Wal Mart targets new segment

Wal-Mart built its empire on enormous stores in suburbs and rural towns. But now the company wants to penetrate a new market, the nations dense cities. Over the past few years Wal-Mart has slowed the opening of superstores, from 132 in 2007 to just 49 in 2009. The company is looking to reach the metropolitan consumer by opening more efficient formats. They are talking about store of about 15000 square feet, maybe with drive through lanes. It just goes to show you that even if you are the biggest, a company must always be looking to expand and innovate.

Goldman shorts mortgage market

It seems Goldman had a pointed objective to short the mortgage market and made $3.7 billion in the process. Hopefully, the government will come up with finance reform that will prevent this from happening in the future. Goldman will go in front of the Senate and will be asked hard questions to prove that they were planning to short the mortgage market. The Senate will be looking at emails to prove their point. Goldman was doing what companies do. They play within the set of rules or no rules to maximize profits. The problem with the finance community there are few if any rules and that's what needs to be changed.

The sun will come out tomorrow

What a difference a year can make in the life of a company. GM has repaid $6.7 billion in U.S. government loans ahead of schedule. When these bailout loans were granted many Americans, myself included, did not think they would ever be repaid. As a matter of fact, many people thought the U.S. government was going into the car making business. Even Chrysler reported a first quarter operating profit and boosted its cash reserves. This bailout strategy appears to be working. Not only did it help the companies involved but it definitely save many jobs, which helped the economy recovery at a quicker pace. Don't get me wrong we are not out of the woods yet and the $6.7 billion payback is only a small portion of the original $50 billion bailout. However, it is a step in the right direction and the sooner the auto makers recover then the sooner the entire U.S. economy will recover. Support America go out and buy a car built in America. That doesn't mean you have to buy an American brand car, Toyota is built in America.
These manufacturers add to the economy also.

Retail Recovering

Economy may be rebounding faster than anticipated. There was an increase in March retail sales of 1.6%. This boost in retail sales is giving forecasters hope that the 8.2 million jobs that have been lost since the recession began may be coming back. Some believe we are underestimating the strength of the recovery. Historically, long recessions are typically followed by steeper recoveries. Many economists are stating that their growth forecast for the next 18 months was probably too low. After the retail report came out the Dow Jones Industrial Average rallied to over 11000, which was up 7.6% over last year at the same time. This was the largest increase since July of 2005. Although many factors that have held the economy back, like bad debt, wounded banks, and many foreclosed homes, still prevail, the outlook is positive. The Federal Reserve appears to be keeping interest rates low in order to shore up growth. This may cause inflation adjusted spending to rise at a rate of more than 3% instead of the forecasted 2%. Hopefully, this increase in spending will be supported by increased incomes so that the U.S. won't be back in the cycle of bad debt and a tight money supply. Only the future will tell. I say Americans go out and buy a new car, go out to dinner, remodel your house, and go on vacations.
Keep the economy growing.

Company's boost advertising budgets

Makers of basic household goods are boosting their advertising budgets for 2010 in hopes of getting the U.S. consumers to start spending. Although retail spending is on the rise, consumers are not spending those dollars on every day household items. Consumers are more likely to eat out or buy new shoes than buy basic products. Brand manufacturers are developing new improved products to entice consumers to spend. However, they need to get the word out and the way to do this is increased advertising to sales ratio. Currently, consumer product manufacturers expect to spend 9.7% of sales on advertising for 2010, up from 8.6% in 2009. P & G plans to increase advertising 20% in 2010. Not only are the companies spending more in advertising they are coming out with record new innovative products and improvements to products. The manufactures have to overcome the sharp rise in private label and store brands which is becoming a buying pattern for consumers. This additional advertising spending will test the theory that boosting the brand's share of advertising beyond current market share will increase its market share. These manufactures have their work cut out for them trying to convince the consumers that their products have more value than cheaper store brands.

China is key market for auto makers

GM had a 68% increase in sales in March 2010 over March 2009 in China. They actually sold more cars that month in China than they did in the U.S. For the entire year, the U.S. market is still the largest for GM; however, China is gaining fast. The China market is putting up fantastic monthly increases like 68% or 71%. This ever expanding global economy is good for global vehicle manufacturers because when sales are down in one market, another market may be up and carry the company. Not only has China overtaken Japan as the world's largest vehicle manufacturer, they have overtaken the U.S. as the world's largest auto market by units sold.
The small cars seem to be selling the best in China. This is probabtly due to tax incentives from the government and fuel efficiencies. This whole scenario reminds me of the early 1980's and Japanese cars invading the U.S. market. Who says American made cars aren't fuel efficient the Chinese seem to think they are.

I Pad on Letterman

I saw David Letterman using an I Pad to read his que cards last night on his television show.
This is huge advertising for I Pad. I am sure they gave him this for free. However, I wonder if they paid him to feature their new product. This exposure had to be tremendous and will reach
the target segment that stays up to watch the David Letterman show.

Tiger Scandal good for business

Americans love to build up a superstar, then they love it when the superstar falls. The only thing Americans love more than that is to forgive the fallen star and return he or she to glory. This happens all the time. Tiger Woods will come through this scandal stronger than ever with even more endorsement power. His apparel sales are up this period vs the same period last year.
So keep your chin up Tiger a year from now everything will be O.K. All you have to do is say, you are sorry and the American public will eat it up with a spoon. Look at Kobe Bryant and the scandal in the hotel with a girl. How about Mark McGuire, Sami Sosa and the lot who all used steroids. Look at Michael Jackson, he has sold millions of records since his death. Wasn't he a child molester? We love to love, hate, then forgive. Its what we do.

What's goodwill worth for Volvo

Its hard to put a dollar amount value on the goodwill of a company. However, I am sure that China's Zheling Greely Holding Group Co. paid a pretty penny for just the brand equity when they purchased Volvo from Ford Motor Co at $1.8 billion. With China's growing market becoming larger than the U.S. its no wonder Zheling Greely wanted to get into the auto manufacturer segment. Ford is using some of the purchase proceeds to pay down a portion of their $23.5 billion debt. Ford is trying to shed non core brands and get down to their core products. They felt Volvo was a distraction to the rest of their manufacturing.

McDonalds and Market Penetration

McDonald's has a new strategy to penetrate the market this summer. The object of market penetration is to sell more of the current product to the current market segment. This can be a low risk marketing strategy because often the company knows the product and the segment very well. What McDonald's is planning to do this summer is offer soft drinks, no matter what size, for a $1. The company would like their locations to become a destination of preference for beverage buyers for a 150 day period this summer. The reason the restaurants can offer the soft drinks for $1 is that these drinks usually account for about a 90% profit margin. Hopefully, by discounting the soft drinks they will increase consumers, which will therefore buy other products and increase the total sales mix. Some franchise owners are worried this promotion will hurt the bottom line because the high margin on soft drinks often offsets the low margins on other products. The McDonald's strategy is to steal customers not only from other restaurants but from other places consumers buy soft drinks, like 7 eleven. Then when the customer is in the McDonald's they will be introduce to other new beverages; such as, smoothies, frappes and ice coffee. The company has a strategy to add $125,000 additional new sales per store in new beverage sales alone. One problem with discounting soda is that the consumers will sometimes bypass the other new beverages for the soda on special. This kind of cannibalization is to be expected but as long as the sales increase overall the strategy will be considered a success.

When is an Ad not an Ad.

Buick took out a full page ad in The Wall Street Journal today. It states that sometimes the best advertising isn't an ad and has the cover of Motor Trend. On this Motor Trend cover it features the new Buick Regal Turbo. It also says " Forget the past 30 years Buick is back!" This is definitley and ad. What Buick is trying to do is satisfy the consumers external search when searching information on a new car. Buick is showing showing consumers that their products are
excellent products on the Motor Trend's criteria. Motor Trend's main criteria many times is performance and most people don't think of Buick when they are looking for a performance car.
However, on the Motor Trend cover it labels the Regal as an Acura killer, the LaCrosse as a Lexus beater, and the Regal GS as an Infiniti fighter. The company has positioned itself against some of the best performance sedans in the industry. Buick is trying to change the belief of the consumer so that can the consumer's behavioral intent and purchase their products as performance vehicles not just sound transportation that your father would buy. After all, if you are a motor head and remember the 1970's the Buick GSX was the fastest quarter mile muscle car in the industry. Also, in 1984 the Buick GNX V6 turbo was faster in the quarter mile than the Corvette. So actually, those of us in the no have always none that Buick can produce a performance automobile. Now maybe the masses will understand.

Free Publicity

Is it true that any publicity is good publicity. I would say not. I was just watching Saturday Night Live and the did a parity of a couple driving a Toyota Prius with a gas pedal stuck in the accelerated position. The couple screams and tries to get the car under control then you hear the sound of the car crashing. At the end of the parity commericial the Ford logo comes up and it say Ford we make Hybrids too. Man I wondered if Ford paid them for this. It was funny and memorable which is very bad advertising for Toyota, but great advertising for Ford. It seems there is an article a day in The Wall Street Journal concerning Toyota. It make you wonder where reporting stops and politcs begin. I know Toyota has had their recent problems, but it seems that several politicians have done their best to keep them in the spot light in order to benefit Ford and GM. Regardless, I am sure that many consumers will be talking about the parity of Toyota on SNL on Monday at work. And that spells added trouble for Toyota.

Cadillac Niche Market

GM is wants to become a niche player in the European luxury car market with the Cadillac brand. A year ago GM pulled the Cadillac out of the European luxury car market because they realized that they were not getting the growth they needed to stay. Now they have a new approach. The Cadillac will be targeted at a small segment of buyers and try to sell only 3000 cars a year. How can they do this and be profitable? Well, the selling approach will be done through a streamlined marketing organization of 20 people and bare bones distribution network.
Low over head means lower costs which means GM can be profitable with fewer sales. In the past GM tried to come into the market with a line extension on the back of the Cadillac brand. The models were specific to the European market designed on existing platforms with features thought to be desired in this market. However, the sales never kept pace with projections. The large design and poor fuel economy of other models did not meet consumer expectations either.
This time Cadillac will focus on key markets like Germany, Switzerland, and Italy. They plan to penetrate these markets with limited models and sleeker designs with better fuel economy. The focus will be a consumer who wants something other than a BMW or a Mercedes. Consumers who want to be the first with new products and technology. With their sights set lower will GM hit their projected sales. What message are they trying to send to the consumers? Are they limiting supply to create more demand? Only time will tell if this marketing strategy will be successful.

Ford Positioning

It looks like Ford's positioning on the perceptual map is on the rise for quality perceived. The company's sales are up 48% in February. I think Ford is using points of parity instead of points of difference to position itself agains the likes of Toyota and Honda. If you look at recent ads the company talks about the quality and mileage being just as good as these foreign auto manufacturers. So they are trying to put into the mind of the target market that we are just as good as imports but you should buy our cars because they are American. All of this comes with the trouble that Toyota is having not only with the actual problems with the gas pedal, but with the perceived problem and growing concern of the public perception of poor quality. Its very hard to be the market leader. The market leader must maintain quality while trying to gain new customers. The cost of gaining new customers can be very high; therefore, sometime manufacturing cost are cut or short cuts taken. This could have been what happen to Toyota while sourcing this gas pedal. Maybe the company who make the pedal was the lowest bidder, but not the highest quality part. In the meantime Ford will need to maintain their quality because I would quess Toyota will be coming on strong to regain their lost market share.

Coca Cola

It seems Coca Cola is taking a play out of the Pepsi play book. Coke is looking to buy up its bottlers in a $15 billion deal. This is a move to increase market penetration into niche markets like sports drinks, energy drinks, and tea drinks. The idea is to increase variety offerings while reducing the price to the consumers through utilizing their extensive bottling and distribution network. This plan could backfire by distracting Coke with bottling operations. Ultimately, this would give Coke control over new product distribution. The bottlers don't have the equipment to bottle the new niche products. I think think this is a good idea. When it comes to business success you cannot leave the your fate in the hands of others and hope for the best. Sometimes you have to take control of the situation to guarantee the outcome you are looking for.

i Pad

When Steve Jobs from Apple introduced the i Pad he said they were trying to penetrate a third segment between the iPod and MacBook. Competitors seemed to snicker and there were derogatory remarks made about the name i Pad. The i Pad is going to be a highly successful product. How do I know. Well, I read in The Wall Street Journal today that all the manufacturers are quick to copy, imitate, or come out with their version of the i Pad. Imitation is
always the best form of a complement. The industry knows that Apple is on the right track and they are chasing fast from behind into this new niche market. Manufacturers like Sony, HP and Dell are letting Apple set the benchmark for this new technology but they are soon to follow hoping to set higher profit margins before this market becomes saturated like the PC and netbooks. The key to Apple's success is the fact that the technology builds on the iPod, i Touch, and i Phone technology. The more products I personally use from Apple the more I want.
I guess I am becoming brand loyal to Apple. I started with the iPod then I switched my phone service that I had for many years and bought and iPhone and now I am considering the iPad.

PepsiCo

I guess Pepsi didn't need a Super Bowl ad and brand recall to boost profits. Pepsi's fourth quarter profits nearly doubled. Of course, Pepsi expects continued growth in the United States,
but they are targeting the international market for rapid growth. They plan on accomplishing this by building infrastructure in China and investing 8 cents per share in this emerging market.
Pepsi is looking to grow sales through product development aimed at health conscious consumers.

Market Penetration

What is the outcome of a product over penetrating a market? Can you over pentrate a market?
Can you have your cake and eat it too? All companies want to build strong brands; however,
some companies want to build exclusive brands. Case in point Harley Davidson Motorcycles.
In the mid 90's it was cool to own a Harley. In fact, it was so cool that there were waiting lists to get your new Harley. Also, you could buy a Harley, ride it for a year or so, and then sell it for more than you paid for it. Harley Davidson had penetrated the American Motorcycle Market.
They had built this exlusive brand that people needed, wanted and were willing to pay top dollar and waite for it. So what went wrong. Well, first they increased production and the waiting list went away, which was a great thing for motorcycling enthusiast. However, now there were Harley Davidsons everywhere and everyone had one. People who didn't even ride motorcycles had a Harley because it was cool and a sign of status. Now, what happened? Motorcycle enthusiast wanted to be different, enter custom motorcycle manufacturers, like Big Dog, Indian, etc. Over exposure of the Harley Davidson brand made it lose its cache. Yes, they still have many customers and sales are strong, but they have changed the market place forever. They have opened up the market place to new competitors for the small segment of upper income motorcycle enthusiasts. Since Harley Davidson started to lose this segment, what have they done? Now they have their custom motorcycle division, which is taking back some of the segment. However, there will forever be those customers that feel HD has lost its cool.
The answer is you cannot have your cake and eat it too. Do you want to make alot of money and appeal to the masses or do you strive to be exclusive and live in that smaller market.

Market Forecasting

In marketing forecasting can make or break a company. It is important to use MIS analysis to estimate demand and keep in touch with the market. Well, I read in The Wall Street Journal today that Abercrombie & Fitch's style was played out. This is to blame for 19% decline in December sales. There lack of style and over price products have opened the door for lower priced competitors like Aeropostle Inc. and American Eagle Outfitters Inc. which posted December sales of +10% and 7%. The Wall Street Journal said that Abercrombie & Fitch's "look is stale and they need to figure out what the next hot trend is and push that". To me this is a perfect example where the company's marketing department has failed. They should have been looking for the next big thing while their current look was still hot. The company should have stayed in touch with its customers through surveys and test markets.Anyway I should have known Aeropostle was at the forefront of fashion, my 11 year old daughters closet is full of it.

global economy

I guess I must re evaluate my thoughts on buying American and the global economy. My wife and I just bought a BMW X3, guess what this German car is made in America. Another example,
Harley-Davidson, the main stay Amerciana motorcycle manufaturer. All the parts are made in
Tawain. Global economy touches all our lives.

MBA Portfolio

Timing is business is everything. Now that I have a new born to take care of and 12 hours of

graduate studies it seems that employers find my credentials very attractive. But if I was just

un employed and no responsibilties my phone would not ring. I have had four propesctive companies contact me in the last two weeks with very attractive postitions. Do I continue down my current path or do I pursue opportunities that a very lucrative. Timing truly is everything.