The Arc Initiative is a third-world oriented outreach program founded by the Sauder School of Business at the University of British Columbia. It shares a common goal with many similar organizations: kickstarting local commerce, along with sharing knowledge and business expertise.

This begs the question, however, why is the Arc Initiative necessary? Given the existence of the United Nations, a much larger entity with essentially the same goal.

The United Nations support programs are indeed large, but limited resources limit their outreach. It is impossible for a single organization with limited resources to serve, wants appears to be unlimited wants and needs.

The Arc Initiative is just one of the many other programs working, in conjunction, to serve a common purpose: to foster the misfortuned. By providing business expertise to these communities, Sauder is allowing for the prosperous commerce in these communities.

It would be optimal for other organizations to join this program. As resources to accomplish this goal are scarce. It would be impossible for any of these programs to be rendered obsolete.

In a recent Financial Post blog, a writer mentions three priority-based business cultures: putting employees first, putting customers first and putting the brand first.

It is interesting to see his opinion that between employees and consumers, it doesn’t matter what you put first, so long as you focus deliberately in one direction. The question remains, however, what about putting the brand first? Is it so far irrelevant that it’s become obsolete?

Focusing on customers means receiving and responding to consumer feedback. Source: Stock photo from Foxworthy and Associates

I believe what the writer has written largely applies to small companies and start-ups; that in few rare instances, however, putting the company brand first is still the ideal dynamic for a company.

Take for example, Nike, or Coca Cola whose brand images are potentially the companies’ most valuable assets, so valuable that they often go through major litigation to protect them. In these cases, a shift in focus from brand image would be largely detrimental to the companies. With these examples, it is clear that putting the brand first is not an entirely obsolete practice, and is still not only relevant, but crucial for some companies.

However, it is clear that not all companies are Coca Cola or Nike. Smaller businesses such as Zappos with less value brand names may benefit more from a customer or employee oriented culture. And if you’re looking to become more customer oriented, the writer also offers a few great ideas on how to do so.

Volkswagen AG operates in the automobile industry. It’s subsidiaries/marques include Audi AG, Lamborghini S.p.A, Bentley Motors Ltd, Porsche AG, Bugatti S.A.S, and Volkswagen Passenger Cars. For this analysis, I will be focusing on the North American market.

Volkswagen Group. Source: IB Times

1. Barriers to Entry: HIGH

Not surprisingly, the automobile industry has large barriers preventing new firms from entering. Aside from insurmountable start-up costs, automakers must set-up dealer networks, acquire licensing, and establish trust in the brand (as cars are usually large purchases for consumers). New competitors often come in the form of subsidiaries of current competitors.

2. Power of Suppliers: LOW

Suppliers specialize. They produce parts for only one or two automakers at once, and are heavily reliant on these automakers. It would be devastating for a supplier to lose an automaker contract.

3. Power of Consumers: LOW-MEDIUM

Despite Volkswagen’s large collection of marques, there is an abundance of brand substitutes. However, consumers rarely purchase large quantities of cars; large firms/government agencies have slightly more power as they purchase vehicles in bulk.

4. Availability of Substitutes: MEDIUM

As a result of increasing rising gas prices and government initiatives to promote environmentally friendly transportation, more consumers are opting to take public transit/walk/cycle.

5. Rivalry: HIGH

The US automobile industry can be regarded as an oligopoly. However, with the recent insurgence of Japanese automakers manufacturing domestically, and the revival of “The Big Three” in the US, rivalry is as fierce as ever.

Conclusion:

Based on this analysis, one can conclude that Volkswagen’s position in the automobile industry is relatively safe. As long as they keep up with competitors in innovation, it is possible for the Volkswagen group to hold a considerable market share.

A Colorado resort town by the name of Steamboat Springs has recently taken an unprecedented initiative. In an effort to promote tourism in the resort town, the chief executive of the Steamboat Springs Chamber Resort Association is offering customer-service training to the entire towns’ small business populace.

This idea may seem preposterous at first, given the essential goal of increasing tourism and boosting the local economy (profit maximization), it seems unlikely that offering an entire town customer-service training would be conducive to this goal.

Steamboat Springs – Source: RMS Harp

However, if we view the entire town as one firm, it is easier to perceive the end objective of this program: increasing revenue by way of improving customer experience (and by extension, demand). A parallel approach is taken by Zappos, similar in the sense that it is based off an often forgotten premise: a customer’s overall experience plays a considerable factor in their choices. And while in the short-run, this may not directly lead to increased profits (a loss may just as likely be incurred), revenue generated from new customers, along with retained existing customers in the long run, can verily make up for these costs.

All this is especially true for Steamboat Springs, a resort town. Because vacationers generally seek enjoyment as vacation time is usually scarce, they are more likely to be affected by negative interactions than any other consumer.

As a result, this unorthodox, unprecedented move by a tourism executive may pave the way for other resort towns to follow suit.

A colleague of mine recently wrote about gutter oil being used illegally in the Taiwanese food supply. He had suggested the “extermination” of the companies involved by way of elaborate fines, mass boycotts, and in contradiction, not fining the company but detaining its executives and largest shareholders.

Gutter Oil. Source: china.org.cn

These methods would be largely detrimental to all stakeholders involved. These forms of essentially retribution will create a massive ripple effect, and affect a larger populace. Workers would be laid off, many companies that rely on the corporation and its subsidiaries will be forced to resource their supplies (whether they’re willing or unwilling).

The root of this scandal is likely much more isolated. It cannot be assumed that all executives and the largest shareholders, especially, were involved or even had knowledge of any illegal doings. Instead, an independent inquiry should be made, and only those responsible, those motivated by greed, possibly managers enumerated based on cost savings, should be held accountable.

While it is understandable that the writer of this blog (who holds a personal stake in the manner) is frustrated, it is important that appropriate measures are taken to ensure only those responsible are punished.

A recent blog entry in the HBR attempts to refute another blogger’s argument that Apple is re-positioning itself away from “egalitarian provider of mass market tech” to a luxury brand for the wealthy: the 1%.  The writer testifies that Apple products today cost relatively less (in terms of average household income) than they did several decades ago. However, aside from having wrong prices (the $499 for an iPhone in 2007 is a carrier subsidized price), I believe the writer also made a fundamental mistake by comparing prices relative to income, of one company in different time periods, as opposed to substitute product prices.

Any first year economics student can tell you why the prices of the Apple II and Macintosh were seemingly high in 1977 and 1984: there was no competition. Apple had to price their products high in order to cover their large fixed costs (in the short-run, with limited production). These product prices were probably irrelevant to Apple’s market position.

Fast-forward to today: as a result of market saturation, demand for electronics is largely price-elastic. Prices for smartphones are more or less fixed at $600-700USD. However, while Apple does sell products at the market price, the majority of its current product line sells well above it (e.g. iPhone 6+ at $949 USD, higher storage capacity models, etc.)

Furthermore, with the introduction of the Apple Watch Edition, a 18 karat gold watch, Apple is clearly creating a point-of-difference distinguishing itself from other producers in the gadget watch market. They are repositioning themselves as a luxury brand, and it is likely that this will carry over to their other product lines in the near future.

I recently studied a blog post by a colleague of mine outlining how Spotify and other music streaming services are inherently killing the CD industry. While she does make a good point in that revenue generated from online streaming is on the verge of eclipsing revenue generated from physical media, she doesn’t appear to realize that the companies receiving these two different streams of revenue are one and the same.

In fact, major record labels and the artists signed to these labels, could benefit from music streaming services! Music streaming opens up new potential customer segments: people who don’t save music (as cloud computing expands, this segment will too), and people that only listen to specific songs for short periods of time.

Streaming services such as Spotify pay massive royalties to content producers and record companies. Spotify claims that these royalties make up 70% of the company’s total expenditures (royalty payments are likely a major reason why Spotify has yet to turn a profit). These payments, which are split amongst producers, artists, writers and the record company itself, similar to the way revenue from digital downloads, or CDs would be split, come at essentially NO VARIABLE COST to the producers of the media, what they are is essentially FREE MONEY. In fact, the decreasing demand for physical media has the potential to decrease costs for record companies, as they produce less CDs and focus on royalty-based revenue streams such as Spotify.

So while online streaming is verily diminishing sales of physical media, no one (save for HMV) seems to be complaining.

In my previous post, I discussed the proposed New Prosperity Mine by Taseko Mines. However, I did not elaborate on what the declaration of a “tribal park” meant for the future of the region; nor did I discuss other external forces in play.

Tribal parks are not legally recognized entities. They are unilaterally designated by aboriginal governments. This means they are legally unbinding, and although mining, and all other forms of heavy industry are “not allowed” within these regions, these rules are not enforced by the provincial or federal governments, and Taseko can chose to ignore them if they so wish.

So what purpose does this declaration serve?

This declaration serves as a caveat to Taseko, an obstacle created by the first nations for the mining company. The (unnecessary) decision to declare corporate-owned land part of a tribal park can be seen as an incendiary move by the nation to show that they are a serious external force: a real threat.

However, the first nations are not the only external forces at play. The provincial and federal governments are also on opposite ends of the spectrum when it comes to this issue. The provincial government’s support for the mining project provides Taseko with important opportunity. However, the federal government is opposed to the New Prosperity mine and has rejected the issuance of its permits.

Taseko is set to appeal the federal governments decision later this month.

So what does this mean for the future of Taseko?

Despite strong opposition, Taseko will continue to fight for its ability to develop this mine as the revenue it would generate would be substantial. Taseko’s main responsibility is to maximize returns to its shareholders, and willingly conceding would put the company at odds with its investors.

On the Fourth of October, 2014, the Tsilhqot’in First Nation declared Dasiqox Tribal Park. A controversial declaration as the first nations do not have rights to, or land claims over a large portion of the declared land. This land is owned by Taseko Mining and is the site of their long-proposed billion dollar mineral mine.

The First Nations and Taseko have been quarelling over the proposed mine for over a year and although the natives do not have title rights for Taseko’s property, they are still stakeholders in the project, as any industry in the area would have a measurable effect on their lives.

However, I don’t believe that R. Edward Freeman’s stakeholder theory applies here. The First Nations and big business have forever been at odds and they always will be. They fail to understand each other on even the most basic levels, and they make no attempts to do so. If Taseko had consulted with First Nations before proposing this mine, the outcome likely have been increased friction, as the parties are too far diverged. Due to their essentially dissimilar interests, and an unwillingness to concede, there is attainable no middle ground.

The desires of the first nations are an external force that’s impeding Taseko’s mine development: it is a threat. But instead of addressing these issues directly, and coming to a compromise with the native peoples, Taseko instead chose to fight in court: a logical move as Taseko’s primary responsibility is to maximize returns of their shareholders, and any willing concession to do so would be a hindrance to potential share purchasers.

It recently emerged that UK supermarket chain Tesco has recently acquired a Gulfstream G550, a $50,000,000USD corporate jet. This comes not a week after major discrepancies were discovered in the company’s accounts, leading to Tesco’s accounting scandal. Tesco’s shares have since plummeted, leaving shareholders angry (as they should be, seeing as they inadvertently paid for Tesco executives’ private jet). The cost of the Gulfstream does not stop at its MSRP, however. Operating the private jet would cost the company approximately $107,000USD per 12 hour flight.

A Gulfstream G550         Source: Associated Press

Tesco, from a consumer standpoint, is not the worst grocery store chain in the world (save for the horse meat scandal); but its corporate ethics negatively differentiate it from its competition. Their lavish expenditures are a reflection of the corporate greed that gave it motive to essentially commit financial fraud. Taking stakeholder theory into consideration, it would not be wrong to say Tesco is a business in decline.

Tesco’s outing of its previous CEO, and the suspension of four members of its C-suite is evidence that the company is attempting damage control, in an effort to save their dwindling share value and re-brand the company. But whether these tasks, undertaken by new CEO David Lewis, are enough to save the company from decline remains to be seen.