Posts Tagged ‘competition’

Outsmarted by Apple: Nokia Looks to Recover the ‘Magic Dust’

December 23rd, 2010 Comments off

It seems like certain industries like airlines, automakers, and mobile phone companies get a lot of attention in strategic management accounting.  This is with good reason as they each tend to highlight several things we discuss.  In terms of the mobile phone companies, the timelines have become so compressed between product introduction to obsolescense that we get to see things happen in months that in the past would have taken decades.  Think about the most recent mobile phone you have purchased…is there any chance that the same model will be on the shelf a year from now?  Doubtful.  Fortunes change quickly and none have been impacted more than Nokia.  Faced with game-changing competition from Apple and Google, this Finnish company is attempting to stay relevant and the next year or two are going to be critical in terms of whether the company will once again dominate the marketplace. 

German magazine, Der Spiegel, does a nice job outlining the challenges faces and the path Nokia has taken to arrive at this point.  You may read more at this link: Outsmarted by Apple: Nokia Looks to Recover the ‘Magic Dust’ – SPIEGEL ONLINE – News – International.

Volkswagen to make U.S. push

October 5th, 2010 Comments off

The Wall Street Journal today has an excellent front-page article documenting some missteps made by Volkswagen in the United States market that has resulted in VW claiming a paltry 2.2% market share along with plans to turn that around in an effort to become the world’s largest automaker by the end of the decade. One of the ideas being implemented is designing, for the first time, a car to specifically meet American tastes rather than selling what works in Europe in North America in nearly identical form.  This is interesting to me because I’ve read elsewhere that Ford is taking the opposite approach trying to produce car models that are virtually identical no matter where in the world they are sold.  VW also risks, in the process, alienating the small but devoted following that it currently has.

“A lot of people worry that we are going to start making VWs for the masses,” says Mark Barnes, VW’s U.S. chief operating officer. “I like to say we’re going to bring the masses to VW.”

The retooled compact sedan marks the first time VW engineers have designed a model specifically for the U.S.

Next year, a new family-size sedan is scheduled to roll off the assembly lines at a newly built $1 billion plant in Chattanooga, Tenn. It is VW’s first U.S.-made car since the 1980s. On its heels comes a revamped New Beetle.

“I am fully aware that Volkswagen was too cautious for too long in North America,” Volkswagen Chief Executive Martin Winterkorn said at a test-driving event for the new Jetta in San Francisco this summer. His remark was a nod to the car maker’s decades-long penchant for deploying cars designed for European tastes across the Atlantic. That left its U.S. operations with models too small and expensive to go head-to-head with Asian and American rivals. Now, he vowed, “we have turned that upside down.”

Adding to the challenge is the constant change at the top in VW’s American operations:

Adding to the challenge is an unanticipated switch at the helm of VW’s U.S. operations.

In June, Stefan Jacoby, a blunt-spoken German who took to wearing cowboy boots to dealer meetings and car shows, left his post as U.S. chief to become Volvo Cars’ new chief executive. His departure came just a week after he presented the new Jetta at a splashy launch party in Manhattan’s Times Square featuring pop singer Katy Perry. VW bosses scrambled much of the summer to fill the void left by a key architect of its American comeback strategy.

Mr. Jacoby’s replacement, former General Motors executive Jonathan Browning, is new to the U.S. market, having spent most of his career at GM’s European operations and managing Jaguar under Ford Motor Co.

Some U.S. dealers complain that the revolving door of U.S. chiefs—Mr. Jacoby was the third to go in five years—reflects a culture at VW’s headquarters in Wolfsburg, Germany, that views the U.S. as a career way station, or worse, graveyard.

Assuming that the leadership and design challenges can be met, there is still the issue of getting Americans to notice.  Marketing has been ramped up to target certain demographics such as Hispanics and families, but the results thus far appear to be mixed.  Before reading this article, I didn’t even know that Volkswagen offered a minivan even though my family purchased a Toyota Sienna less than a year ago. In an interesting partnership with Chrysler, VW rabadges the American van as it’s own with some minor tweaks but production had to be halted due to low sales.

After dropping plans for a modern version of its Microbus for fear it would be too niche and costly, it signed a deal with Chrysler to modify and rebrand the U.S. car maker’s Town & Country minivan under the VW Routan name. VW tightened the minivan’s suspension, gave it a sleeker front end and kept it in the same price range as the Chrysler. With an ad blitz featuring Brooke Shields, it aimed to capture 5%, or 45,000, of the 700,000 annual minivan market.

But the Routan’s launch coincided with the auto industry’s nose dive in late 2008. So many of them sat unsold on VW dealer lots last year that the auto maker asked Chrysler, which builds them at its Windsor, Ontario, plant, to temporarily halt production. While much of the rest of the minivan market has rebounded, Routan sales have slipped 0.8% to 12,539 vans so far this year, one-seventh of the number of Town & Country sales in the same period.

VW officials argue that the Routan has enabled them to sell to a key new customer segment. The company still expects the Routan’s market share to grow as more consumers become aware of it as a minivan option.

But Casey Gunther, VW’s top-selling U.S. dealer, says the Routan isn’t what people expect from VW.

“It’s like someone trying to sell you a piece of chicken and claiming it was a steak,” Mr. Gunther says.

VW, he argues, could achieve its 800,000 sales target, “but we need to elevate the brand with products that play up our heritage,” such as the Microbus concept or VW’s sporty Scirocco, which it sells only in Europe. “There are so many people out there who love the lifestyle VW represents,” Mr. Gunther says. “I’m worried we’ve turned into a follower and not the leader.”

There are countless other great examples in this article that address things we discuss in class like strategy, international competition, product design, and more.  It is not a short piece, but is well worth the read when you have 10-15 minutes.  Seeing where things are at in 2, 5, or 10 years will be even more interesting.

Volkswagen Aims At Fast Lane in U.S.. Vanessa Fuhrmans. Wall Street Journal. (Eastern edition). New York, N.Y.: Oct 5, 2010. pg. A.1

Nobody Prices Better Than Airlines

August 27th, 2010 Comments off

One of the first things frequent fliers learn is that the number of fares paid by each person a plane is nearly equal to the number of passengers.  Airlines aggressively price routes to try to maximize usage of capacity while also maximizing profits.  The end result is that airlines can and do change prices multiple times a day as they jockey themselves amid a sea of competitors to sell what has largely become a commodity, at least in the eyes of leisure travelers.  Simply put, too many people have grown accustomed to searching for flights based on price (because nearly every online search defaults to sorting with the lowest priced flights first) that airlines were unable to differentiate themselves effectively from competitors because when their fares were on screen 2 or 3 of the search they never got booked.

Realizing this (and realizing that not every company can compete solely on cost/price) we’ve seen the “unbundling” of items that used to be included in airfares.  Everything from checked-baggage fees to higher penalties for changing flights (and even carry-on baggage fees at Spirit Airlines) is now seen as a way to charge customers which, in turn, makes it hard for airline passengers to compare two prices because one needs to know all the fees that each airline can assess to make a valid comparison.

The Wall Street Journal today took a look at airline pricing (more from a consumer’s point-of-view than a scientific one as this appeared in the Personal Journal section) and asked some questions about why it is sometimes cheaper to fly overseas than to fly a few hundred miles.  The short answer? Because people are willing to pay more to fly to certain places and/or the competition is not as rigorous on certain (especially international) routes.

The price you pay for a ticket is driven by a number of variables: competition, types of passengers, the route and operating costs. But the biggest factor, by far, is whether discount airlines fly in a market. Low-cost carriers often set the price in markets because competitors feel compelled to match that price or risk losing customers and flying empty seats. And when they aren’t there, big airlines behave radically differently when setting prices.

Over a year ago when Southwest began serving MSP, I offered my own examples coupled with a Marketwatch article of the wide disparity in fares on routes where discount carriers are strong vs. those where they are absent.  The Wall Street Journal piece largely comes to the same conclusion.

And when there’s not low-fare competition, prices soar. The most-expensive average domestic ticket in the first quarter was $786 for round-trip flights between San Francisco and Philadelphia, according to the DOT. That 2,521-mile route is dominated by United and US Airways, who are competitors but also partners in the Star Alliance. Fly to Boston from San Francisco—183 miles farther by air than Philadelphia—and you paid an average $296 less round-trip in the first quarter, according to DOT. The difference: JetBlue Airways has 17% of the San Francisco-Boston market, but none of the San Francisco-Philadelphia market.

As you will discover in this course (and in life) the cost of something often has little to do with the price that is charged.  Does it really cost 100 times more to make a Coach bag that sells for $4,000 as it does to make the one at Target that goes for $40?  Of course not…yet many still fall into this trap with regard to their expectations about prices.

The Middle Seat: You Paid What for That Flight? — It Can Cost More to Fly to Hartford Than Barcelona; How Airlines Determine Ticket Prices. Scott McCartney. Wall Street Journal. (Eastern edition). New York, N.Y.: Aug 26, 2010. pg. D.1

Porter’s Five Forces Model

February 28th, 2010 Comments off

In Chapter 13 we discuss strategy and the factors that impact how a company positions itself in the marketplace.  This discussion encompasses the Five Forces Model outlined by Michael Porter in 1979, even though our textbook doesn’t reference this fact.  Porter is still teaching at Harvard and has recently provided an updated look at his model and the way that it applies to competition today even with the introduction of the brand new technologies like the internet and online shipping/competition.

I stumbled upon an interview of Michael Porter when I subscribed to the Harvard Business Video IdeaCast series in Itunes.  If a picture is worth a thousand words then I guess that makes video worth even more.  If you are so inclined, I recommend that you subscribe to both the video and audio versions of IdeaCast in your RSS reader or Itunes (video/audio).  You may also want to track down some topics that interest you at one of the many sites that carry these resources such as the Harvard Business Publishing YouTube site.

Cost-Cutting & Innovation in Developing Nations

May 28th, 2009 Comments off

As I have mentioned in class, The Economist does an excellent job at exploring the business world — with “world” being the key word.  Unlike many other publications that focus on larger companies/nations, The Economist often contains reports filed from outposts where other journalists dare not tread.  An article from the print edition being published today has been posted to their website and it highlights not only cost-cutting but some of the things we’ve talked about as far as the globalization of business and the fact that competition these days is not limted to XYZ Company down the street or in the next town — it very often can come from the opposite side of the world.

COBBLED together from carts, old cars and anything else to hand, the improvised vehicles used by Indian farmers are often known as jugaad. The term also has a much broader meaning—referring to an innovative, low-cost way of doing something—as goods and services are provided in India at a fraction of the cost of those in developed countries. Ingenuity is a necessity when resources are limited and customers have little money. In a global recession it also provides a way for companies in India and China to expand into foreign markets where consumers are seeking better value for money.

A snip at the price. May 28th 2009. From The Economist print edition

If you are interested in other articles from this week’s issue, there is a page that contains links to all the articles:

You may subscribe to the RSS feed of the Economist Print Edition using a tool like Google Reader or you can become an Economist Fan on Facebook to receive a weekly link to updated information.

Starbucks and Product Differentiation

May 14th, 2009 Comments off

At class on this week we had a discussion about the struggles Starbucks is having of late.  In their quest to grow, Starbucks gave up some of what made the “Starbucks experience” special and their products, therefore, became less differentiated from the competition in pursuit of more market share and sales.  The last few years have been especially difficult for them including the closure of hundreds of stores and now they find themselves exposed to attack by McDonald’s, something that would have seemed unthinkable only a few years ago.

Here are some articles I dug up from a couple years ago that chronicle the beginning of the realization by the executives of Starbucks that drastic measures were in order, including a memo written by Chairman Howard Schultz sent to his employees entitled “The Commoditization of the Starbucks Experience.”  The one titled “No Romance Please…” is actually a letter to the editor and I’m guessing the guy that wrote it is the kind of customer McDonald’s is targeting these days, although recently Starbucks has attempted to persuade people that they aren’t as costly as people think they are.  I’ll post some of those kinds of articles later.

As always, you will need to use your NetDirect login ID and password to access the items at at ProQuest (use the ProQuest/ links if the WSJ links require you to login and you don’t have a WSJ subscription).

Starbucks Chairman Says Trouble May Be Brewing; Brand Could Be Compromised, Schultz’s Blunt Memo Warns; ‘Time to Get Back to the Core’. Janet Adamy. Wall Street Journal. (Eastern edition). New York, N.Y.: Feb 24, 2007. pg. A.4

Text of Starbucks Memo; Online edition. Wall Street Journal. (Eastern edition). New York, N.Y.: Feb 25, 2007.

Starbucks Stirred to Refocus on Coffee; Strategy Sharpens As Chairman Sends A Wake-Up Memo. Janet Adamy. Wall Street Journal. (Eastern edition). New York, N.Y.: Feb 26, 2007. pg. A.12

No Romance, Please, Just the Coffee…and Quickly. Wall Street Journal. (Eastern edition). New York, N.Y.: Mar 3, 2007. pg. A.5

Tall Order for Starbucks; Investors Seek Reassurance on Brand’s Buzz as Competition Circles. Janet Adamy. Wall Street Journal. (Eastern edition). New York, N.Y.: Mar 21, 2007. pg. C.1

Airfares are so low, it’s cheaper to bring a friend than an extra bag

April 12th, 2009 Comments off

Airline pricing has been greatly impacted by the recession, but nothing seems to impact it more than some good old fashioned competition.  The Chicago to Minneapolis route is featured in the article linked below.

I can tell you from personal experience that flights on this route even with 21-day advance purchase were in the neighborhood of $400+ late last year but once Southwest Airlines announced that they were expanding with several flights a day on this route the price fell to under $100.  Recently they are as low as $88 on many airlines (American, United, Northwest, & Southwest all fly this route) and flights to nearby Milwaukee are also under $100 as AirTran has expanded into that market to compete with a faltering/retrenching Midwest Airlines. Unfortunately, flying from MSP to MKE on AirTran currently requires a layover in Atlanta but that is changing soon.  Interestingly enough, the prices on the MSP to Chicago route were cheap before AirTran abandoned that route last year.

Read the article at this link:{BCA6AD1A-6A63-4D94-8351-52B8F5A8EAE3}&siteid=rss

CNBC Episode on Corporate Social Responsibility

April 7th, 2009 Comments off

I mentioned in class last week that the MMEC module is rather dated and that I recommend, if you have time, that you check out a CNBC program for a more current discussion on Corporate Social Responsibility.

Here is how you can view the episode:

  1. Visit
  2. Choose the video or audio podcast.
  3. Choose Itunes or the RSS link (depending on if you have Itunes I suppose).
  4. The one that has to do with CSR is called “CNBC’s The Business of Innovation – Season 2, Episode 4″

This direct link to the video may work:

You will need Quicktime to view the video version of the Podcast.  Quicktime is free and is available at if you don’t already have it installed.