How well does our system work? You can use the numerical index to check our blogs from the last big recession.
Much of the world suffered a severe recession from 2008 to 2011. During that time, we wrote more than 250 blogs using publicly available information and our Strategystreet system to project what would happen in various companies and industries who were living in those hostile environments. In 2022, we began to update each of these blogs to see what later took place and to check the quality of our conclusions. To date, we have completed the first 175 of our original blogs. You can use these updated blogs to see how well the Strategystreet system works.
The evolution of a market often brings new consumers who prefer, or can afford, only low-priced products. In order to reach these consumers, a company must reduce its costs while it grows. The British confectionery firm Cadbury dominates the Indian chocolate market. It has 70% market share in the chocolate market and a 30% share of the confectionery market in India. The company began operations in India in 1947. They imported its chocolate bars and sold them to the very wealthy. Later, it developed its own factories in India. As the Indian market develops, more…
Read MoreThere are two pathways to low cost: Focus on particular customers and their product needs; or create economies of scale. When you combine both, you have a powerful low-cost engine that is also attractive to customers. Several years ago, I consulted for a high tech company. This company sold components for a much larger technology system. The company’s customers were many times the size of my client. Most of the technology system companies who could have been my client’s customers produced their own component rather than purchasing from a merchant outside supplier like my client.…
Read MoreThe debate is about to rage over healthcare costs and coverage. So, what might our future look like? Let me preface this blog entry with the note that I, personally, believe that healthcare should be available to all of our people. What I will question here is the assumption about the effectiveness of what we are about to do, not whether the ends are worthwhile. We are about to extend healthcare coverage to 47 million people who are currently uninsured. This 47 million figure is a little over 20% of the population below the age…
Read MoreNow that GM has entered bankruptcy, there are many opinions crossing the wires about the likelihood of the new GM being a successful stand-alone company. I thought I might as well add to this crowd noise. First of all, let’s consider the problems that caused the bankruptcy. The first, and least forgivable, cause was the management team. The management team, some years ago, gave away the store to the UAW. They promised wages, benefits and work rules that were non-competitive in the world market. They agreed to numerous, costly work rules, high wages, generous time…
Read MoreThe consumer food industry has both an opportunity and a challenge in today’s marketplace. The opportunity comes as consumers reduce their “eating out” occasions and, instead, eat at home more frequently. The challenge is the seemingly inexorable market share growth of the less-expensive private label products. Some of the responses of the packaged food industry to these opportunities and challenges give us some insight into how to compete with low-end competitors and offset the ravages of a tough economy. Several of the branded food companies are instituting advertising programs emphasizing the value of their products…
Read MoreSmithCNC-USA is an Ohio firm that helps small midwestern manufacturers obtain components and raw materials from China and Mexico. The firm’s customers are U.S. manufacturers who are doing small and medium sized production runs. These companies are under severe pressure in the United States because of relatively high costs here compared to those in China and Mexico. This company has convinced its customers that they can save a good number of their jobs, and perhaps, even grow, by outsourcing only part of their production to cheaper foreign sources. The company convinces its customers to outsource…
Read MoreMcKinsey and Company has undertaken a detailed examination of Productivity in the pharmaceutical industry. This extensive study offers us an opportunity to see common patterns in cost management and productivity improvement. We described these patterns in Part 1 of this blog. These common patterns of Productivity improvement include four major concepts. Reduce the rate of cost for the Input Reduce the Inputs not producing Output Reduce unique Intermediate Cost Drivers(ICDs) in products and processes Spread fixed cost ICDs over new Output McKinsey undertook a detailed analysis of 1900 pharmaceutical production lines at 150 plants located…
Read MoreThe objective of every cost management system is to improve the Productivity of the Input (I) resources used to produce the final Output (O) product. These resources include the Inputs of People, Purchases and Capital. The Output is the unit of product sold. A simple measure of Productivity is Inputs divided by Outputs (P=I/O). There are several stages in producing a unit of Output, so relatively few employees (one of the key Inputs) actually produce a unit of Output. Instead, most employees produce something else as an intermediate end product on the way to the…
Read MoreFor a while last year, it looked like the legacy airlines were well on their way to profitability. Business and international demands were strong and the companies had pricing power. The legacy airlines attributed much of this pricing power to their strategy of removing capacity from the marketplace. Let’s look at how that capacity removal is working out over time across the entire industry. Recently, the Wall Street Journal’s “The Middle Seat” column conducted an analysis of some Morgan Stanley research data. The analysis evaluated changes in capacity in the industry over the recent months.…
Read MoreRecently, Vodafone and Hutchison Whampoa announced that they will combine their Australian mobile telecommunications businesses into a joint venture. Currently, Vodafone is the third ranked competitor in the Australian market, while Hutchison is the fourth. The combined subscribers of the new firm will still rank third in the market, but a relatively strong third. This is a pattern common to an industry as its high growth begins to slow. Once an industry begins to slow down, the top competitors in the industry are usually capable players. These top competitors are unlikely, and unwilling, to cede…
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