile market, where returns are low and price competition remains intense. These kinds of markets end in one of two ways, either demand picks up and sops up the industry’s overcapacity, or the industry consolidates to the point where the top four competitors control 85% or more of the industry’s volume. The remaining players then demur from competitive price discounts. The majority of industries see demand growth pull them out of hostile conditions. There is one potential fly in this hard disk ointment. Computer tablets and other portable devices don’t use hard disk drives. Instead, they use NAND flash drives. These are solid state drives. They are more expensive than hard disks, have a much smaller form factor and are generally more reliable. Samsung, Toshiba and SanDisk are the leaders in this market. It could happen that Samsung and Toshiba, two of the four remaining hard disk drive suppliers, use low prices in the hard disk market to create customers for their more expensive flash drives. It is more likely, however, that these two companies, who are distant followers in the hard disk market, would prefer to see higher prices for hard disks. These higher prices on a competitive product would help some customers in the market transfer alliance to flash drives. This acquisition should be a good deal for the remaining four hard disk players. While some analysts have argued that the hard disk drive market will slowly die under the pressure of the growth in the applications of flash drives, industry observers still see an 8% per annum unit growth for this market over the next five years. That unit growth should come with better margins for the remaining players. Full Article acquisitions company strategy Hitachi industry leader overcapacity pricing strategy Samsung SanDisk Toshiba Western Digital
general The Mobile Phone Industry and Customer Retention By strategystreet.blogspot.com Published On :: Thu, 30 Jun 2011 00:14:00 +0000 The mobile phone industry’s growth has slowed. It is now operating more like a stable, moderate to slow growth market. This is particularly true in Europe. To face the challenge of slower growth in the industry, European mobile operators are turning to customer retention, but they are careful of the customers they seek to retain. The Europeans have observed that less than 20% of an operator’s customers generate to 80% of the operator’s total revenue. This pattern repeats itself in many industries. When we have seen these patterns in other industries, we have also noted that less than 10% of the total customers generate an astounding 50% of total revenues. These are the really important customers in an industry. A company must retain its key customers. In the mobile phone industry, as in most industries, the largest 20% of the industry’s customers are likely to be what we would call Core customers for the industry’s larger competitors. A Core customer allows supplier company to earn at least the cost of capital through a business cycle. The retention of these core customers is of paramount importance to long term company success. It costs a great deal more to find a new customer than to retain and build the relationship with a customer you already have. In the European mobile phone industry, carriers have found that it costs ten times more to acquire a customer than to retain one. The industry has found another important phenomenon associated with customer defection. Recent research has told it that defection is a social phenomenon. If defecting customers leave an operator, they usually are not quiet about it. They tell their friends. In turn, some of their friends defect as well. So, the loss of a Core customer to an operator will often bring with it the loss of several other Core customers. The mobile phone operators in Europe are working on retention by focusing particularly on those Core customers most likely to defect. These operators have analyzed the value of their customers and have assigned a rating to each customer. When a customer calls a call center, the information about the customer, including his rating, is readily displayed on the service representative’s screen. This customer specific information enables the service representative to respond with different value offers, depending on the importance of the customer. Most of these offers reflect lower prices for a potential defector. But the industry is responding to potential defections with more than simple price reductions. Some companies are developing personal calling rates and plans tailored to individual Core customer habits. One European company instituted this individual approach and cut its percentage of customers defecting each year in half, from 20% to 10%. The industry has found another important phenomenon associated with customer churn. Recent research has told it that defection is a social phenomenon. If defecting customers leave an operator, they usually are not quiet about it. They tell their friends. In turn, some of their friends defect as well. So, the loss of a core customer to an operator will often bring with it the loss of several other core customers. Customer retention is an important, strategic management imperative, even in fast growing markets Full Article competitor success and failure customer analysis industry evolution pricing product innovation
general Failures in Reliability Lead to Share Loss By strategystreet.blogspot.com Published On :: Wed, 06 Jul 2011 23:04:00 +0000 We have written several times before about the Customer Buying Hierarchy (i.e. customers buy Function, Reliability, Convenience and Price, in that order). We have also written, on several occasions, about companies winning and failing customers in a marketplace. In a stable market, failure of a supplier causes more market share to move than does another competitor’s “win” of market share against its peers. Most failures occur in Reliability. Recently, two of America’s paragon companies have failed their customers on Reliability and are now struggling to catch up. Other leaders have had a similar problem and have recovered nicely. Macy’s is a clear leader in the department store market. Over the last several years, Macy’s has purchased and integrated other large department store competitors. For example, in 2005 Macy’s purchased May Department Stores. As the company worked to integrate these acquisitions and obtain synergistic savings, their attention swerved from customer service. The company’s failings were greatest in customer interactions with the company’s sales associates. Nearly half of customer complaints focused on actions of sales associates. These are failures in Reliability. A customer expects to be well treated by a department store that charges relatively high prices for its goods. Macy’s failed to do that. The company’s market share began to drift lower as a result of these failures. Now Macys is investing a great deal more money and time into the proper training of its sales associates. This investment is beginning to pay off. A recent survey of customer satisfaction indicated that the company was making strides in improving its reputation. Still, it lags the performance of some of its important rivals. This is still a Macy’s work-in-progress. Wal-Mart is another industry paragon who drifted from its Reliability promises. Wal-Mart committed two notable sins. First, it removed some products that were important to its core customers. The company did so in an effort to improve the product mix and the margins a better product mix would bring. Some of its core customer volume began to drift away. The company also moved away from its aggressive pricing. Instead of every day low prices, the company began to promote deals on some products while raising prices on others. Customers didn’t like that either. Recently, a survey by a retail consulting firm has found that Target Stores offered prices below those of Wal-Mart. So, Wal-Mart has created Reliability failures in both product availability in its stores and its promise to have “always low prices, always.” The company’s market share has also drifted lower. Wal-Mart now promises to return to its core values and core customers. It is bringing back the products it once eliminated in favor of higher margin products. It is getting more aggressive in pricing once more. This, too, is a work-in-progress. Certainly, these leaders can recover from these miscues. We have seen other leading companies struggle with Reliability and yet recover nicely. For example, several years ago McDonald’s went through a period of time where it was losing market share. As the company examined the reasons for this market share loss, it noted that customers began to see its prices as high in the quick service restaurant industry. In addition, its products in stores had developed a reputation as being about the same as or, in some cases, lower in quality than some of its big competition. Under the leadership of a CEO well versed in operations, the company returned to its roots by emphasizing its core quality values and aggressive pricing. Today, McDonald’s is the unquestioned leader in the quick service restaurant industry. Many of its competitors struggle to keep up with McDonald’s. Most fail to do so. McDonald’s again has gained share in the industry over the last several years. McDonald’s success in reversing its Reliability failures suggests that the pathway is open for both Macy’s and Wal-Mart. They both should be able to enjoy similar success. The odds are they will. Full Article competition customer analysis industry leader Macy’s market share volatility McDonald’s pricing Target Stores Wal-Mart
general Does the Withdrawal of Capacity Help? By strategystreet.blogspot.com Published On :: Sat, 23 Jul 2011 01:04:00 +0000 As industry prices fall, and companies’ fortunes decline with the resultant squeeze on their margins, some companies, especially the leaders, seek to withdraw capacity from the market. The leading companies expect the capacity withdrawal to do two things: redress the imbalance between capacity and demand; and raise prices to more attractive levels because of this better balance. In practice, the withdrawal of capacity often fails to achieve either of these objectives. Whenever a leader in an industry reduces its capacity to force price increases, it must consider how competitors will respond. In many, if not most, cases low-cost competitors expand their capacity to make up for the withdrawal of capacity by the industry leaders. The end result often is even more capacity available in a marketplace and the same or lower prices available for the industry leaders. After several quarters of improving profits, the airline industry is again slipping into hostile market conditions as rising fuel prices reduce margins and force higher prices. Higher prices limit demand growth. In response to the margin squeeze these tougher times bring to the industry, the industry leaders are restricting the growth in their capacity and, in some cases, reducing the capacity they offer in the domestic U.S. market. The problem is that several of the industry followers are not going along. United Continental Holdings and AMR Corporation’s American Airlines have both posted losses for the most recent quarter. Both of these industry leaders plan to reduce their domestic capacity as a result. They will be reducing seats available flying into and out of selected domestic markets. The pattern of leaders reducing capacity and followers adding it seems to be holding in the current airline industry. Southwest Airlines, JetBlue Airways and Alaska Air Group derive most of their revenues in the domestic U.S. market. Each of these companies reported profits in the most recent quarter. This profitability of the three follower airline competitors indicates that their costs are lower than are the costs of the two legacy airlines that have reported losses, United Continental and American Airlines. Southwest plans to increase its capacity by 5% to 6% in 2011. JetBlue plans to add 6% to 8% this year, while Alaska Air plans to grow its capacity by 9%. The industry followers are able to add capacity in the face of capacity withdrawal by their larger industry-leading competitors because they have these lower costs. The lower costs enable the follower companies to make a profit while their larger competitors suffer losses. In the long run, the only way that the industry-leading competitors will be able to stop the expansion of these follower competitors will be to match or beat their lower cost structures Full Article Alaska Air Group American Airlines change in capacity competitor success and failure jetBlue Airways low-end competitor market share pricing strategy Southwest Airlines United Continental
general Benefits of Intense Competition: Lower Prices and Better Products By strategystreet.blogspot.com Published On :: Wed, 17 Aug 2011 00:06:00 +0000 No segment of our economy has been under more intense pressure than the manufacturing sector. Lower labor costs in many parts of the international economy have forced manufactured product prices down and shifted manufacturing jobs out of the United States. Competition has indeed been intense. Over the years, we have done in depth studies of more than fifty industries who have faced intense competitive markets. We found both what you might expect and, also, what you wouldn’t expect. You would expect that costs in a difficult industry would fall as companies work to make a profit despite the falling prices that accompany intense competition. What you might not expect is that product quality and supporting service levels increase at the same time as costs and prices fall. Customers simply will not buy a poor product even if its pricing declines. The broad measures of the manufacturing sector illustrate these same conclusions. Manufacturing in the U.S. is finally growing again. In 2010, manufacturing jobs increased for the first time since 1997. Today manufacturing is growing at three times the rate of the domestic economy. Consider, as well, the following facts as noted by Jerry Jasinowski, a former President of the National Association of Manufacturers: American exports of goods rose 21% in 2010. Conclusion: the quality of our goods is rising. Manufacturing output in the U.S. today is twice that of the rate of the 1970s, in real terms. Conclusion: we are more cost competitive today than we were in the 1970s. Between 1987 and 2008, manufacturing productivity grew by more than 100%, while the rest of the business sector’s productivity increased by less than 60%. Conclusion: we get far more out of our workforce today than we did in 1987 and than many businesses do today. Between 1995 and 2008, manufacturing prices decreased by 3%, while the overall price level in the economy increased by 33%. Conclusion: while product quality has improved, and costs have fallen, prices have also declined. The overall picture the manufacturing sector portrays, over the last twenty-five years, is that hostile market conditions produce better products and lower prices for customers, both at the same time. Full Article competitive success and failures cost management hostile markets pricing product innovation
general SLC-2L-12: Two-Light Bike for the Bucks By strobist.blogspot.com Published On :: Thu, 11 Jun 2020 23:18:00 +0000 UODATE: The bike sold, quickly, for the full asking price to the first person who showed up. Which was cool. And even better, the guy was like, "Who did the pictures? They jumped out at me." (Tiny speedlights FTW...) Have you tried to buy a new bike lately? Or even a used bike? The coronavirus pandemic has made them very tough to find. Between homebound people snapping them up and all of the various broken supply chains, most of the bike inventory — other than very pricey specialty bikes — has pretty much vanished. Which means that if you have a functional bike in your garage that you don't need, it will likely never be worth more than it is right now. My daughter Emily has an unneeded bike in the garage. It's a Trek 7100, which is decent hybrid. She rode it to middle school. But she's just graduated college and won't be bringing it to her new job. But right now it should fetch a nice price in the Craigslist Bicycle Hunger Games. Especially if it is photographed and presented well. So that's exactly what we are going to do today: photograph a bike with a basic two speedlight kit.Read more » Full Article
general SLC-1L-11: Planting Rice at Sunrise By strobist.blogspot.com Published On :: Mon, 13 Jul 2020 23:24:00 +0000 Seeing as no one is doing much traveling these days, I thought it'd be fun to pay a visit with a Strobist reader photographing somewhere far away. Up for a little Lighting Cookbook field trip to Indonesia? Yeah? Then let's go... Read more » Full Article
general SLC-2L-13: Shoot Through Your Sunset By strobist.blogspot.com Published On :: Sat, 22 Aug 2020 20:35:00 +0000 Whenever you have control over the time of day in which you'll be shooting a location portrait, always remember that the hour that wraps around sunset will offer you at least five different lighting environments in which to work. And for today's portrait of birders Jo (left) and Bob Solem, we're going to use three of them. Read more » Full Article
general SLC-2L-14: Fill in the Blanks By strobist.blogspot.com Published On :: Thu, 24 Sep 2020 23:10:00 +0000 There are two main schools of thought when it comes to lighting. One is to light your subject in a way that is not grounded in reality but merely looks cool. And the other is to use lighting to translate the way your eye sees light into a way that your camera can better understand it. That latter choice is the option we'll be exploring today in a walk-through of a sunset portrait of artist Wendy Ng for the Howard County Conservancy. Read more » Full Article
general SLC-1L-12: A Garden of Ideas By strobist.blogspot.com Published On :: Tue, 27 Oct 2020 01:04:00 +0000 At first glance: a simple, one-light portrait of activist gardener Janssen Evelyn.Dig deeper: a look at tonal mapping via specular highlights, stretching the range of your modestly powered flash, and how to discover your next project.Read more » Full Article
general SLC-0L-05: Lighting's Gateway Drug By strobist.blogspot.com Published On :: Wed, 25 Nov 2020 22:26:00 +0000 Quick, guess the lighting.If you said two lights, and use of high-speed sync to get the shallow depth of field, that's a pretty good guess.If you said zero lights and a rigid high-efficiency reflector, that's an even better (and correct) guess.When working with an inexperienced assistant — or looking to introduce someone to the world of off-camera lighting — a rigid/high-efficiency reflector is a fantastic and inexpensive place to start.Read more » Full Article
general SLC-OE-08: Turning the Corner By strobist.blogspot.com Published On :: Thu, 31 Dec 2020 15:38:00 +0000 Whew. What a year. But if you're reading this, you made it through! As we all move into a hopefully much better 2021, here are three things you can do to improve your experience as a photographer for the coming year.Read more » Full Article
general SLC-2L-15: Cross-Pollination By strobist.blogspot.com Published On :: Sun, 28 Feb 2021 01:01:00 +0000 Lighting with flash can give you more than just the ability to control the quality of your light. With the inherent consistency of light from (manual) flash, you can layer in slices of time as well. But first, you’ll want to lock down two things: the ambient light portion of your exposure, and your camera’s physical position.Read more » Full Article
general Notes on the Paul Buff Link 800ws Flash By strobist.blogspot.com Published On :: Sat, 29 May 2021 00:09:00 +0000 The Paul C. Buff Link monobloc studio strobe ($895.95) delivers 800ws of portable power, and deserves consideration from anyone in the United States who is considering a big gun for use on location. Please note: This is not a full review. There have been several thorough examples already published — most notably this one by Mike McGee. There are many others, from the usual suspects, a Google search away. Rather, this is a quick write-up of some first-hand impressions, thoughts and features I have not seen much mention of elsewhere. Read more » Full Article
general iPhone Users: Put an AirTag in Your Camera Bag By strobist.blogspot.com Published On :: Wed, 02 Jun 2021 05:35:00 +0000 Apple’s new AirTags are a straight-up gift for photographers. After testing one for the past couple of weeks, I’ll be hiding an AirTag in my scooter, one in my car and another one in my camera bag. Read more » Full Article
general SLC-1L-13: Conservancy Critters By strobist.blogspot.com Published On :: Wed, 30 Jun 2021 03:16:00 +0000 When lighting with small subjects, a speedlight is generally all you’ll ever need. Further, because of the scale and distances involved, even with a small flash you’ll be working at low power settings. For these photos of some of the resident animals at the Howard County Conservancy, we used a single speedlight generally at one-eighth power, and let the environment of the impromptu studio to the rest of the heavy lifting for light modification. Read more » Full Article
general So Long (for Now!) and Thank You. By strobist.blogspot.com Published On :: Thu, 01 Jul 2021 15:26:00 +0000 In 2006 I started a lighting blog while working full-time as a staffer at The Baltimore Sun. By early 2007, it became obvious that I didn't have the personal resources to give 100% to both Strobist and my job at the newspaper. That’s exactly the position I find myself in today. For the past year I have been working on a new project. It is photography-based, and will be as unique to the photo space as Strobist was back in 2006. But, as I found with Strobist in 2007, this project will require all of my focus. So I am shifting Strobist into archive mode to allow myself the time and mental space to do that. If I had more available brain cells/hours in the day, I would be happy to do both. Alas, I do not. So I am choosing the one I think can make a bigger difference to photographers. When the new project launches, I’ll do my best to make sure you hear about it. So please, stay tuned! For those of you who are interested in our in-person lighting workshops and/or our X-Peditions trips (both of which are currently on pause during the pandemic) we absolutely are planning to restart them once the coast is clear. Please make sure you are on the relevant notification list(s) by clicking through to the links above. Finally, I want to take this moment to say thank you to the countless people I have met, and new friendships made, as a result of publishing Strobist over the past 15 years. It is impossible to express how much you all have enriched my life, and that of my family. Thank you so much, David Full Article
general I've Been Working on Something By strobist.blogspot.com Published On :: Tue, 11 Jun 2024 22:22:00 +0000 Hey gang, it’s David. It’s been a while! In 2021, I archived Strobist as a completed project. I can’t honestly say that I’ve missed the breakneck pace of running a solo site. But I’ve definitely missed interacting with so many cool people all of the time. That said, I am still teaching. X-Peditions gives me the twin advantages much smaller class sizes, plus being in Hanoi every fall. And that’s been wonderful. Better yet, my new schedule has given me the breathing room to be able build my current project. Like Strobist, this project is designed for photographers. But unlike this website, it has nothing at all to do with flash. Today I’m introducing my new book, The Traveling Photographer’s Manifesto. It aspires to be for traveling photographers what Strobist always tried to be for lighting photographers. The premise of the book is that your camera can, and should, be much more than just a pricey recording device when you travel. It can also serve as a passport, opening up new connections and possibilities that otherwise might not have happened. Using a photo trip to Southeast Asia as a framework, the book walks through many things that you can do to help this to happen. I have uploaded three documents to help you to know if TTPM might be suited for you: 1. A 5-minute summary: This will quickly give you a feel for the book. 2. A 27-page supplement: Only a small portion of the book, which is unillustrated, is about camera operation. This visual supplement is available for readers who are more visual learners. And it will give you a quick skim of parts 4 and 5. 3. A sample chapter: How to become more comfortable meeting and engaging with people as a photographer. As you'll see from the summary, most of the book is not about camera operation at all. It’s more about the countless little things that working photojournalists do while on assignment that an enthusiast might not think of. These little habits, taken together, can start to form the impression of a photographer being consistently, conspicuously lucky. When in reality, luck had very little to do with it. So, if this is the sort of thing that interests you, I hope you’ll give the book a spin. It is available now, on Amazon.com worldwide. Just as with Strobist, I welcome your feedback from this project as well. My email is listed on the copyright page and elsewhere. And of course, I will read and take to heart every Amazon review. Because my goal is for the project to continue to evolve and improve over time, just as the material on this website did. Thanks for your interest, and for your readership of Strobist. As always, please say hi at any time on Twitter at @Strobist. Cheers, David The Traveling Photographer’s Manifesto (Amazon.com) Full Article
general My Social Life By vickdogsblog.blogspot.com Published On :: Mon, 20 Jun 2011 22:04:00 +0000 I have been busy this month! I took my mom to Pit Ed a couple of weeks ago to show her the ropes and I got to see some of my special old Bad Rap friends.I had a "dog sitter" experience this month, too. This man and lady called Aunt and Uncle came and stayed at my house while my family went away for a couple of days. At first I wasn't sure I was going to have fun with them, but once I saw that they had my magical purple leash I figured they must be great. Here I am wrestling with Uncle.This is my friend Gordon. He belongs to a lady called Grandma. He's 15 years old and can't play much anymore so we lick each other's faces and sniff stuff on short walks. I really like him.This is my neighbor, Cooper. Even though he is only 9 months old, he is giant. I kind of like him. He has good manners. I think he has potential. Here we are having some down time, but Cooper told me his dad's command for this is "chillax".So, that's my report on my social life lately! Grace Full Article
general A New Friend By vickdogsblog.blogspot.com Published On :: Tue, 28 Jun 2011 01:17:00 +0000 So this weekend, I made a new freind. Her name is Cuda, and she is a very special dog.She lives all the way on the other side of our big country. She came here with her people to be in a dog show. She also works hard to show people that you need to be responsible.My dad said she took 3rd place in her dog show, but I think he is kidding me .....I can tell she is a winner !!!!- Jonny Full Article
general Happy 4th of July! By vickdogsblog.blogspot.com Published On :: Mon, 04 Jul 2011 03:31:00 +0000 From Grace! Full Article
general My Summer So Far By vickdogsblog.blogspot.com Published On :: Thu, 14 Jul 2011 04:09:00 +0000 This summer has been a whole lot of fun so far. I've been going to nosework class and learning circus tricks. When I'm not at school we go for walks at my favorite park and sniff things and look at the squirrels there.I get to play with my spring pole outside now its not raining all the time.I've spent a little time doing famous dog stuff and hanging out with friends.I look at the squirrel in the tree in the back yard every day and I've taught him how to bark just like me.The only sad part of this summer was saying so long to Winnie when she went to her forever family. I love Winnie, but I'm really glad she found her family.I wonder who my next foster sister will be? I can't wait to find out.I hope you're enjoying your summer as much as I'm enjoying mine.hugs,Uba Full Article
general Summer Gardening By vickdogsblog.blogspot.com Published On :: Wed, 03 Aug 2011 21:00:00 +0000 Hi Everyone! The garden at my house hasn't been making very many fruits and vegetables lately, so I am trying to help it a little bit. I hope you are having a great summer.Grace Full Article
general My Naughty Knee By vickdogsblog.blogspot.com Published On :: Wed, 07 Sep 2011 04:32:00 +0000 For a while now I have been having behavior problems with my right knee. Sometimes I tell my right knee that it is time to jump down the back stairs and chase the squirrel up his tree, and my knee says “nooooooo, I will not participate in that craziness. I am a boring and old knee and I do not want to have fun with my owner, the fabulous Uba”. This makes me pretty annoyed, but I go about my important work of bouncing and running and chasing and having fun and just carry my naughty knee along with me. I even dragged that naughty knee along when I got into the kitchen sink the other day to look for my red rubber ball.When it is time to relax my naughty knee punishes me for not agreeing with it, and I have to rest it on a soft pillow so it stops yelling at me.My mom took me and my naughty knee to my regular doctor and then to another special doctor so they could take pictures of it and tell it that it is a naughty knee. After a lot of people talking and looking at me walking and more talking about how my naughty knee is bad, the people have decided that I am going to get a new knee. I am really happy about this. I will have a new knee that will say “woo hoo! Lets chase things and jump and run and have fun!” and I won’t have to carry it around with me and then get yelled at by it later and rest it on a soft pillow.My mom says it will take a long time for me to heal, just like it did when Lolo and Daisy got their new knees. I will have to wear a donut thing around my neck and I will have an itchy zipper and maybe I’ll even have to wear pants like Audie. I will also have to walk slowly on the boring slow and noisy treadmill instead of running on my most beloved TREADMILL!! I won’t be able to go to nose work class or to circus class and I will have to sit around in my crate and be bored. But then, after a really long time, once the doctors look at my leg again and take more pictures, I will be bionic, just like Lolo and Audie and Daisy.Boring Treadmill from Letti de Little on Vimeo.I have been practicing on the boring treadmill so I know what to do when I have to use it while I’m “on drugs”. I don’t know how I could forget how to walk, but she says it might be hard for me to figure out after surgery because of the drugs, so I have to be all bored on the boring treadmill almost every day. My surgery is next Wednesday, but I am not nervous. I get to have all the fun I want now because she says it doesn’t matter if I hurt my naughty knee more. I’ll deal with the drugs and the boredom next week.hugs,Uba Full Article
general Why? By vickdogsblog.blogspot.com Published On :: Thu, 15 Sep 2011 23:14:00 +0000 What did I do to deserve this?I thought my leg was getting fixed. I didn't know it would get so broken first.I can't even sit on the couch without a leash and my mom making sure I don't move around.The only good thing about today is this nice card that came from Winnie.Ow. Sigh. This is not what I had in mind.Uba Full Article
general Two Weeks With My New Knee By vickdogsblog.blogspot.com Published On :: Tue, 27 Sep 2011 00:14:00 +0000 It has been almost two weeks since my surgery and it has been boring. I have destroyed two and a half beds and let myself out of my crate one time before she put carabiners on the door. Also, I have destroyed one hard plastic cone,one nice soft cone that was borrowed and now my mom has to find a new one to replace it,one horrible blue donut thing from my last post, one pair of pants,and one stuffy. The stuffy was my reward for not destroying anything on Friday.I have not removed any of my sutures though. I'm sure everyone will be proud of me for that.Today my mom stayed home with me to talk on the phone, make faces at paper and stare at the computer all day. I got to go outside and spend some time helping her talk on the phone while staring at paper. It was nice and sunny so I nibbled on some grass, checked on some of the plants,and looked for my squirrel friend (without running over and looking up his tree).Ubas are meant for bouncing and running and having fun. There is nothing fun about all this sitting around in crates. I feel a whole lot better, my knee isn't acting so naughty and I keep telling her I'm healed, but she doesn't believe me. She says I have WEEKS more to go before I can jump and twirl and leap and play with my flirt pole. I only had a tibial crest transposition, a wedge recession sulcoplasty and lateral fascial imbrication. Can someone please tell her that my knee is all better now? hugs, Uba Full Article
general Road Trip! By vickdogsblog.blogspot.com Published On :: Tue, 04 Oct 2011 18:41:00 +0000 This weekend we piled in the car with my bff Abbie the Golden Retriever, and headed south to San Luis Obispo for my first Nose Work competition. Nose Work is a dog sport and my job is to do what dogs are especially good at, using my nose. I train like K9 police detection dogs who search for drugs, but unlike police dogs, I search for the scent of birch oil on a q-tip, all for fun and sport.We arrived in Cayucos, a few minutes outside of San Luis Obispo and took off to the beach for a quick swim. My bff Abbie dove into the ocean, so I followed. Apparently my brick-like physique is suited for sinking, not swimming. I’m sure glad she didn’t take off my leash. I shook the water out of my ears and decided it was much warmer and safer to watch the action from the sandy beach.Back at the hotel, we crammed ourselves into the dog bath. I’m not fond of baths, but it felt good to get the sand out from between my toes.Next day, I nailed three of four elements of the Nose Work trial. My interior, exterior, and vehicle searches were some of the fastest of the day. But I goofed on the container search so no title for me. Oop… maybe next time. I cheered for all my dog friends who were also trialing and I got lots of pets from their people. A couple of people who learned of my beginnings were surprised to see that I’m a content and friendly guy. I’m glad I met them and I’m glad to change minds.We packed up and headed for home the next morning, stopping at two California missions to stretch our legs while our people read plaques screwed to walls (how strange is that!). Back home, I hopped up on my chair and went to sleep. I have the life of a lucky dog. Full Article
general I'm a Canine Good Citizen! By vickdogsblog.blogspot.com Published On :: Tue, 11 Oct 2011 16:02:00 +0000 Hi Everyone, it's me, Grace. You might remember that a couple of years ago I earned my Canine Good Citizen award with my foster dad. Well, my mom said to me about a month ago, "Hey Grace, I know you already know this stuff, but what do you say you and I take the Canine Good Citizen test again?" So I told her I would do it again, just for her if it would make her feel good. So we practiced all these things like sitting, staying, coming, not pulling on the leash, and passing by dogs nicely without staring at them. I didn't mind it at all, because she gave me lots of treats for doing it. This past weekend I went with my family to this place with a ton of dogs. They called it a "dog show", but there was no TV there. Anyway, I had to wait for a long time and finally, I heard them call my me and my mom's names and we went into this fenced area. There was a lady with a blue shirt and she told my mom to have me do all these things. She kept saying "nice" after I did them. After about 10 minutes of doing what she asked me to do, my mom looked very happy and gave me a delicious beef tendon and told me we had passed the Canine Good Citizen test. It was a great day. Full Article
general Floppy Uba By vickdogsblog.blogspot.com Published On :: Fri, 28 Oct 2011 03:11:00 +0000 Since my surgery I have learned that there is a new kind of Uba. Its called floppy Uba. I think floppy Uba has something to do with this little bright pink treat that she says is helping my knee heal. Every morning on my breakfast there is one of the special pink treats.Then, after breakfast my mom makes a little meat ball with a special treat tucked in the middle. She puts it in the fridge and my friends who come in the middle of the day to help me walk around the back yard on leash and check on the squirrel give it to me.After I eat the pink treats I feel all floppy. My body is all heavy and I just want to rest in the sun. She says this is good for me because it lets my new knee get ready for all the fun I have planned. If my mom is home, she helps my floppy body get up on the bench in the sun so I can snuggle with Lulu. Lulu is always kind of floppy and I guess thats why her knees aren't naughty.I sometimes even get floppy while I'm working on the blog, which is why its taken a little while for me to get this post ready.My new knee feels really good when I try it out on my walks and when I do the things I'm not supposed to do because its been a long time since I had a pink treat. My mom says I have two more weeks until we go to see the doctor. Once the doctor has looked at my knee again I should be able to start having fun. Although being floppy Uba is ok, I can't wait to be bouncy and fun Uba again.floppy hugs,Uba Full Article
general Bouncy Uba is BACK! By vickdogsblog.blogspot.com Published On :: Fri, 18 Nov 2011 03:33:00 +0000 I thought it would never happen, but the doctor says I'm all better. My naughty knee has gone away for good. I still have to be nice to my new knee for a few more weeks, but I'm allowed to jump up on my mom's big bed and lie in the sun again.I can run and play in the back yard, and go for walks and best of all go to training classes. We went for a walk in one of my favorite places to celebrate my new knee. I sniffed and sniffed everything and looked at the fat squirrels and it made me smile to be back out in the world.I got really tired and had to lie down and pant for a long time when we got home. I kept on smiling because my new knee makes me very happy.Thank you Dr. Sams and all the nice people at the Sams Clinic for taking such good care of me and helping me get my bounce back.hugs,Uba Full Article
general Dog-sized Christmas Tree By vickdogsblog.blogspot.com Published On :: Sat, 26 Nov 2011 21:51:00 +0000 Today my family is getting out this stuff they call Christmas decorations and I'm helping. There's even a little tree just my size in the room where I sleep!It's kind of exciting, but this decorating thing can make a girl tired!-Grace Full Article