kevinlu's blog

Pizza delivery man pees on woman’s door after not receiving tip

Many people complain about unsatisfactory customer service. But what about the customer service representative? I think it’s a bit unfair that they have to take all the blame for a malfunctioning product that they didn’t design, or even sell. As we learned in class, customer service is sometimes not only frustrating for the customer, but it can also be just as frustrating for the customer service representative as well. Yet they aren’t allowed to complain about the treatment they receive from customers. Well this video is an example of a pizza delivery guy (which is providing a customer service) who decides that he can do something about the mistreatment he receives from the customer. Obviously, he went a little overboard, which resulted in getting fired to prevent damaging Pizza Hut’s reputation. This makes me wonder, how do companies calculate the risk involved with customer service representatives. Isn’t it a bit risky to let the actions of one person potentially destroy the reputation of the entire brand?

I read Casey’s blog about RIM’s recent success in the Nigeria smartphone market. Currently, it appears RIM’s Blackberry devices own a 50% market share in the Nigeria market. Looking at that number alone, we can say that RIM is very successful (at least compared to its performance in the North American market).

This is an excellent example of how we need adequate information to make a good judgment. Is that 50% because consumers actually like the devices and line up to buy them? Or is it because there is lack of competition from iPhone and Android, who may not view Nigeria as a significant market to compete in? Is it because consumers cannot afford anything else? How many of those 2 million Blackberries are corporate phones?

I’m not saying that RIM doesn’t deserve its success in Nigeria, I just think that without knowing the answer to these questions, it is difficult to determine how well RIM is performing. If all of its success is due to external factors, can we just say that it got lucky? Nonetheless, we do have to credit RIM for being in the right place at the right time to take advantage of its opportunities before competitors.

This discussion site suggests that social entrepreneurs are more afraid of failure compared to traditional profit seeking entrepreneurs. I can’t say I agree with this idea, because I think social entrepreneurs face a different kind of failure. As we learned in class, social entrepreneurs do not set out to make a profit for themselves, instead they are trying to fix a problem for society. So for them, failure is not just a financial deficit. They have a lot more at stake because their success or failure can directly impact their beloved society. So it is understandable that social entrepreneurs are sometimes not as daring as traditional businesses because sometimes they simply cannot afford to fail.

When a business fails, the entrepreneur behind it can still use their remaining capital and start another business. However, it is much more difficult for a social entrepreneur to ‘restart’. They usually do not have the capital that a traditional entrepreneur has, and it is much more difficult to take on a problem in the society compared to opening a new business. Repeated failures in social enterprise leave many unsolved problems that will only get worse with time. This is why it is crucial for social entrepreneurs to get it right the first time, because unlike money, society cannot be recycled.

In Audrey’s post about Apple’s new mapping app, she says that posting a public apology is a bad move by Apple and could potentially negatively affect their reputation. However, I think that by admitting its obvious mistake, Apple is recognizing its fault and assuring its customers that they are working hard to fix it as soon as possible. In my opinion, I think this strategy is better than denying their mistake and leaving customers in the dark. In fact, Scott Forstall has recently been fired as the former Senior Vice President of iOS for refusing to sign his name on the public apology letter. Instead, Tim Cook, the CEO of Apple had to sign his name and take the responsibility.

The result is that although Apple has certainly received negative publicity from its maps app, but they are better off because they recognize their mistake and are working to fix it rather than pretend like there’s nothing wrong with it, which would be mistreating its customers.

The picture above shows an example of the taxes that would be applied to a typical imported electronic device in Brazil. In this case, the product is an iPad, which costs $499 USD when purchased from USA and Canada, but it is the equivalent of $933 USD when purchased in Brazil. This same is true for many other common consumer electronic goods such as cameras, smartphones, laptops etc. Ultimately, the final price for a Brazilian consumer buying an electronic good can be double the price of the exact same good in USA. Obviously this is not fair for the majority of Brazilian consumers, and as a result, many of them travel to neighbouring countries to purchase their electronics and save considerable amounts of money.

Sure, these huge import tariffs benefit domestic manufacturers, but the consumer electronic goods industry is dominated by companies from the US and Asia, and now many resellers in Brazil are turning those ridiculous tariffs into ‘Brazil profit’. A 55% tax on an iPad still does not explain why the price is nearly double. So where does the rest of that excess price go? Exactly where you think.

Most products go through the typical introduction phase, growth phase, maturity, and then decline. Consumer electronics in particular seem to have very short product life cycles, with new flagship smartphones and computers coming from manufacturers every year. However, one day while eating fries with delicious Heinz ketchup, I suddenly realized that Heinz ketchup never seems to go into decline. It’s been in existence for over 130 years and unlike other products, it didn’t need to adjust to competitors, or come out with a new version. It simply existed, and succeeded. Even Coca Cola needs to come up with a new product once in a while (eg. Coke zero) to compete in the market, and they often resort to international marketing strategies to stay competitive. Meanwhile, Heinz just continues to produce its signature ketchup and reap the profits. I still don’t understand what makes Heinz ketchup stay in the maturity phase of its product life cycle forever. Why does this not happen with any other product?

Today, Morgan Stanley upgraded the rating of Netflix stock, causing prices to rise 10% and close at the highest point in two months. The reason for Morgan Stanley’s upgrade was due to mediocre competition from Amazon Prime, previously thought as one of the biggest threats to Netflix.

Currently, Amazon Prime has around 25000 digital titles versus around 60000 for Netflix. Analysts say that in order for Amazon to match Netflix’s content, they would have to spend over $1 billion on negotiations with various service providers. However, Amazon has not committed to spending that amount to compete with Netflix yet.

This reminds me of a discussion that came up in one of our lectures about efficiency of decisions and the urgency/importance diagram. Competing against Netflix is probably not the most important thing on Amazon’s list, so they would rather spend their money more wisely, for example competing in the tablet market, which Amazon is doing well in, but could be caught off guard by a possible iPad mini. I think Amazon is making the right choice because the market for tablets is much bigger than the market for digital movie rentals. And after all, consumers who purchase an Amazon tablet will likely use the integrated Amazon digital content. That being said, while Amazon does not need to convert Netflix users in the immediate short term, they need to consistently maintain the quality of their service to make sure that their existing customers do not switch to Netflix. Once they succeed in the tablet industry, they will naturally attract more consumers to their digital media business due to the ecosystem in their devices and various other services.

After having sold 2 million online pre-orders in 24 hours, Apple finally started selling the much-anticipated iPhone 5 in stores on September 21. Three days and another 5 million iPhones later, analysts were still disappointed by the launch weekend sales. (For the inevitable Apple vs Samsung comparison, the Galaxy S3 shipped 10 million in one month.) According to this blog post, following the Wall Street disappointment, Apple shares dropped over $9 as some investor dump their stocks. Are investors losing confidence in the company? Is Apple going to pull a RIM?

No.

Apple’s sales were constrained by supply shortages, and not a lack of demand. The company has just released what is undeniably the best iPhone ever and they still have time to increase supply for the holiday quarter. The disappointment from analysts is once again a result of Apple setting the bar too high for themselves. Realistically, Apple is doing just fine, and is still the envy of the industry.

If it managed to become the world’s most valuable company by selling the hugely disappointing iPhone 4S, then how can the supposedly biggest upgrade in consumer electronics history possibly slow their growth? When the holiday quarter results are released, Apple could very likely report record earnings, but will that be enough to please insatiable investors?

In the summer of 2012, Google was charged with secretly tracking the browsing of Safari users using cookies, and therefore violating their privacy. As a result, the FTC fined Google $22.5 million, the biggest fine in the history of the FTC.

However, consider the fact that Google generates on average $136 million in revenue PER DAY (calculated using the numbers from their latest quarterly financial report), or that they have $43 billion in cash, and suddenly the $22.5 million fine seems like pocket change.  In fact, the biggest consequence of this ordeal for Google is likely the negative publicity and damage to their reputation.

We often see articles using the generic headline “X Company slapped with $$$ fine”. It makes perfect sense actually. A monetary fine for these multibillion-dollar companies is just like a slap, embarrassing, but it ultimately does no real damage. Google stock actually gained $13 per share on the day after the fine.

Perhaps one of the lesser-known competitors in the vast sea of airline companies, Ryanair first started operations in 1985 and has since identified itself as one of the ‘cheapest’ airlines in Europe.

Unlike some service-oriented businesses, Ryanair makes no attempt to market the quality of its services; instead, it has no shame in branding itself as a low quality, low price airliner. There is nothing wrong with this marketing approach, as there are plenty of successful value based businesses in various industries, including Ryanair itself (at least financially), which earned 503 million pounds in profit after tax in Q4 2012. [1]

However, the issue with Ryanair is the extent that it reaches in order to establish itself as a budget business. Michael O’Leary, CEO of Ryanair, famously stated on TV that the company was considering charging passengers for the use of the on board toilets. He later admitted that it was “interesting and very cheap PR”[2]. Another example is the proposed ‘fat tax’, which would charge extra for customers over an arbitrarily determined weight.[3] This is supposedly to accommodate for the extra load, which can lead to higher fuel consumption. Ironically, this extra load likely came from their decision to remove toilets from their planes to make room for extra seats, or maybe their decision to allow standing passengers on the plane. Basically, what they did is allow more people on one flight to increase efficiency, and then charge those passengers for the extra mass. This is quite genius from a business perspective because it allows them to save costs due to the higher efficiency, and also gain extra revenue from the ‘fat tax’. Unfortunately, it also severely affects their customer service and reputation, which are both essential to success in the airline industry.

This raises the question: is it ethical and effective for a company to go market its cheap services to such an extent where customers may start to feel uncomfortable (ie. ‘fat tax’) about using its services?