“Going against the grain - by going with the grain”

http://www.businessinsider.com.au/why-kickstarter-could-be-bad-for-a-startup-2016-9?r=US&IR=T

In recent years, a shift has occurred in the way in which business start-ups receive funding for their latest products. This has been provided by various platforms, i.e. Kickstarter (2009) and Indiegogo (2007), which allow for accessible methods of community-funding and traction. In this article however, we see one entrepreneur who has chosen to by-pass this trend, claiming it is an unreliable method of financing which would ultimately harm his company’s actualisation of their product (the Raden Smart Suitcase). 

Raden CEO Josh Udashkin has stated, “I didn’t want [the product] to be too engineer-driven,” which he claims would harm the longevity of the RSS. This is due to the potential for ‘unrealistic expectations’ and quick ‘burnouts’ to occur, which may impact the motivation his company has to complete the suitcase as it was originally intended. Instead, Mr Udashkin has chosen to seek out a more traditional method of funding (i.e. Venture Capitalist funding) which - while more challenging to acquire in the short-term - may mean Raden has greater control over it’s product’s manufacturing in the long-term. Mr Udashkin has observed the failure of several large Kickstarter projects including the Zano Drone ($3.4 USD in funding). He believes such failures came as a result of the risks associated with the online funding platforms mentioned above. 

This article relates to the Business Concept of strategy. This can be seen in the way in which Raden has chosen to fund it’s product strategically. Their strategy involves both long and short term thinking which is often not addressed in the constantly changing technology sector. It is clear that unlike a number of other entrepreneurs, Mr Udashkin does not believe in a small project with a large initial return and no long-term interests. Instead, he has chosen to ensure that the product he is bringing to market meets his company’s initial demands in quality and functionality, before being released to the wider market. This would then allow for a more coherent business plan and the actualisation of their product’s long-term success. 

Tesla Motors

Tesla Motors was founded in 2003 by Martin Eberhard and Marc Tarpenning, and today stands as one of the most innovative car manufacturers in America. Tesla's aim is to provide an accessible mode of sustainable transport to society, leading the world into a more sustainable future. It's CEO Elon Musk has taken it upon himself to continue to promote innovation within his company, now focused on the construction of Tesla's first Gigafactory which will be used to construct the famous electric cars Tesla Motors is famous for.

Product:

Tesla Motor's main product (as of July 2016) is the newly released Tesla Model S (>$100,000 AUD). A high-end car that has drawn a great deal of controversy in recent times (see http://www.dmnews.com/marketing-strategy/five-marketing-lessons-from-tesla/article/510913/) as it has been criticized for going against Tesla's original plan to make cars accessible to everyone (not just the super-rich). The car is fitted with electric motors in all wheels, can be used on Tesla's extensive US-based long-distance charging network, and boasts a safety-rating higher than any car ever tested to date.

Place:

Tesla's cars are exclusively sold at 'Tesla Showrooms' - stores across the globe which allow potential customers to experience the car up close, place orders for custom builds, and overall get an idea of the brand's core concepts. There have been some downsides to this strategy (as noted by the article found here: http://jalopnik.com/no-tesla-you-aren-t-a-special-special-snowflake-1784263215).  On a recent test of dealerships where the ability of their dealers to make a sale was tested, Tesla's dealers rated last in the industry. This reliance on the product selling itself may result in drastic numbers of lost consumers, however Tesla Motors itself has assured its investors that the current selling model they have adopted has been more than satisfactory for the brand. An alternative strategy could be to temporarily change the attitude of the dealers for a short time basis, to determine which method really is more effective.


Promotion and Price:

The promotion strategies Tesla has adopted ties in with both the pricing and place of distribution. In recent times, Tesla has been marketed to the rich and elite of society (based on it's high 'skimming price' and exclusive selling process).  Mr Musk however stands by Tesla's founding plan:

"1. Create a low volume car, which would necessarily be expensive
2. Use that money to develop a medium volume car at a lower price
3.Use that money to create an affordable, high volume car And...
4. Provide solar power."

The announcement of his much anticipated Model 3 (a car retailing for $35,000USD) is proof of his commitment to providing sustainable transport to the world. While the Model S has been sold at a high cost, the company expects to be selling cars at far less than this amount in the near future.

A BOOST in the Sneaker Industry

The sneaker industry caters for a market that is in constant flux with it’s consumer wants and needs. Today, the kinds of shoes made popular are not necessarily the most comfortable, the most affordable or the easiest to find. Rather, it is the rarer, more expensive, more exclusive shoes that find themselves flying off shelves. As seen in the articles listed below however, there are exceptions, and there is no greater exception than the Adidas x Kanye West collaboration on the Adidas Yeezy Boost 350s, a shoe that has completely revolutionised the way celebrities interact with clothing, shoe and garment manufacturers. The Yeezy 350, a shoe that isn’t exclusive, is cheaper than most fashion sneakers, and wasn’t made by Nike (the industry’s greatest market shareholder) - has become one of the most sought after, well-recognised, and most expensive sneakers on the after-market, collecting prices upwards of $1,500 USD a pair world-wide.

Today, many of the larger players within the sneaker industry operate on a product-orientated basis, choosing to make shoes people will want to buy rather for the buzz of owning the shoe, rather than making shoes in response to consumer demands. The problem eventually arises that people’s interests in certain shoes dies down over time (making way for the latest and greatest products released every season). Hence the onus is then placed on the marketing departments of Nike and Adidas etc. to stay with the latest trends in fashion and hype-culture. Today, these trends are influenced by the various celebrities and famous members of society that we follow so closely on social media and other platforms; Adidas’ acknowledgment of this has allowed them to produce a shoe that has single-handedly increased their market-share ten-fold since its initial release. 

Adidas’ marketing strategy involved several elements:

1| The shoes were given in limited release to high-ranking celebrities and profiles several weeks prior to their public release later in the year. These celebrities would then endorse the shoes by wearing them to public events, posting about them on social media, and generally creating buzz among their own colleagues who would in turn bring in more exposure around the shoe. (As mentioned before this celebrities are the modern-day trend setters and have a strong influence on the target demographic of these sneaker companies).

2| The shoe itself would be sold in larger quantities than ultra-rare shoes (like limited release Air Jordans, Balenciagas etc.) but would be capped at a small-enough limit to create a frenzy to get them before they sold out (thus leading to potentially more sales for future releases).

3| While other shoe brands had created shoes with celebrity endorsements in the past, the Yeezy Boost 350 would have several firsts. It would be one of the first popular sneakers to be designed by the celebrity directly (a celebrity particularly known for being characteristically ‘un-liked’ and controversial). It would also make a celebrity musician the focus, rather than a sportsman or women, indicating a shift from performance-driven products to shoes specifically made for every-day wear. 

The result of this innovative marketing strategy is that the shoe (and its later renditions since 2015) have sold out with record numbers, won several awards for best sneakers, assumed an infamous reputation for being associated with Kanye West, and has completely re-vitalised the sneaker re-selling industry. While it may prove concerning that all it takes for a shoe to sell out in 2016 is for have a celebrity wear it on the way to the gym, it is undeniable a significant change in the way the industry markets its products has taken place thanks to this collaboration.

https://matiesmarketing244.com/2015/09/15/yeezy-350-boost-a-marketing-miracle/

http://www.highsnobiety.com/2016/04/06/kanye-west-yeezy-boost-resale-market/

People Are Angry That They CAN Buy Air Jordans

http://www.sneakersofficial.com/

Today, Nike is one of the largest, most well known footwear brands in the garment industry, with estimated total revenue clocking in at around $30.6 billion USD. Up until 2013, a general consumer might never have heard of their subsidiary line ‘Jordan Brand’, a brand that until that point had rarely been widely available for purchase thanks to the high demand for the product, the Air Jordan sneaker line, and their limited production numbers. But over the last 3 years many shifts have occurred throughout the sneaker industry: Sketchers has become the 2nd most successful sneaker brand in the world, Nike’s competitor Adidas has increased their sales exponentially with the release of a number of hit shoes, the production of high performance sneakers is struggling to keep up with the demand for a number of products, and Air Jordans are sitting on shelves for days, even weeks after their release. But why is this? And who does it affect?

Well to discuss the role Nike’s stakeholders have in this unusual change, we can begin with the Jordan Brand itself. In early 2015, Nike CEO Mark Parker announced that Jordan Brand was attempting to grow its business from $2.6B in 2015 to $4.5B by 2020, hence the company would be required to sell more shoes (or raise the prices). The company has since enacted both of these strategies, raising many of their shoes’ prices to upwards of $200 and releasing new shoes every week at a substantial increase to their volume pre-2013. 

This comes bitter-sweet to the next stakeholder, the customer. A positive for this group is that they can now have a good chance at being able to purchase a pair of Air-Jordan’s in store without being pressured by the shoes selling out in less than a day. They will also have a larger selection to choose from as a new release each week means something new all the time. The downside of this new business strategy is that the cost to the consumer will be far greater for each shoe, and hence they will be less inclined to buy every release (thus the retailers will be unable to sell every shoe they stock). 

The final major stakeholders affected are the sneaker resellers, individuals or businesses that make a profit off buying limited releases at retail price and selling them to the customers who weren’t able to buy them at retail for a substantial mark-up. These stakeholders rely upon the hype and the exclusivity surrounding the shoes to make a profit, and the flood of new Jordans into the market prevent them from making the profit necessary to sustain the business. Hence the shoes they can sell at a profitable mark-up (generally celebrity endorsed collaborations or retro releases of old shoes) come at a higher price, meaning that a customer wishing to purchase a limited sneaker may have to pay much more for the same sneaker than they would have three years ago.

There is no obvious need to fix this change currently as the only stakeholder who really loses in this situation is the re-seller. The customers get the shoes they want (albeit at a higher cost) and the Nike brand makes substantially more profit. Retailers will still be able to make high returns and the new releases of shoes will continue to bring new customers into their stores. It’s unclear whether Nike’s plan will remain sound and whether or not the Jordan Brand will survive despite the dying of hype for each of their releases but as of the present it is too early to make judgement.

Article Referenced:

http://au.complex.com/sneakers/2015/12/why-air-jordans-arent-selling-out

CSR and David Jones

Image by Kgbo

For decades, the global garment industry has been haunted by poor business practices. Practices that turn a blind eye towards the production of their products, motivated by quick profit and market dominance. In as recently as 2013, a garment manufacturing building in Bangladesh collapsed killing approximately 1,129 people and injuring 2,500. The 'Savar building collapse' is now acknowledged as the deadliest accident within the industry in history. To combat this, several companies have introduced socio-ethical practices into their business models, including one of the largest garment retailers in Australia, David Jones.

As of 2015, David Jones has begun a drastic new program to eventually being about a consensus among its producers. This program requires all of their manufacturers to produce garments "sustainably, environmentally friendly, and child and slave-labour free." This equates to around 1600 individual manufacturers both within Australia and abroad. They have even begun extending this code to their electronic and appliance brand suppliers and hope that by partnering with other like minded businesses they may make a profound difference within the community. 

Sources Accessed 13/3/16:

http://www.smh.com.au/business/retail/david-jones-sets-ambitious-target-for-every-product-to-be-ethically-sourced-20150428-1mvi3v.html

https://en.wikipedia.org/wiki/2013_Savar_building_collapse

An Uber Success

Since 2009, Uber (https://www.uber.com/?hero=b) has become one of the most successful startups in the modern era, now worth an approximately $50 Billion as of early 2015. It’s innovative work by integrating smartphone usage into the taxi/limousine experience has completely altered the transport-for-hire industry, transforming the way much of the world travels. In the article I have chosen to discuss here (http://www.shortlist.com/instant-improver/cab-wars), the author Jon Axworthy discusses some of the main innovations and controversies surrounding both the Uber services and the modern day taxi providers in their ‘war’ to monopolise a sustained market. It discusses how Uber manages to essentially ‘invade’ cities, crippling the monopoly that taxi drivers once held over the market by skirting pre-existing regulation and licensing. Today, the topic of whether Uber should be legal is hotly debated as many question both the legality and safety of such programs. Others however, suggest that Uber not only refines the car-for-hire experience, but cuts licensing costs to divers, provides job opportunities to otherwise busy individuals, and creates safer roads by providing intoxicated individuals a safe journey at the touch of a button.

The Uber startup has experienced a number of issues when attacking new markets with their service. The main ones remain: government and taxi regulation, as well as competitive start-ups. To combat the initial problem of globalisation, the executives at uber developed an essentially ‘blitzkrieg-like’ plan. When approaching a new market/city, they would begin by sending a ‘launcher (a motivated member of the marketing team)’ to assist the local executives in establishing a large amount of providers (drivers) in a very short period of time. Their thinking behind this was that government interference could be severely weakened if the service was at a noticeably influential level within the region before it drew notice. The problem came from allowing this to occur despite Uber’s odd choice of word-of-mouth advertising as its main source of customer-grabbing. However, through constructing unique region-based business models (focusing on the requirements of the populous such as safety, convenience etc.) this problem was soon negligible. Stemming from this, many taxi providers felt rightfully threatened by this competition that entered their networks so suddenly. Unfortunately for them, many people are quite against the idea of the old system of transport-for-hire as the monopolisation of select providers promote expensive fares, poor service, and an overall worse experience than the one that Uber provides its patrons.  

The second problem was the increased amount of similar startups that began as a result of Uber’s success in much of the world. In Asia particularly, many similar startups have convened towards this new mode of transport, backed by several large Chinese companies/investment groups. Thus it became apparent that a need for innovation was present should Uber wish to expand into these markets. This meant streamlining their calling app, adding a greater level of safety by providing both the passenger and driver with more information about the other participant, as well as ensuring the map system is kept up to date, and structuring their program to allow for drivers to operate within their own hours without being restricted by daily/weekly minimums etc.

If I were to suggest one solution towards fixing the reception of Uber to new communities it would need to be heard by both parties. It is well known that many countries gain significant income from taxi-licence holders through tax and registration fees. However this system allows for select companies to monopolise the market and drive the services into providing dis-satisfactory standards. Uber provides a solution to this with its innovative and reliable driver rating system, however the company and their drivers do not currently pay any fees to the local governments who rely upon that income. Hence it would be in both parties best interest to allow for governments to acquire a reasonable percentage profits from the drivers at the expense of allowing Uber to continue to grow within their cities.