Monday, 24 June 2013

CASE STUDY: Smart Move by Dow Chemical

Herbert Dow founded Dow Chemical in Midland, Michigan when he invented a way to produce bromine cheaply. He sold the chemical for industrial purposes all over the US for 36 cents per pound at the turn of the 20th century. He couldn't go overseas, however, because the international market was controlled by a giant German chemical cartel that sold it at a fixed price of 49 cents per pound. It was understood that the Germans would stay out of the US market so long as Dow and the other American suppliers stayed within its borders.

Eventually Dow's business was in trouble and he had to expand. He took his bromine to England and easily beat the cartel's fixed price of 49 cents per pound. Things were okay for a while until a German visitor came to Michigan and threatened Dow that he had to cease and desist. Dow didn't like being told what to do and told the cartel to get lost.

Shortly thereafter German bromine started appearing for sale in the US for 15 cents per pound, way below Dow's price. The cartel flooded the US market, offering the chemical way below their own costs, intending to drive Dow out of business. But Dow outsmarted them. He stopped selling in the US market entirely and instead arranged for someone to secretly start buying up all the German bromine he could get his hands on. Dow repackaged it as his own product, shipped it to Europe, and made it widely available (even in Germany) at 27 cents per pound. The Germans were wondering 1) why wasn't Dow out of business and 2) why was there suddenly such demand for bromine in the US??

The cartel lowered its price to 12 cents and then 10 cents. Dow just kept buying more and more, gaining huge market share in Europe. Finally the Germans caught on and had to lower their prices at home. Dow had broken the German chemical monopoly and expanded his business greatly. And customers got a wider range of places to buy bromine at lower prices.

Dow went on to do the same trick to the German dye and magnesium monopolies. This is now the textbook way to deal with predatory price cutting.

Source: Herbert Dow, the Monopoly Breaker

Signs of the Times

Graduates of Harvard University are increasingly heading into careers in finance, which is a bad thing. Statistics show that when Harvard grads flock to Wall Street (when times are good and careers there appear most attractive), the stock market falls the following year. In 2007, for instance, 47 per cent of Harvard grads went to Wall Street, reports the website Quartz. We all know what happened in 2008.

Austerity strikes again. Italy reported there were 1.65 million bicycles sold in the country in 2012, compared to 1.4 million cars. It's the first time bike sales have passed car sales in nearly 50 years in Italy, home to Ferrari and Lamborghini. "There is a silent revolution taking place on two wheels in our cities," said the country's transport undersecretary last week.

Culled from  Back to basics. Maclean's, 00249262, 6/17/2013, Vol. 126, Issue 23

Mobile Money Growing in Kenya

Kenya is fast becoming one of African's leading hi-tech countries. It has encouraged technological landmarks like the first African electric car, and it is exploring the most of modern technological gadgets especially mobile technology.

In recent times, there has been a considerable growth of mobile technology users since 2011 in Kenya, the country will be providing Visa card-swiping machines that are attached to mobile phones  to is small business owners.

According to a report from African Business, Kenyan card users grew by 20% to 6m from 2011 to 2012 and point-of-sale usage rose to 15% from 10%, with cash-machine visits making up the rest of the $6bn transacted last year and Visa's client banks increased 39% to 25.

Friday, 17 May 2013

Briefly On Business: Can You State Your Strategy Statement?

One major problem most business executives encounter is to briefly state their company's strategy statement. No company can operate successfully without having a clear statement about their strategy.

Researchers have identified three components of a successful strategy statement: objective, scope, and advantage.

Strategic Objective
This identifies the factors that drive the business over the next few years.

Strategic Scope
A firm's scope encompasses three dimensions: customer or offering, geographic location, and vertical integration.
Boundaries make it easy to identify which activities the firm should concentrate on and which they shouldn't.

Strategic Advantage
A strategic Advantage shows what makes the company unique and different in the market.

With a clear definition of your strategy, formulation and implementation become infinitely easier-the statement will be easier to communicate, and will empower your people to raise the performance of your organization.

-- I Spring 2013 I Harvard Business Review OnPoint