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Shenxin(Nicolas) Xu

Where does store brand steal 5%?

Normally, store brand grocery can bring 5% more margin. How do we launch a store brand? It’s the real question that a major consulting firm answers for its client.

But before the how question, there is always why question which is 100 more important than how.

Is more margin the only objective? If it is, will launching store brand help you achieve the objective?  The answer is not that clear.

The branded product that you are going to replace must not be too complex in terms of designing, manufacturing, and marketing. Have you seen store branded Coke, which is very complicated in marketing? On the other hand, in Staples, most of their paper products are store brand.

By replacing a branded “common” grocery product with store brand, what you can save is the product R&D if any, branding, marketing expense, but you probably rely the manufacture for product quality, and it’s your credibility on the line. You may need to pay more on logistics. No product stands still, how do keep your product updated? It still costs money.

Replacing a already cheap common product, there is not much room for error. Make sure you know what it takes before jump in.

Tsotsi

We can learn a lot from crime movies, e.g. leadership, and enterprising. Actually, God Father is not about gangster, it’s about politics.

Tsotsi

Other spontaneous crime is more violence than cerebral, for example Tsotsi, and City of God. The problem of spontaneous crime is that the

1) risk volatility is so large

2) you don’t have much control over it

3) you will be fully exposed to the risk.

As in the Tsotsi, a routine robbery turns to a homicide, and a quarrel turns to assault. The lack of discipline and unmanageable risk makes it not feasible business model for long term.

In my trip to Houston, the cab driver told me Houston is a safe place. I said “If that, I would be disappointed.” It’s a joke.

It’s hard to find an unsafe place nowadays, because as reasoned in Sovereign Individual (this book is about future and strategy), the return of violence is decreasing so drastically after 1991, the fall of Soviet Union, that in a functioning country system, it’s not a issue anymore.

For example in Boston, the parking ticket will do more damage to most people than any street crime, let along any terrorists. I can use a simple statistic model to prove it. Violent crime is not much of relevant nowadays. However, watch out for city government, Goldman Sachs, and Feds.

Jokes from Harvard China Conference – Entrepreneurship Panel

Real jokes from those entrepreneurs:

PhD <=> Illiteracy

From illiteracy to PhD is easy, but from PhD to illiteracy is difficult. (Shaping a habit somewhat easier than breaking old one by Nicolas Xu), or the chain of habit is too easy to be felt and too heavy to be broken by Warren Buffett

What is important for start-up? Technology or business knowledge

If you ask a solder what is important in the army, he will not say weapon, or leadership. He told me it’s women, since there is no women in the army. People think what they don’t have is important.

China Banking System by Numbers

Here are some facts I took back from Harvard China Forum 2011.

In China, there are:

1) 5 state owned giant banks

2) 120 province and city level banks

3) 3,000 rural credit cooperatives

90% bank income is from interest difference between saving and loan, 10% is non-interest income, e.g.: transaction fee. Most of banking business is done by state owned bank.

China Merchant Bank is the most successful private bank in China. I am very excited to know the strategy of this bank is: a little bit earlier, a little bit faster, and a little bit better (早一点，快一点，好一点). Who ever crafted it, I think, is wise. It’s remarkable similar to the strategy I gave to Ford Motor in a finance case in Babson. My strategy is – build better cars. The “better” here means better than your competitors’, not yours. The reason is simple, in an oligopoly market, which is true for cars in US and banking in China, it doesn’t matter what you do, it only matters how much you do better than your competitors.

So don’t talk about making green cars, making small cars, or making smart cars, because oligopoly market will render what you do irrelevant. It’s how much you do better really matters. It’s on a higher level of abstraction. Only wise mind can recognize that. If you want to learn more about how to win in this market, read the Only The Paranoid Survive by Andrew S. Grove. He knows, since it’s where he is from.

Itemization In Business – A Better Framework to Reality

Bertrand_Russell

Bertrand Russell, British philosopher who won Nobel Price in Literature in 1950, once wrote:

Three passions, simple but overwhelmingly strong, have governed my life: the longing for love, the search for knowledge, and unbearable pity for the suffering of mankind. These passions, like great winds, have blown me hither and thither, in a wayward course, over a deep ocean of anguish, reaching to the very verge of despair.

Why Marketing Mix should be 4P?  Product, Pricing, Place and Promotion.

Why business plan has to include CVP, Team, Market, Competition, and Competitive Advantage etc?

The short answer is the collection of items can generally pinpoint what matters, just like Russel’s three passions can make sense of people’s passion.

They all use one technique to describe the subject – itemization.  Why? I guess the answer lies in the world we live in. Just like Discrete mathematics is a good abstraction of discontinues number and logic, a list of logically related characters is the closest thing we can get to represent the discontinues world that we all live in. You will never see perfect straight line  in the nature.

How do you describe your face? In describing a thing, process, or an abstract logic ,e.g. building a successful business, itemization is the probably the only salvation we have to make sense the mother nature.

Especially in business, there is no such formula F = M * A. (Don’t tell me finance, because finance is not business, it’s academic junk) Product benefits, M&A risk, project management, why hire this manager, year end review are all using the itemization method.

The interesting thing I found out in speaking/persuasion is , a logically tight list of evidence or example can dramatically increase your chance of acceptance, because itemization better represents the reality. But keep the number of items below seven, since our brain can’t handle more than seven items normally. With a little bit of sympathy, logic, and charm(Ethos Pathos Logos). Oh man, you will be light years ahead of other people.

Itemization – the act of making a list of items

My Love Poem About TJ Maxx

After visiting the HQ of 20 billion dollar retail giant, I have to confess: It’s nothing but miracle, organizational, managerial, technological and anthropological miracle.  Here is my poem about TJ Maxx: My Heaven

I was happy in Wal-Mart,

since I feel I am at home,

until I know about TJ Maxx,

Since in TJ Maxx store,

I feel I am at heaven,

LV, CK, and COACH,

European quality with China price,

a place is close to heaven if not,

after everyting else,

the store name still makes me thrilled,

even they told me no porno movie sold in store,

I’ll visit there more

after I become millionaire,

but I can still be there today,

to live my dream on tour.

walmart

TJ Maxx

TJ Maxx ads

What do IBM server, Harley-Davidson, and Jesus Christ have in common? Part III

So what do they have in common?

This graph shows

They occupy totally different space on this map, but here are their similarities:

1) Harley-Davidson and Jesus Christ both have significant emotional benefits (only to some people)

2) They all have a price

3) IBM server and Harley-Davidson both have functionality. At least a Harley-Davidson has to run, even it’s very loud.

If a product have high visibility, it probably has high emotional benefits, e.g. prestige. Clothes, cars, hand bags are in this category. Sometime, it’s even cell phone.

Low visibility product in general has low emotional benefits. Just like P&G doesn’t advertise tampons can bring woman status and prestige, no Internet companies think their Dell Blade Server in their server room is worth mentioning to their customer.

What do IBM server, Harley-Davidson, and Jesus Christ have in common? Part II

We can use a vector (functionality, emotional benefits, price) to represent a product on this graph. Given a magnitude from 0 to 10, we can say Harley-Davidson = (5, 10, 10), Honda CBR1000 = (10, 8, 8), but we can’t compare HD with computer on the same graph, since they have incomparable functionality.

How to put Jesus Christ in the framework? I think religion in general should be (0, 10, 10) 2,000 years ago, and (0, 3, 3) right now. No need to argue if it’s 3 or 5, since it’s the trend that is the key here.

How about Louis Vuitton hand bag? I think it’s (3, 10, 10) comparing with common bag (3, 1, 1), again it’s the difference that has the most information, not the absolute number.

IBM server should be (10, 0, 8). How about crude oil, I think it’s (10,0,10). Lexus (8, 8, 10), while Toyota is (6, 3, 5).

Cars in general is (5, 3, 5) in US, but (5, 6, 8) in China. Since the car price is doubled in China due to government monopoly and Chinese people think car = status.

3D framework with objects

What do IBM server, Harley-Davidson, and Jesus Christ have in common? Part I

I heard of Harley-Davidson back in China, but never buy one, since it’s over priced and low quality. Isn’t Honda CBR1000 a much better product?

2003_harley_davidson_fatboy

In Boston, what I saw just confirmed my dislike about Harley:
1) HD is so laud, I like quietness.
2) People who ride HD are so out of shape – obesities; I want to keep fit.
3) My prejudice told me
a) HD are probably made in China
b) riders look uneducated and un-sophisticated Caucasian
c) the sound makes me think it’s going to break due to over vibration
1) and 2) are facts, and 3) is my perception.

It’s heavy, slow, and handling pretty bad. Why people still love it?
One thing clear is they don’t think the way I do.  Here let me introduce my three dimension product analysis framework. After that it will be clear about the product difference and people difference. You can use it to make sense of any product in the world.

3D Product Analysis framework