Monthly Archives: April 2013

When one is asking the question: Is Air Canada making a lot of profit ? People might think so since they consider Air Canada and Westjet asthe oligopoliers in the Canadian commerical aviation industry. However, the turth is far different —Air Canada reported losses on Q1 and Q2 during 2012, and a profit margin of only 0.8% ( that is, 0.008 times of its revenue) for quarter four of 2012. The questions arise on what causes the loss for Air Canada when they’re dominating the canadian aviation market.

What on earth contribute the low profit margin of Air Canada. Before knowing this, we need to figure out where our money for flight goes. The following ariticle address that only less than 10% of the ticket price on average can become the profit for an typical national airline.

http://money.cnn.com/magazines/fortune/storysupplement/airline_costs/

However, what the ariticle didn’t mention, is that the profit margin from first-class or business class are relatively much higher than economy class. The portion of costs of those tickets to airlines are not as high as what those “premium passengers” pay for, compared with economy class. Hence, many can realize that Air Canada is lacking thier focus: business class travelers.

Even though the business class on Air Canada’s aircrafts have been renovated, they may still not good enough to generate the value to customers and make them have a high willingness to pay. And the complaints on the service quality, including on-time rate, or if crew members are friendly, can be find on travelers’ review websites such as tripadvisor or skytrax. In comparsion, the emerging airlines such as Emirates or Qatar, are paying high attention to their busines class and have been aimed at providing excellent serivice to those highly profitable customers (business class traverls).

Therefore, Air Canada’s priority is to improve their business class product, from the process of booking, customers support, airport experience, in flight experience, and promoting their new proposition on being excellent. By doing this, they’ll raise customer’s willingness to pay and therefore receive higher profit, so they can increase the profit margin and increase the financial performance for the company as a whole.

People keep talks about the emerging market, and one of the biggest emering marketing, China, has atrrected many international companies’s attention. Many of those companies are very optimistic about the potential of Chinese market.

Is that always the turth? Does all the famous international companies make their sucesses in the Chinese market? The answer was “no” for the fact that “this statement is too abosulute”. However, when it comes to the leading consumer electironic corperation, Buestbuy, many people are surprised by their complete failure in Chinese market and asking if the oversea companies is really able to do well in chinese market.

The bestbuy store in Shanghai after shutting down (from the newsletter called 青年报)

The failure of Bestbuy in 2011 isn’t the end of the the story. Two years later, after MediaMarket, the electronic store lauched by Metro AG, the third largest wholesale&retailer in the world, which acquisitded all the locations of bestbuy in China, deceided to shutdown themselves. That is, the repetition of the story of Bestbuy.

What causes the two big retailer fails?

The answer is that both of them does not adjusted themselves properly to chinese market. Bestbuy simply copied the pattern that it was in the united steates, even if the store made a little bit change on consumers’ experience. However, the size of targeted consumers of bestbuy is relatively small, and most people prefer to bargin with the salesclerks and buy the products through the personal conversation, rather than the feeling of “be assisted by some experters who doesn’t communicate with you emotionally.” And the supply chain of the eletronic products are also different from the pattern in the US, and the size was not big enough to compete with the local retailers, such as Suning, Gome, to reduce its distribution costs. Bestbuy do realized this but still fail to find a approperate propostion in the market, and failures on addressing those issues resulted in the loss of those companies in the competitive market.