ivanchan

This post is yet another response to Xin Lu’s blog post title: The Success of iTunes.

https://blogs.ubc.ca/xinlu/2011/11/

Without a doubt, the iTunes Store is one of the most innovative outcomes from IT giant – Apple Inc. The idea to sell music online offers the consumer an effortless and affordable solution to purchasing music and videos.

On top of being affordable (99 cents for a song and $9.99 for an album), and being legal, the iTunes Store makes purchasing music convenient. Imagine residing in Surrey or Delta and having to go to Downtown Vancouver every time a new album is released! The iTunes Store changes this inconvenience. All you need is a credit card and internet connection.

To add on to Xin Lu’s post, one of the iTunes Store’s strategy to remain viable is by allowing “hit” songs to be purchased with the entire album only. The consumer would be “forced” to spend $9.99 instead of 99cents. This would still be in the consumer’s favour nonetheless. The opportunity cost of traveling to a CD store would probably cost more than that already!

Photo:

http://www.findthatlogo.com/apple-logos

This post is a response to Xin Lu’s blog post title: Just Do It.

(https://blogs.ubc.ca/xinlu/)

I don’t deny that NIKE is an example of effective marketing strategy and absolutely agree that it is certainly a brand with a strong image. The question, however, is, at what cost?

To achieve a profound brand image, NIKE exploits cheap labour – way below what is considered a minimum wage in countries such as Vietnam. A typical Vietnamese NIKE worker would earn a daily wage of US$1.60, while NIKE continues to sponsor athletes at costs ranging from thousands to millions of dollars (Naomi Klein), only to achieve public recognition of the swoosh. Ethical practice? I don’t think so.

NIKE’s efforts to achieve its effective recognition is done at the expense of its employees who are being exploited on a daily basis so that costs could be driven down to allow for more social advertising to take place and allow the company to remain viable.

So, is NIKE really that successful in its marketing strategy? Ethically speaking, No. Not at all.

Photo:

http://www.findthatlogo.com/nike-logo

This is http://www.channelnewsasia.com/blogs/

By now, any reader of my blog who read my citations would have realized that this is where I source the articles for my blog posts from. Channel NewsAsia is based, mainly, in Singapore, with an aim to provide an Asian perspective in world events, including business.

Reading articles on this blog gives me a new perspective of how global markets are performing, from a different point-of-view.

More important than providing an Asian perspective in world matters, this blog keeps me in touch with events back home in Singapore and this is why it is the blog of my choice when choosing articles to write about.

Photo:

http://www.quarkbase.com/people/channelnewsasia.com

Aviation industry giant Singapore Airlines has unveiled a long-haul budget carrier which will operate in medium and long haul flights beginning with destinations such as China and Australia.

The new carrier, SCOOT, would cost S$280 million. Out of this, S$60 million will be spent on start-up costs in the initial 24 months.

Using a SWOT analysis and Porter’s Five Forces Diagram could provide a better understanding of the airline’s decision to compete in the budget industry.

THESE ARE THE MAIN POINTS TAKEN FROM THE SWOT ANALYSIS:

STRENGTH:

1. Distinguished Brand Name

2. Sufficient capital injection from SIA

WEAKNESS:

1. Unable to serve the US market due to limitations of aircraft.

OPPORTUNITIES:

1. Increasing market trend for demand for low-cost flights

2. Vast markets available for SCOOT to cater to

THREATS:

1. Many other budget airlines in the region have established their position in the industry.

The strengths identified by the SWOT would put SCOOT in good stead in the starting up of the business. SCOOT is able to overcome the high barrier to entry due to its financial backing from Singapore Airlines. At the same time, the brand name of Singapore Airlines would positively influence the image of the new budget airline.

Although SCOOT is currently unable to serve the US market, it could do so in the long run when expansion to that sector seems viable enough.

Competition from rival airlines in the region should not be an issue should there be a deliberate “price war” in an attempt to drive the new-comer out, because of SCOOT’s financial backing from Singapore Airlines. Therefore, this substantially neutralizes the airline’s threat.

Citation:

http://www.channelnewsasia.com/stories/singaporebusinessnews/view/1162834/1/.html

A social entrepreneur is one who recognizes a social problem, and, by using entrepreneurial principles, makes a social change. Such could be said about 7-time Tour de France winner and cycling legend Lance Armstrong.

The highly-decorated cyclist retired from professional cycling for good in 2010 to devote himself to the non-profit organization that he founded way back in 1997 – the Lance Armstrong Foundation.

A former cancer patient himself, Armstrong recognized the need to create social awareness for cancer, and, as such, the foundation was born with the mission “to inspire and empower” cancer patients and their immediate families.

Although the foundation accepts donations, its proceeds generally come from the sale of merchandize from its online store as well as its partner, NIKE. The foundation’s most prominent merchandize, the yellow LIVESTRONG bracelet, could be purchased from outlets such as Spotchek or NIKE stores in downtown or Metrotown.

The Lance Armstrong foundation uses a wide range of advertisement campaigns. Through the organizing of events, partnerships with various communities, the foundation creates a strong awareness about its existence and its mission. The representation of athletes who endorse the foundation at sports events such as cycling races, marathons and triathlons also boost the foundation’s publicity.

For more information about LIVESTRONG, the Lance Armstrong Foundation, visit www.livestrong.org.

Photograph adopted from www.livestrong.org.

In recent times, there is a global shift towards environmental-friendliness. Such is the trend of businesses and other organizations such as political parties. This movement probably gave rise to the idea of sustainability.

But the question is, at what cost?

Certainly, the move towards such a theoretical idea would almost-definitely mean that some alternative is foregone, and I would say that the opportunity cost of being sustainable is being inefficient.

I shall take Vancouver as a simple example.

In downtown Vancouver, certain roads and lanes are closed for cyclists to use them – an implementation by the local government towards environmental-friendliness. Now that roads are closed for the sake of cyclists, motorists are inconvenienced because of traffic congestion as a result of road and lane closures. The arrival of the winter season complicates matters more. Cyclists are less-likely to ride during this time of the year for various reasons such as cold & safety. They now take motor transport to travel to downtown instead; which increases the flow of traffic moving into downtown Vancouver (and lanes are still closed for cyclists). Traveling time for both motorists and “cyclists” is now increased.

The model of downtown Vancouver traffic illustrates my argument that the opportunity cost of sustainability is inefficiency.

Applying this model to the typical business firm who intends to jump into the bandwagon of sustainability, the firm now incurs a higher cost (including opportunity cost). Just pause for a moment and think about this: even energy-saving light bulbs that the firm purchases would already cost more than regular light bulbs. What about sourcing raw materials from environmental-friendly sources? Surely the firm would incur additional costs as well.

Now, the firm must produce more goods to increase its revenue in order to cover the increased cost. Isn’t this inefficient?

This links me to the lesson on business ethics. Only individuals can have responsibilities. Not companies. (Milton Friedman). It should not be an organization’s responsibility to go green because it does the firm no good.

Are the organizations’ intentions (to go green) sincere? Or are they simply jumping onto a gimmick bandwagon as an opportunity to exploit and conspire to raise prices (Adam Smith)?

This post is somehow inspired by a comm101 lecture on supply chain and inventory turnover, but has little to do with the lecture itself. There is a link between the study of business and the failure of economics and I’d like to examine this correlation.

In economics, when supply of a good falls short and demand remains constant, a new equilibrium should be formed and prices should be increased, ceteris paribus.

Ceteris Paribus. A term that is non-existent in the dictionary of the business world.

In the world of business, or rather, practically, when prices are raised, consumers who intend to purchase the good the once-agreed equilibrium price would go elsewhere to source for substitute goods at a comparatively-lower price. Thus, demand for the good falls and the firm finds itself not being able to sell its goods and generate revenue. Such is the example of the sale of milk in class.

This is a clear example of the failure of economics in the business world.

Ceteris paribus – holding all other factors constant, is a key economic assumption when analyzing models and predicting outcomes. To omit this key term is to undermine the reliability of economic application in business models, which brings me to the conclusion that the study of Business is in fact the study of the failure of economics.

German auto car maker BMW wants an increased stake in SGL Carbon, a West-German carbon product manufacturer located in Wiesbaden. As of now, BMW already owns 29% of shares in their existing strategic partner and leading firm in the carbon-based manufacturing industry.

Many car makers are taking similar interest in carbon because of the lightweight, durability and perhaps appealing characteristics of the raw material which will enhance the car in many aspects.

SGL Carbon produces high-end components to BMW Sports models. The 2 firms collaborated in a US$100M high-tech plant in the USA to produce such parts for the German auto car giant.

The potential increment of shares by BMW in SGL Carbon would definitely give BMW an edge over local rivals Volkswagen, who currently have 8% of shares in the Carbon-producing company. I consider this strategic move as vital because it would provide BMW with a certain sense of security over the availability of a key raw material, especially as BMW prepares the launch of the i-series – the state of the art environmentally-friendly sports car series that is uncompromising in speed, power and performance.

Citation:

http://www.businessspectator.com.au/bs.nsf/Article/BMW-wants-stake-in-SGL-Carbon-report-MQ92M?opendocument&src=rss

Photo:

http://www.google.ca/imgres?q=BMW+i8&um=1&hl=en&client=firefox-a&sa=N&rls=org.mozilla:en-US:official&biw=1680&bih=916&tbm=isch&tbnid=2iOyAUuM8pPQPM:&imgrefurl=http://www.sharegoodstuffs.com/2011/08/sporty-concept-of-bmw-i8.html&docid=8Xmc2Ws_-4b8GM&imgurl=http://i56.tinypic.com/25jfwcj.jpg&w=432&h=287&ei=T2edTtX-EZKGiQLKw_naCQ&zoom=1&iact=hc&vpx=380&vpy=162&dur=366&hovh=152&hovw=220&tx=184&ty=100&sig=118431967909509010723&page=1&tbnh=133&tbnw=185&start=0&ndsp=35&ved=1t:429,r:1,s:0

After winning a ban on Samsung’s Galaxy Tab 10.1 in Germany earlier this month, Apple failed in a separate bid to win a similar injection in Australia. The Silicon Valley technology titan is on a global campaign to halt sales of the Galaxy Tab 10.1, claiming that industry rivals and Korean Technology giant Samsung  has infringed on copyrights protecting the iPad.

These two firms are the world’s largest technology companies who are competing to acquire the largest market share for mobile-IT products such as smartphones and tablet computers. The market is reportedly valued at US$100 billion.

The current patent that protects the iPad are beneficial to Apple in keeping out identical products that may potentially rival the iPad and become a viable substitute product to that of Apple’s.

It also decreases the cross-elasticity of demand, creates an added barrier to entry into the industry. Firms who intend to produce similar products will have to think of other ways to innovate their products so as not to find themselves in trouble with patent rights lawsuits, deters most of them away fro  breaking into the industry and hence, denies consumers of similar choices.

As of now, Apple’s iPad2  stands unrivaled with less than a handful of similar products sold in the mobile-IT market.

Citation:

http://www.channelnewsasia.com/stories/afp_asiapacific_business/view/1159395/1/.html

Photo:

http://www.emate-econtent.org/technology-news/apps-news/what-exactly-is-an-ipad-2-and-tablet-competition/

In a quest to expand its market share and break into the budget industry, the Australian carrier Qantas made the largest aeroplane order in Australian history couple of days ago.

The purchase of 78 A320NEOs and 32 A320s are to be the key of the Airline’s restructuring programme that will now focus on Asian flight routes. The A320s are suited for both long and short haul flights at large capacities – ideal for trips between Australia and Asia.

This increases the Australian airline’s factors of production and positively affects its potential growth.

The deal symbolises Qantas’ commitment to Japanese firms Mitsubishi Corp and Japan Airlines in its quest to set up a joint venture premium airline – a move that would strengthen its subsidiary low-cost carrier Jetstar; and provide more aggressive competition to the budget airline industry especially on routes between Asia and Australia.

The growth strategy seems logical as the route between the 2 regions are in high demand, mainly because both Asia and Australia are hubs for tourism, sports & arts and business.

Citation:

http://www.channelnewsasia.com/stories/afp_asiapacific_business/view/1157592/1/html

Photo:

http://www.google.ca/imgres?q=Qantas&um=1&hl=en&client=firefox-a&sa=N&rls=org.mozilla:en-US:official&biw=1680&bih=916&tbm=isch&tbnid=Ee2Tha3gBX8r9M:&imgrefurl=http://blog.cheapoair.com/news/qantas-ditches-san-francisco-decides-on-dallas-instead.aspx&docid=1pQLmP4MOx0ZHM&w=600&h=375&ei=N3KVTs2FHuniiAKc-eD9BA&zoom=1&iact=rc&dur=403&page=1&tbnh=126&tbnw=202&start=0&ndsp=25&ved=1t:429,r:6,s:0&tx=122&ty=65