After reading this article about Southwest Airlines on Harvard Blog Review by Rafi Mohammed, it is easy to tell that Southwest is doing a great job at broadening its target market and is effectively able to take care of the needs of a greater demographic of people. Southwest Airline now charges tickets at two prices – either a full premium ticket with all costs included (i.e. pillows, food, luggage, etc) or a ‘de-bundled’ ticket which is just the base cost of travelling from one destination to the other, customers will then be able to chose what they wish to pay for afterward, a la carte.

The benefits of having such a pricing strategy is that this airline is now able to attract multiple demographics of people. It not only attract those who are looking for a bargain price for air travel, but they now also attract those who are willing to pay the full premium price of the ticket (as some customers are simply not bothered to have to go through the hassle of paying each time they wish to utilize specific facilities of the aircraft; and some customers would rather pay all at once than feeling the pressure of paying multiple times over the period of their travel time).

This goes to show how playing with your companies pricing strategy and implementing changes to it does indeed come with a risk of losing sales from customers who are resisting this specific change, however, I feel that the benefits of such actions clearly outweigh the risks. This also allows Southwest Airlines to gain an edge over any existing competitors who do not have this strategy implemented.

However, there is one thing that can completely turn around the benefits of this specific strategy. Southwest Airlines has done a great job of switching up their pricing strategy and being able to benefit from it, but what specific elements are now being charged for in their ‘a la carte’ options that weren’t before? Well, the answer to that is a bit appalling. Southwest Airlines has considered charging its customers for being overweight. This “fat tax” is completely justifiable according to CEO Chris Langton who states that its the “fairest way” to charge passengers, as well as tackle obesity issues that are being faced within the country. By targeting and segregating customers by their physical demographics and then charging them extra money for it not only  raises some ethical questions within the Airline industry, but wouldn’t this be costly and time consuming to implement? Whilst checking in luggage, passengers will now have to get themselves weighed as well! The implementation process of it all is challenging on so many levels – cost, time, and customer satisfaction.

Would you like to be singled out and taxed extra money for having a heavier body?

http://blogs.hbr.org/2013/11/southwest-may-start-charging-for-baggage-and-thats-a-good-thing/

http://www.businessinsider.com/will-big-airlines-charge-fat-passengers-extra-2013-4

There has been so much talk over whether or not Apple has been keeping up with its competition ever since Steve Jobs passed away and left his legacy to Tim Cook. Most times than not, we always hear customers complaining about how Apple isn’t able to keep up with the technological advancement that Samsung has been able to apply in their products, and that Apple simply isn’t listening to what the customers want. This isn’t too surprising, as the motto Jobs thrived upon was that

“people don’t know what they want until you show it to them.”

People have also started complaining about Apple’s pricing strategy as they started to expand their product line. From a fellow Sauder student’s blog entry, we can see that “the unlocked iPhone 5c is listed on the apple store for between $599 to $719” and they “believe that this practice is slightly unethical as it is not using ground breaking innovation to sell its product rather its name and fame”.

I disagree with the above statement, and here’s why. Since the birth of this multi-billion company, Apple has overcome obstacles and been one of the most innovative technological firms in the whole market. Their easy to use interface, and their unique OS has created a strong and unbreakable brand loyalty over the years – no matter what other companies may have to offer, many people, including myself, have chosen to stay with Apple. So is it really unethical for them to charge prices higher than their marginal costs? No, because thats what most firms do anyways – in order to make a substantial amount of profit, Apple, as among other companies, charge prices that pass way over their total cost for one unit. And why shouldn’t they? Their target segment is willingly handing them money to get their hands on whatever products they have to offer – Apple is THE brand in the tech industry, so the brand itself adds an intangible value to the product, hence increasing the price. The price of a product, especially for established brands, doesn’t arise from the costs alone, part of the price is most definitely derived from how much the market values the company and the brand as a whole.

So yes, Apple created an ‘in-between’ product, and yes, the features themselves of the 5C don’t match up with the price, but the brand definitely does.

https://blogs.ubc.ca/shubhankarrustagi/2013/10/01/iphone-how-much-does-it-really-cost/

Snapchat, a two year old company that makes no revenue recently turned down the incredulous offer of US$3 BILLION from Facebook. This potential acquisition acquired great amount of interest from various segments of people – first of all, why did Snapchat turn down the offer, and secondly, more importantly, why did Facebook even offer $3 billion for it in the first place? What did Mark Zuckerberg find so valuable in a social media platform that, until recently, was known for its use of sending sexually provocative images? Facebook bought over Instagram last year for $1 billion, but apparently Zuckerberg deems Snapchat three times as worthy.

Let us first look at why Zuckerberg could have offered such an atrociously high offer for Snapchat. One of the main reasons that seems the most obvious and rational amongst the rest is actually a really simple and comprehendible reason. Perhaps Mark Zuckerberg is simply buying any social media platform that it is able to which is deemed as a potential threat to Facebook. Afterall, Zuckerberg himself admitted that Facebook is losing a significant portion of its ‘younger team’ segment as newer generations are constantly looking for new technological updates in parallel to the old ones. If you can’t beat them, might as well buy them, right? Forget trying to gather competitive intelligence, Zuckerberg goes straight for the kill. Competition is just something he doesn’t want to deal with.

So why would Snapchat, a company that makes no revenue otherwise, give up such an incredible offer? Evan Spiegel, the co-founder of Snapchat stated that in June 200 million photos were being shared in a single day, and from then, that number has grown to 350 million photos. Snapchat differentiates itself by allowing supreme privacy and doesn’t save records of any of your photos you share with your friends. Spiegel believes that the value of his company will grow and exceed $3 billion – just look at twitter! From an unprofitable company that was valued at just $3 million, after its IPO it is now worth $29 million – more than 9 times worth its original. Turning down Zuckerberg’s offer was definitely a risky decision, who knows whether they’ll be able to attract advertisers in order to become profitable. Will advertisers really pay large sums of money for advertising on a social media platform that only allows a maximum of 10 seconds worth of visual exposure? Will something better than Snapchat arise and completely shut down the company before it launches its IPO? These questions will only be answered in time, all we can deduce for now is that Evan Spiegel is one fearless human being.

http://www.forbes.com/sites/markrogowsky/2013/11/14/maybe-snapchat-is-crazy-to-turn-down-3b-but-was-facebook-nuts-to-offer-it/

http://www.csmonitor.com/Innovation/Horizons/2013/1116/Why-did-Snapchat-s-23-year-old-CEO-reject-a-3-billion-buyout-offer-video?cmpid=twitterfeed

Typhoon Haiyan has definitely cultivated intense mass destruction within the central area of the Philippines, but the damage that was done isn’t just solely physical.

Finance Minister Cesar Purisma states that the central region that was hit by this typhoon accounted for 12.5% of Philippines GDP, and based on preliminary data, there is a predicted deceleration in that region of 8-10%, which will most likely shave off 1% of the national growth rate of the Philippines the following year. This means that not only is the development and improvement of the standard of living going to be decreasing or put to a halt (as government will most likely spend money on provision of shelter, water, sanitation and hospital facilities), but it will be hard for the economy to bounce back fully as such a vast amount of GDP was being generated in this specific area of the Philippines.

There is ongoing criticism of the government that there aren’t enough prevention measures put in place to ensure effective risk management, but Purisma states that this typhoon is equivalent to the highest category of a tornado multiplied by a hundred.

“Risk management is the identification, assessment, and prioritization of risks (defined in ISO 31000 as the effect of uncertainty on objectives, whether positive or negative) followed by coordinated and economical application of resources to minimize, monitor, and control the probability and/or impact of unfortunate events or to maximize the realization of opportunities. Risks can come from uncertainty in financial markets, threats from project failures (at any phase in design, development, production, or sustainment life-cycles), legal liabilities, credit risk, accidents, natural causes and disasters as well as deliberate attack from an adversary, or events of uncertain or unpredictable root-cause.”

The government of the Philippines is steadily trying to rebuild stable infrastructure more fitting to potential future climate changes, and something more durable during the times of natural disasters. Purisma states that it will take many years to rebuild this part of Philippines again, but if the government is effectively able integrate risk management and infrastructure, damage control will strengthen and improve the outcome of any natural disasters if it were to occur again.

http://www.bbc.co.uk/news/business-24936249

http://en.wikipedia.org/wiki/Risk_management

Kohl’s, Target and Toys’R’Us have already implemented a marketing strategy that would hype up customers even further for Thanksgiving sales. The Thanksgiving holiday in the United States might just outrank Christmas for fellow shopaholics as promotions on any and all kinds of products creates a buzz like no other. During the Thanksgiving sales period, stores remain open for 41 hours straight, allowing customers to literally shop until they drop.

What Kohl’s, Target, and Toys’R’Us is achieving by opening earlier than other retail stores is that they are creating a sense of urgency amongst the mob of customers that are going to be flooding through their doors at 6PM this year. By remaining the selected few stores that are opening earlier than others, it allows customers to shift their focus onto these stores, hence effectively increasing potential sale figures and revenue to be generated during the Thanksgiving period. Kohl’s is also going to fully pay for the purchases of four customers in each of their branches that will be selected randomly. These new promotions makes Thanksgiving shopping that much more exhilarating, something that shopaholics, their target segments, really feed off of. By looking at trends and statistics from past years, retailers are able to entice customers in a more efficient manner than ever before,  promotion and pricing strategies that are being implemented affect the customer’s psychological thinking, in my opinion, which is able to not only mentally hype up the customer, but physically as well. Who wouldn’t get an adrenaline rush from drowning themselves in materialistic goods?

http://www.washingtonpost.com/business/economy/kohls-target-toys-r-us-add-to-early-holiday-shopping-frenzy/2013/11/11/961a1be8-4ae4-11e3-ac54-aa84301ced81_story.html

Sustainable development is something that is being looked at by companies from a variety of different industries around the world today. Sustainable development is an organizational principle that plans for development on a finite scale – where future needs are planned out in such a way that living conditions and usage of resources are coordinated in a beneficial way to the planet and to the society, so that even further future needs are looked after as well. Companies are strategically planning for not 1, 10, 20, but 30 years down the road.

The automobile industry is extremely flexible, which means that it can easily be molded to satisfy the demands of customers. Customers are constantly seeking ways to exploit technological advancement to gain luxury and comfort, and companies are constantly seeking ways to be sustainable in order to prolong their business life span – and by integrating these two factors, the automobile industry will be able to create a vehicle that is sustainable, safe, environmentally friendly, and of course,  luxuriously technologically advanced. Automobile companies are taking into account that as compared to present day, where there are only one billion cars driving around, in 2050 there will be approximately three billion – hence they are finding was to make cars electronic rather than fuel-based. They are also looking for ways to decrease the number of driver-related accidents by implementing high level technology to create automated driving modes, self parking features, and more.

By being future-oriented and encouraging sustainable development and production from early stages, companies will still be able to flourish and hold a high market share even when customer needs and wants drastically change, as they would have done their research and development process beforehand to keep ahead of the game.

http://www.bbc.com/future/story/20131108-what-will-we-be-driving-in-2050

#GOVERNMENTSHUTDOWN #DEBTCEILING #FISCALCLIFF these terms have been flowing in and out of the news for months now, and their stay just got elongated as the U.S. Government shutdown in October 2013.

There is a considerable amount of concern arising from the general public, and for a rational reason at that. There are workers that are going unpaid until the government decides to get their act together (a week minimum has been predicted); there are over tens of thousands of workers that will be staying home from the following departments: department of military, department of energy, department of commerce, department of transportation, smithsonian institution, national parks, department of homeland security, department of justice, department of health and human services, department of education, and the environment protection agency.

The outcome of the unpaid workers is simple: there would be a drastic drop in job motivation and job satisfaction. But that just seems like the better half of the outcome. Anger arising from government workers can cause the formation of pressure groups that can start aggressive behavior – and once this starts, it can become hard to oppress due to the large quantity of people.

The outcome of the workers sent home is just as bad: the productivity levels drastically reduce, and national output is put into dangerously low levels. It is stated that the US will be undergoing a $300mil loss per day, which ‘humorously’ can be regarded as trivial to a nation whose annual output is 52,000 times greater.

Let us hope the US government gets its act together, and quick.

BARILLA, a classic Italian pasta making company just lost a huge segment of their customer base. Why? Because it’s chairman publicly announced that he “would not (feature gay families in advertisements)” as he does not “see things like they do and (thinks) the family (they) speak to is a classic family.” And if you thought that was astonishing, when he was asked on a radio interview what he would do if his gay customer segment doesn’t like it, he responded blatantly by saying “eat another brand of pasta”. This chairman clearly does not have a clear understanding of ethics and/or social etiquette.

This obviously outraged a vast amount of people and cultivated a mass amount of negative publicity for the company. It even encouraged people to create pressure groups (boycotting) and caused many customers to switch over to competitor brands such as Ragu.

Customers angrily began to tweet:

This hard-hitting negativity probably put the chairman back into his senses, as it lead to him apologizing on Facebook and Twitter pages. But how sincere was his apology and did it fix the damage that was already done? In my opinion after he made such blatant and controversial statements, it would be hard to gain back the loyalty of his homosexual customers, as well as those who strongly support gay rights. As the apology directly followed the continuous flow of online-hate, you can only assume that it was superficial and done only to gain back whatever his company had lost.

Read more: http://business.time.com/2013/09/26/pasta-maker-in-boiling-water-over-comments-on-gays/#ixzz2h7CxafdT

INSTAGRAM is ushering in a new change…will it be enough to drive away loyal users? Instagram has announced that it will now be introducing advertisements into users’ photo streams. This is obviously a tactic being used to introduce a new revenue stream, and their first step towards ‘monetizing’ Instagram, but how well will they be able to manage and control this change?

As Facebook bought over Instagram, it’s interesting to note that in the recent months, the CEO of Facebook, Mark Zuckerberg, publicly announced that “(they) are currently working on some updates to the ads algorithm to improve the relevance and quality of the ads people see.” In other words, he publicly announced that the advertisements on Facebook are annoying, and irk users on a daily basis. How are they going to avoid this problem when it comes to introducing advertisements on Instagram? Statements have been made that “(their) aim is to make any advertisements you see feel as natural to Instagram as the photos and videos many of you already enjoy from your favorite brands.” They have also stated that users will be able to hide advertisements they don’t like and will have to provide feedback on why they have done so.

Is this enough and is this convenient for the users of a currently easy to use and efficient social media platform? I don’t think so, not initially at least. People do not like change, especially when it comes to social media platforms that they use on a daily basis – I feel that there will be a mass cultivation of negative reactions, but as per the norm, it will not effect the usage nor the profitability of Instagram, as users may get annoyed, but it’s never enough to drive them away completely.

Read more: http://business.time.com/2013/10/03/instagram-will-usher-in-ads/#ixzz2h7AEQe2d

ETHICS is the study of moral values that guide our behavior and allows us to differentiate right from wrong. When it comes to businesses, the major decisions that are being taken over time build up an ethical culture, which influence the organization as a whole. Ethical behavior and social responsibility are usually paired up in the business world, and when done right, can bring potential benefits for the business as it would attract and please the stakeholders involved. On the contrary, unethical behavior can damage a firms reputation and cause outrage from different stakeholder groups – which we can see by the following example.

Recently in July 2013, Starbucks refused to ban loaded guns from 43 states in the US that allow open carry. Now, while this may not come off as unethical to some people, it did cause enmity from social pressure groups and a large part of their customer base that reside in these areas.

“Why is Starbucks willing take a public health stand on smoking, but not gun violence, which kills more than 55 children and teens a week in America? Since when is second-hand smoke more dangerous than second-hand bullets?” – Shannen Watts, an outraged customer and opinion writer for CNN.

Starbucks claims that their decision was based on the safety of their employees – so we can clearly see how difficult it is to satisfy the various stakeholder groups when it comes to being ethically correct in the business world.

Full article: http://edition.cnn.com/2013/07/30/opinion/watts-beck-guns-starbucks/index.html?iref=allsearch