Thursday, April 28, 2011
In the earlier blog on Business model, we had a brief discussion on the premium business model, where the company providing could charge more given their ability to create an image that stands out. Today we talk about value added reseller as a business model.
If we have closer look at most of the industries around us, we begin realizing that major portions of the companies work at creating a certain single component of the final product that consumer's purchase. There is another company that puts together all the individual single components from various vendors to help solve an issue that bothers the end consumer.
As most of the consumers of products, limit their interest to the usage of the product in discussion and the construction of the product is of interest only to a few people, these companies try to extract a premium using the components that are of greater worth. Given this situation, there are companies which outsource the component manufacturing to other companies while these companies focus on enhancing the usage of the product to the consumers through the product features.
Even after this, the overall experience of the product remains with the `end reseller of the product. They deliver the product, but also its service, its experience as a whole; and cater to the specific audience. This gives them the name value added reseller. Their value addition varies with what they provide, sometimes just the storage, and in some cases the experience. They make their money through value addition!
Read in Kannada:
Wednesday, April 27, 2011
In our discussion on business model, we today look at a very unique business model - the premium business model.
A lot of people intent to have a lifestyle, which distinguishes them from the normal people. It is about a status symbol that they try to communicate in everything they do. This is the core value that, this business model relies on.
Most of us have heard about - "Mercedes". Their cars are known world over as being very costly and only affordable by the really elite. What makes these cars cost really such an exorbitant amount?
It is said that Mercedes uses their aircraft components in their cars. Though there is no visible advantage for users with these kinds of components, it focuses on the mindset of the people who want to portray a different lifestyle. This aspiration for a higher lifestyle enable them afford shelling out more for their purchase and thereby makes the companies charge their "extra" which could offset their limited customer base.
Read in Kannada:
Tuesday, April 26, 2011
In the earlier blog on Business Models, we discussed about Networks. In today's blog, we discussed about online content.
In an earlier blog, we mentioned the importance of information in business. The criticality of information ensures there is business advantage, and the insights one receives from these gives a life-time lead. This is why we find a lot of news channels, giving us news about the government, the people sentiments, etc which have an impact from us.
An old adage says - "History Repeats", having a good understanding of the history gives us an ability to move ahead with confidence.
Finding such historical knowledge at one place would be of great value to the business community. One of the largest such collection is the Harvard Business Review cases. The knowledge repository of this kind is worth millions to provide a competitive advantage helping business executives hone their skills.
This method of charging people for quality content - is all this business model has on offer. Simple yet impactful.
Read in Kannada:
Monday, April 25, 2011
Thursday, April 21, 2011
- ಆ ಉತ್ಪನ್ನದ ಪೂರ್ಣ ಉಪಯೋಗವನ್ನು ತಿಳಿದುಕೊಳ್ಳಲು ಸಹಕಾರ ಬೇಕೆನ್ನಿಸುತ್ತದೆ
- ಆ ಉತ್ಪನ್ನವನ್ನು ಖರೀದಿಯ ಮುಂಚೆ ಚೆನ್ನಾಗಿ ಪರಿಶೀಲಿಸಬೇಕಾಗುತ್ತದೆ
- ನಿವೇಶನದ ಮೊತ್ತ ಹೆಚ್ಚಿದ್ದರಿಂದ ಅದನ್ನು ಒಂದೇ ಬರಿ ಹೂಡುವುದು ಕಷ್ಟ
- A felt need of continuous assistance explore its features better
- Test the product before really buying it
- A high investment
Wednesday, April 20, 2011
Tuesday, April 19, 2011
Monday, April 18, 2011
In our discussion on Business models we discussed 4 models over the last week; we continue further and discuss about one of the most common business model -Aggregation of Demand in today's blog.
Have you ever wondered how does the next door shop keeper make his money?
The Shops in our surrounding are the ones where we generally drop in, if we are short of time to go the distance, and make a random purchase. These shops generally store a variety of stuff of daily use. What is their business model?
In the example I subtle made a mention that they generally have a lot of variety and cater to a particular locality, these are the 2 essential things that these neighborhood shops really provide us. Their locality focus ensures that they have the best market knowledge, and are able to collectively order the stuff that local people ask for (only that this ordering is aggregated). Since there is certain commonality in the choices the local people ask for, this aggregate demand enables the shop owner to bargain for a lower price and ensure he is able to earn a healthy margin for himself.
The variety keeps the consumer happy, and the aggregated demand makes the shopkeeper's purse happy.
We shall deal with a minor variant of the aggregation of demand in the next blog to expand the purview of this Business Model.
Read in Kannada: http://somanagement.blogspot.com/2011/04/b.html
Thursday, April 14, 2011
Wednesday, April 13, 2011
- The cost of acquisition occurs only at the beginning of a relationship: the longer the relationship, the lower the amortized cost.
- Account maintenance costs decline as a percentage of total costs (or as a percentage of revenue).
- Long term customers tend to be less inclined to switch and also tend to be less price sensitive. This can result in stable unit sales volume and increases in dollar-sales volume.
- Long term customers may initiate free word of mouth promotions and referrals.
- Long term customers are more likely to purchase ancillary products and high-margin supplemental products.
- Long term customers tend to be satisfied with their relationship with the company and are less likely to switch to competitors, making market entry or competitors' market share gains difficult.
- Regular customers tend to be less expensive to service because they are familiar with the processes involved, require less "education," and are consistent in their order placement.
- Increased customer retention and loyalty makes the employees' jobs easier and more satisfying. In turn, happy employees feed back into higher customer satisfaction in a virtuous circle.
- The loyal customers could be involved with greater confidence in your product development, with a better solution to the problem
Tuesday, April 12, 2011
Monday, April 11, 2011
Thursday, April 7, 2011
It is but common for us to hear our parent say "the price of a meal when I came to Bangalore was just 5 paisa, today it is Rs 30/- per plate!" Looks alarming isn’t it?
Hang on! We need to just take a bit of caution. Can we really compare the two? Have everything remained constant?
No! We cannot compare the two, the prices of all the commodities have increased over the year - this is the effect of inflation that has to be factored in. The price of the meal today is the "Current Rupee" or "Nominal Price"; to make any comparison with what was probably 40 year back, we need to have the same standard - we create a common scale for the same. We create this scale and correct today’s price and let them all talk in the same price, we call that the "Real Price" or "Constant Rupee".
The Nominal Price of a good is its absolute price. The Real Price of a good is the price relative to an aggregate measure of prices (i.e. it is adjusted for inflation). The aggregate measure of prices is generally called the "Consumer Price Index (CPI)". The percentage change in the CPI is the measure of inflation.
We would deal more about the CPI as we begin the section on Macro Economics. We dealt with the prices here just for the sake of completion. When we are studying micro-economics through these blogs, we always mean the Real Prices when we mention about price unless explicitly mentioned.
Read in Kannada: http://somanagement.blogspot.com/2011/04/blog-post_07.html
Wednesday, April 6, 2011
- ಕಂಪನಿಯ ದೃಷ್ಟಿಕೋನದಿಂದ: ಮಾರುಕಟ್ಟೆಯಲ್ಲಿ ನಮ್ಮ ಇಂದಿನ ಮತ್ತು ಮುಂಬರುವ ಸ್ಪರ್ಧಿಗಳನ್ನು ಗುರುತಿಸುವುದು ಸುಲಭವಾಗುತ್ತದೆ. ನಮ್ಮ ಇಂದು ಮತ್ತು ಭವಿಷ್ಯದಲ್ಲಿ ತಯಾರಿಸುವ ವಸ್ತುಗಳ ಬೇಡಿಕೆಯನ್ನು ತಿಳಿದುಕೊಳ್ಳುವುದು ಮುಖ್ಯವಾಗುತ್ತದೆ; ಅದರ ಭೌಗೋಳಿಕ ಪರಿಮಿತಿ ಮತ್ತು ಅದಕ್ಕೆ ಬರಬಹುದಾದ ಸ್ಪರ್ಧೆಯನ್ನು ನಿಶ್ಚಯಿಸುವುದು ಸುಲಭವಾಗುತ್ತದೆ.
- ದೇಶದ ಅರ್ಥವ್ಯವಸ್ತೆಯ ದೃಷ್ಟಿಕೋನದಿಂದ: ಮಾರುಕಟ್ಟೆಯಲ್ಲಿ ಸಂಭವಿಸುವ ಕಂಪನಿಗಳ ಒಕ್ಕೂಟ ಮತ್ತು ಸೇರ್ಪಡೆಯನ್ನು ನಿಗ್ರಹಿಸುವುದು ಮುಖ್ಯ. ಇವುಗಳಿಂದ ಆಗುವ ದರ ಪರಿವರ್ತನೆ, ಮತ್ತು ಮುಂದೆ ಆಗಬಹುದಾದ ಪರಿಣಾಮಗಳನ್ನೆಲ್ಲ ಅವಲೋಕಿಸಿ ತಮ್ಮ ನಿರ್ಧಾರಗಳಿಂದ ಇವುಗಳಿಗೆ ಅನುಮತಿ ನೀಡಬಹುದು ಅಥವಾ ನಿಷೇಧಿಸಬಹುದು.
In the earlier blog, we mentioned that definition of a market helps identify which buyers and sellers should be included in a given market. To get more clarity on whom to be included or excluded it is important to define the extent of a market - i.e. its boundaries, both geographically and in the range of products to be included.
Extent of a market is the boundaries of a market, both geographical and in terms of range of products produced and sold within it.
If the extent of a market is not defined, it leaves many questions open; lets clarify this with the example of a petrol. When I say a market for petrol the questions that would come out include - which geography are we referring to - Is it Bangalore or Delhi or Mumbai? What is the octane number of the petrol? Is the petrol leaded or unleaded? Should diesel be included as well? Etc.
The market definition is important for two reasons:
- A company must understand its actual and potential competition for its current or future products. A thorough understanding of the product boundaries and geographical boundaries of its market to set the price, determine the advertisement budgets and make capital investment decisions etc.
- At a macro level, an understanding of the market helps make effective public policy decisions. The government could look at the implications of a possible merger or acquisition of two companies either in the same domain or other, on the market situation on the prices, competition and approve or disapprove it
Tuesday, April 5, 2011
ಹಿಂದಿನ ಅಂಕಣದಲ್ಲಿ ತಿಳಿಸಿದಂತೆ, ಮಾರುಕಟ್ಟೆಯ ಸರಿಯಾದ ತಿಳುವಳಿಕೆ ವ್ಯವಹಾರ ಮತ್ತು ಪ್ರಬಂಧನೆಗೆ ಬಹುಮುಖ್ಯವಾದುದು. ಆದ್ದರಿಂದ ನಮ್ಮ ಈಗಿನ ಹಾದಿಯಿಂದ ಕೆಲಕಾಲದೂರ ಹೋಗಿ, ಈ ಅರ್ಥಶಾಸ್ತ್ರದ ಅಧ್ಯಯನವನ್ನು ಮಾಡಿ ಮತ್ತೊಮ್ಮೆ ಹಿಂತಿರುಗೋಣ.
ಅರ್ಥಶಾಸ್ತ್ರದಲ್ಲಿ ಪರಿಪೂರ್ಣ ಸ್ಪರ್ಧಾತ್ಮಕ ಮಾರುಕಟ್ಟೆಯೆನ್ನುವ ವಿಧವನ್ನು ನಿರ್ಮಿಸಿದ್ದಾರೆ. ಇದರಂತೆ ಯಾವ ಮಾರುಕಟ್ಟೆಯಲ್ಲಿ ತುಂಬಾ ಜನ ವರ್ತಕರು ಮತ್ತು ತುಂಬಾಜನ ಗ್ರಾಹಕರಿರುವರೋ ಅದರಲ್ಲಿ ಸ್ಪರ್ಧಾತ್ಮಕ ಮನೋಭಾವ ಹೆಚ್ಚಿದ್ದು, ಯಾವುದೇ ಒಬ್ಬ ವರ್ತಕ ಅಥವಾ ಒಬ್ಬ ಗ್ರಾಹಕ ಮಾರುಕಟ್ಟೆಯಲ್ಲಿ ವ್ಯವಹಾರಕ್ಕೆಂದಿರುವ ವಸ್ತುವಿನ ಬೆಲೆಯ ಮೇಲೆ ಪ್ರಭಾವ ಬೀರಲು ಸಾಧ್ಯವಾಗುವುದಿಲ್ಲ.
ಸಾವಿರಾರು ರೈತರು ಬೆಳೆಯುವ ಬೆಳೆಗೆ ಅಸಂಖ್ಯಾತ ಗ್ರಾಹಕರ ಬೇಡಿಕೆ ಇರುವುದು; ಹೀಗಿದ್ದಲ್ಲಿ ಅದರ ಬೆಲೆಯನ್ನು ಯಾವುದೇ ಒರ್ವ ರೈತ ಅಥವಾ ಗ್ರಾಹಕ ನಿಶ್ಚಯಿಸಲು ಸಾಧ್ಯವಾಗದು.
ನಾವು ಈ ಹಿಂದೆಯೆ ತಿಳಿಸಿದಂತೆ, ಸ್ಪರ್ಧಾತ್ಮಕ ಮನೊಭಾವಇರುವುದು ಮುಖ್ಯ; ಮಾರುಕಟ್ಟೆಯಲ್ಲಿರು ವವ್ಯವಹಾರಿಗಳ ಸಂಖ್ಯೆಯಲ್ಲ.
As we proceeded with the blog, it becomes very important to understand the concept of market thoroughly. With this in mind, we would take a detour from the normal course and get a bit further on the concept of market.
We began with defining the concept of market in the earlier blog. In this blog we would move a bit further and look into some important flavors that economists give to the market. This understanding is important since these flavors encapsulate many common features of the market its competitiveness in the market. We begin with defining the "Perfectly Competitive Market".
A Perfectly Competitive Market is one that has many buyers and sellers, so that no single buyer or seller has a significant impact on price.
As an Example we could imagine the market for food grains like rice. There are many sellers and many buyers - the choice of any single buyer or seller wouldn’t really affect the overall impact of the market and the price that is defined in the market.
While defining perfectly competitive market the underlying assumption with the large number of buyers and sellers being present is that they would be very competitive with each other. So even if the numbers are not really large but there is very huge competition amongst these sellers or buyers; then too we could assume such a market as a perfectly competitive one for any analysis.
Read in Kannada: http://somanagement.blogspot.com/2011/04/blog-post_04.html
Monday, April 4, 2011
In our discussion on Demand and Supply, to which we would return pretty soon, we made a mention of "Market" where lemons were traded. We have used the term Market in the general understanding of common parlance, but it is interesting to see how Economics defines the term "Market".
A "market" refers to the collection of buyers and sellers that, through their actual or potential interactions, determine the price of a product or a set of products. It is interesting here to note the difference of the term "market" from that of "Industry" - An Industry is a collection of firms that sell the same or closely related products. In effect industry forms the supply side of the market.
While defining a market; economist are generally concerned with the determination of the buyers, sellers and range of products that should be included in a particular market; this is of interest since the definition of the market essentially buts a boundary on the buyers and sellers - the potential and actual ones both are important. The difference in the definition of the Maker essentially leads to a possibility of "Arbitrage". Arbitrage: Is the practice of buying at a low price at one location and selling at a higher price in another.
Let’s take an example to make it clear:
Let’s say Mr. X a resident of Hong Kong wants to purchase gold and that the price of gold is significantly lower in Chennai in India. If he intends to make use of this difference in price he would travel all the way from Hong Kong to Chennai and make the purchase at a lower price, take it back to Hong Kong and Sell it at a higher price. This is given that the transportation cost he incurs is much lower than the profit he would earn by entering into such an activity. Such activities would be detrimental on a large scale and hence the possibility of arbitrage is always checked across the globe for gold price.
The example above also highlight the “importance of Information flow in business” - about which we made brief mention while discussing Information Asymmetry.
Read in Kannada: http://somanagement.blogspot.com/2011/04/blog-post.html