Give Michigan a Hand

With the U.S. trying to recover from the economic recession over the last two years, lawmakers in the state of Michigan are trying to jockey for position in the race to win over growing companies. The state recently passed a new 25% state "Small Business Investment Tax Credit" aimed at promoting the growth of small, innovative businesses already located in the state. The ultimate goal is to help Michigan entrepreneurs have financial stability while their firms are in the growth phase of the business cycle, which allows the firm avoid potential risks that may occur when starting a new business.

The program allows qualified investors to apply for a 25% credit on their personal tax return if they made investments to Michigan-based firms who are in the the seed/early stage of development. The article goes on to explain the qualification criteria for investors and how growing firms are categorized by the state.

The Michigan Economic Development Corporation has been involved in a strong marketing effort to bring back jobs to Michigan. Young professionals are looking to leave the state right after graduation since there are few lucrative offers from employers. Start-up firms are difficult to grow and many fail before they break even. Tax credits like this one and the "Pure Michigan" campaigns have tried to lure workers and firms back to the state and believe in the "blue collar" culture once again.

Questions:

1. Do you believe that tax credits like these will promote long standing growth opportunities for firms or is this a quick fix to the problem?

2. Helping technology firms grow was the main purpose of the tax credit; do you think that this is the right market segment or should the state be looking at health-care, automotive, or agriculture (industries the state was built on)?

3. If Michigan is known for its young innovators, how should the state increase loyalty amongst its young professionals?

Google TV - Treading in Unfamiliar Territory

An article posted in The New York Times, Google TV Faces Delays Amid Poor Reviews, gives us a snapshot of some of the difficulties Google has faced during the launch of their new product, Google TV. (http://www.nytimes.com/2010/12/20/technology/20google.html?_r=2&src=busln)

With so many Americans fed-up with what seems to be a regional based monopoly for TV and internet providers, there is high demand for a web-based product to step in as a cable or satellite substitute. However, “the biggest promise of Internet television — the ability to watch any show or movie at any time, streamed over the Web — is far from reality with Google TV.” The introduction of Google TV was a glimpse of hope for consumers as the search engine and marketing giant entered the electronics market and provided what was thought by many to be the next wave of TV viewing. Yet, the lackluster product launch has been filled with poor partnership management and product updates. In addition, Google has struggled to land deals with the major TV networks (NBC, CBS, and ABC) to stream full-length programs from their websites, further preventing the product offer fulfillment. The competition in the internet television market is fierce, with Apple TV and Boxee Box by D-Link pushing the industry, as each of these devices provide access to the major TV networks and online streaming through Netflix and Hulu. “Internet video traffic from 3-D and HDTV is slated to increase 13 times between now and 2014, when that eye-popping goodness will comprise 42 percent of consumer video traffic.” (Men’s Health, November 2010)

Questions:

Has Google stretched beyond their core competencies as a web search engine and marketing platform by introducing Google TV into the consumer electronics market?

It appears that Google had a poorly designed marketing plan for the Google TV without a well defined product offering, a lack of strategic alliances with key partners, a advertising campaign to promote customer interest, and a launch ready product that can meet customer expectations. Can Google turn this around as they tweak the software and re-launch the product in the future?

Borders' Woes Help E-Books

(click title to link to WSJ article)

Borders Group is expected to file bankruptcy within days. The filing will include an aggressive plan by Borders which is believed to close as many as 1/3 of their 674 stores in the restructuring. Quite simply, there will be fewer places for consumers to buy physical books. This is expected to speed the pace of online and e-book sales.

Borders handed the online book business to Amazon over a decade ago but only relaunched their own site three years ago. This contributed to their current problems but Borders still is a substantial presence in the traditional book business. "...Borders is probably 8% of sales for many publishers, but on certain titles, Borders could be 20%," said Laurence Kirshbaum, a NY literary agent. This is significant for smaller titles. Mr. Kirshbaum has noticed over the past couple months that publishers have taken a reserved posture towards smaller titles due to distribution concerns.

"Once physical shelf space is gone, it's gone forever," said the CEO of an e-book publishing and distribution company it the article. This will will make the off-handed discovery of books in traditional retailing more difficult.

Word of mouth sales of books will be more significant in the future since sales will not be bounded simply by what bookstores carry. The article stated that the same marketing tools will exist for small publishers as well large ones. It was suggested that these two factors will bode well for smaller titles and smaller publishers.

Do competitors stand to gain in the seeming demise of Borders' stores? Absolutely. Barnes & Noble is estimated to potentially gain $1B in sales if Borders' closes altogether. Independents also stand to gain in markets where a Borders' store closes. When Borders liquidated their U.K. stores in 2009 they had about 4% of the market. The former Borders' U.K. CEO estimated that their sales were roughly evenly distributed between online retailer Amazon and a physical bookstore chain called Waterstones. It will be interesting to see if a similar distribution happens in the US or if the proliferation of e-books in the last couple years alone skews those numbers.

I found this article interesting because a typical Borders' customer relishes in the value proposition they provide. They go to a store, browse, touch, sample, read, eat, drink, study, socialize, surf, etc. For consumers who find their local store shuttered this void will not be filled easily for them. Where they land in the future and spend their dollars will be an interesting adventure for such a classic activity, book reading.

Questions:

1. An online distributor states in the article that Borders has an opportunity to save itself with e-books. Do you agree that a retailer like Borders, with physical stores in its DNA, can successfully adapt to selling digital content? Can they do this profitably? Do you agree with the online distributor that this can save Borders?

2. Who do you feel stands to gain more with Borders closing stores? Chains like Barnes & Noble or even a retailer like Wal-Mart? Online retailers like Amazon? Independents?

3. Is there a new opportunity for a completely new entrant into the market? If so, what do you see this new entrant offering? How would their value proposition entice new customers?

4. Do you think smaller titles are on track with their belief that word of mouth will be more significant than traditional advertising methods in the future?

5. Will this invigorate the book buying population to finally switch to e-books?

“Huawei Wants to Woo the U.S With Cheap Tablets”, Jenna Worthham NYTimes:

“Huawei Wants to Woo the U.S With Cheap Tablets”, Jenna Worthham NYTimes:

This NYTimes BITS (Buisness Innovation Technology Society) blog post is provides a brief introduction cheap tablet computers as presented at the Mobile World Congress in Barcelona. There is an acknowledgment that there is a great deal of competition among tablet manufactures, many with similar features. However competition on price has only recently developed, led by Huawei. Huawei is a low price tablet manufacturer, priced around $300, running on an open source mobile operating system, Android. Though Huawei is not a major player in the United States yet, it is seeking entry using its low cost. Their product will be sold at Best Buy by mid-2011. One key to keep the costs down for Huawei, eliminate mass-marketing campaigns. According to Ross Gan, the world-wide head of corporate communications at Huawei: “we adopted a much leaner approach to these devices. We didn’t set our margins based our massive advertising campaigns that you see for some tablets. Our main goal is to offer value to the product.”

Of interest here is how much weight the consumer is going to place on price and whether the lower price tag is enough to develop Huawei’s market share. An optimized consumer would select those products with the best price/value combination. Assuming that these new low-cost tablets have same functionality as the existing tablets, the consumers should gravitate to these cheaper tablets. However consumers are not always rational. Big ticket items, like a tablet, would draw more scrutiny from the consumer and the consumer, being “boundedly rational,” would be drawn to the established brands. However if the price drops far enough, then consumers may become more lax with their standards and maybe more open to different brands, like the new-comer, Huawei.

1.) Do you foresee a tablet price war whereby consumer’s expectation on price narrows and their allegiance towards specific brands gets tested?

2.) Are their parallels between Apple’s first PCs and its response to “IBM compatible” PC’s to the Apple iPad and its response to other tablet manufactures using Android? Has Apple learned any lessons?

3.) In your opinion, is $300 low enough to draw consumers to a new brand?

How Great Entrepreneurs Think

This article in Inc. Magazine poses insight into the minds of great entrepreneurs and how they approach business opportunities and compares that to the ways successful corporate executives would approach the same situation. Sara Sarasvathy, a professor at the University of Virinia’s Darden School of business set out to understand how expert entrepreneurs think. She interviewed 45 entrepreneurs with successful track records with company revenues ranging from $200 million to $6.5 billion in a variety of industries. She presented each person with a case study on a hypothetical start-up company and asked for responses on 10 decisions that the founder of such a company would have to make when building the venture. She then conducted the same experiment with professional managers at large corporations (e.g. Nestle’, Philip Morris, and Shell to name a few).

The differences between these two groups were quite interesting especially when it comes to each group’s perception on the value of market research when launching a product or a company. Sarasvathy asked “what kind of market research they would conduct for their hypothetical start-up.

The entrepreneur’s responses leaned away from needing to conduct market research. Market research would take too much time and could still be wrong in the end. It would be better to just get out there and try to sell the product. That in itself would be all the market research they needed. If they found a customer for their product, then they found their market. The entrepreneur’s motto is Ready, Fire, Aim. Get out to the market fast and make adjustments on the fly.

On the other hand, the corporate executives were much more likely to desire market research. They want to run a quantitative analysis on the market size and customer segments before pulling the trigger. You could say the corporate executive’s motto is Ready, Aim, Aim, Fire.

Going through an MBA program and working within the corporate world I find myself relating more with the mind set of the executives than the entreprenuers. I feel that market research definately has it's place within corporate America but is this why it takes a long time to get things done in corporations? Have we become too risk averse that we aren't willing to pull the trigger on projects, jump in and make adjustments on the fly?

This leads me to ask the following questions regarding your perceptions on market research.

1. Why do you think successful entrepreneurs discount the need for market research when successful corporate executives value it?
2. If you came up with a great business opportunity tomorrow that you wanted to launch, how much market research would you conduct before moving forward with it? (Rate it on a scale from 1-10 where 1= no market research and 10 = extensive quantitative and qualitative research)
3. Is speed to market more important than conducting extensive market research?

Menswear's Youngbloods Kick It Old School

The article is very relevant to a few of our latest topics in marketing -Segmentation and Targeting and Positioning. Burgeoning new designers are capitilizing on the niche market of offering tailored clothing for men that don't want to be labeled as fashionable but do want to project the right image of themselves. The goal is to concentrate on fit, quality, and understatement. While the bespoke industry is not new its certainly a growing trend. The economic downturn has "unleased a desire ro be uplifted and energized." These designers are positioning themselves to provide exclusivity, simplicity and uniqueness to men that care about their image but not fashion so much. Some of the marketing strategies include partnering with firms of high end products, such as Bentley, who will give you an Astor and Black suit, shirt and tie with any car purchased. The article suggests that men are tired of dressing casual and are rediscovering the joy that dressing up can give. And just like the Ofek and Wathieu's article suggests, there can be opportunities to offer new value propositions that exploit trends that could shake up or grow the business.

My questions:

1) For men: Does the thought of having clothes tailored to fit your needs appeal to you?
2) Does this market seem like a trend or like something that is here to stay.
3) Ladies - Would you invest in the opportunity to dress the men in your life in something other than jeans and khaki shirts?

NFL vs. NFLPA. How about the customer?

Recently if you listen to any radio sports talk or visit any sports web page, I am sure you have heard about the NFL lockout for the year 2011~2012. The team owners and the players association are fighting over their share of money and are not concerned about the customers (fans).

•But it all comes down to one thing: finding a way to split the $8.9 billion. The owners already are allowed to take $1 billion off the top before the players get their nearly 60% share. Now the owners want to take another $1 billion off the top.

•The NFL will stop paying the premiums on the players' health insurance policies. This does not mean they will be without insurance. They can continue their coverage through COBRA and pay the premiums themselves, estimated anywhere from $1,500 to $3,000 per month.

•Here's what the NFL said it will lose in revenue if there is a lockout: $120 million in March, the cumulative figure grows to $350 million in August and $1 billion if the lockout ends right before the season. Then it's another $400 million per week in lost revenue once the regular season starts.

If you would like to know more about lockout click on the heading or the link below.

http://www.nydailynews.com/sports/football/2011/02/11/2011-02-11_stall_in_nfl_collective_bargaining_agreement_talks_between_roger_goodell_owners_.html

To me it looks like both NFL & NFLPA will lose if there is a lockout but both parties are not at all concerned about revenue loss and most importantly distancing themselves away from their customer base instead of building a life time customer value to their customers. I feel that NFL & NFLPA thinking is similar to that of Henry Ford’s view that “People can have the Model T in any color-so long that it’s black”.

My questions to you are.

1. Do the owners and the players association will distance themselves from the fan base (customers) due to the lockout?

2. Do you think NFL will lose their customer base and revenue to other sports?

3. Or it doesn’t matter to NFL as the customer base will be back irrespective of lockout. Do you think are there any other businesses like NFL that will survive in the current economy if they have a lockout similar to that of NFL, if there is one?

4. Do the customers (fans) have any say on the lockout or are they mere spectators like in a football game and at the mercy of NFL & NFLPA?