Month: October 2012

(Feedback of Case#2)

During the class, we were introduced different cost of a company, such as fixed cost, varible cost, sunk cost, and relevant cost. Varible cost and relevant cost are easier to understand since one of them changes relatively to the output and the other changes depends on the decision which the administration makes. But the fixed cost and the sunk cost confused me. But after doing Case 2, I can now clearly seperate these two cost.

Fixed cost is the cost that will disapear when you shut down the company. For example, in case 2, when you shut down the adult department, you don’t have to pay the salary for the manager any more. So the salary is the fixed cost. While the rental fee of the factory is a sunk cost for the company. Shutting down one of the department will not affect the rental fee, because you still need the factory for operating the other product lines. Sunk cost is the cost once it has paid, it can not be recovered.

There is a video I found just now which explains clearly about the fixed cost and the sunk cost.

https://www.youtube.com/watch?v=Eu2UWaFDQKM

http://finance.yahoo.com/blogs/daily-ticker/apple-shares-fall-iphone-5-sales-fail-meet-145041575.html

Iphone 5 is now coming into the market. Unlike the usual, Apple’s shares fell instead of defying gravity. The problem is the new product sales didn’t meet the analysts’ expectation. Comparing Iphone 5 to the prior product, Iphone 4S, there is no big and attractive difference. This leads to the low sales, and the falling of the shares. Iphone sales occupies 50% of Apple’s revenue and 60% of the profit, which determine the annual return of Apple. The investors are now watching the sales number. If Apple doesn’t boost the sales, the shares will keep falling and cause more trouble.

Another problem is the policy in the U.S.. Recently subsidies by the cellphone carries allow the customers switches from one smart phone to another upgrade one by paying less money within the contract days. This action highly reduce the revenue of both the carriers and the Apple.

In the article, Piecky says if Apple introduced a new, lower-priced phone that could sell in Brazil, China, Mexico and other developing markets, that will boost the iphone sales. I am not totally agree with him. As a Chinese, I can see the insane iphone fans. Yet, selling lower-priced phone can increase the quantity demand, but will also overset the business plan and reputation of Apple, which is selling high-tech product.

http://www.quickmba.com/marketing/ries-trout/positioning/

The article highly generalizes the importance of brand positioning. As a customer, I understand that it is impossible for people to remember every advertisements. Just like the Olympics Games, everyone knows who is in the first place and hardly remembers the second or the third. Same application among brands. That’s true that customers keep in mind only the first. To be the first comes into customers’ mind or the first in the category. But sometimes it’s difficult to range the first in the category. Finding other unoccupied position to be number one is an easier way to get into the market. For example, when we talk about clothes, people think about LV, Gucci because they are the top luxury brands; think about H&M since it is famous for the cheaper price and the popularity. Another example, Lululemon is the company selling professional yoga outfit and it is well-known in North America. So when customers consider buying yoga apparel, the first brand jumps out of their mind is Lululemon. Although nowadays there are many copycats, it’s so hard for the competitors to get the leadership position.