March 2013

Would you lose weight to get a cheaper ticket?

Published on: 31 Mar 2013

Samoa is a small group of islands situated in the Pacific Ocean, approximately half way between Hawaii and New Zealand. I’ve heard it’s a beautiful place and hopefully one day I’ll be lucky enough to visit it. Following a recent announcement though then maybe it would be worth my while losing a bit of weight before I go there.

airline-flight-ticketsAlthough it’s only a very small country with a population of less than 200,000, the national airline has just launched a unique ticket pricing policy which if any of the major airlines followed would please one group of people but upset another group.

So who would be pleased and who would be unhappy?

Put simply – overweight people would be unhappy.

So what is their pricing policy?

Well, the airline has announced that ticket prices for their flights would be based on the combined weight of the passenger and their luggage. In other more blunt words, the fatter you are the more your flight ticket will cost whilst the slimmer you are the cheaper your ticket will be.

Are Samoa Air leading the way and will other airlines follow?

Arguably this is a fairer way of charging for flights as after all one of the major costs of airlines is fuel and the heavier you are the more fuel will be needed to move you through the air. This is especially true for the small planes that Samoa Air use.

It does also seem unfair when a slim person who has 1 kg of luggage above his or her limit is charged an excess luggage fee when somebody who is 50 kg heavier than them but is within their luggage limit doesn’t suffer an excess luggage fee.

Good luck to the airline with this novel pricing policy and also to their management accountants who will no doubt be monitoring movements in the average waistlines of the population when they are putting together their annual revenue forecasts.

Do you know the link between fashion, strategy and Ostriches?

Published on: 24 Mar 2013

What do you normally do when you go on holiday? Do you a) visit some historical sights, b) relax and put your feet up or c) buy a £5,500 handbag?

designers-financial-statementsTwo luxury fashion brands have just released their financial results and for one of them tourists have had a significant impact.

Fashion retailer Ted Baker had some great results and reported an 18% increase in revenues to ₤255 million while pre-tax profit increased by nearly 20% to ₤29 million.

The luxury handbag manufacturer Mulberry on the other hand has issued a profit warning forecasting annual revenue of £165 million and pre-tax profits of £26 million, both of which are significantly below analysts’ forecasts of £177 million and £31 million respectively.

Interestingly though if you look purely at the pre tax profit margin for both companies the Mulberry ratio of 16% is better than Ted Baker’s 11% but the market reacted badly to Mulberry’s announcement and their share price fell by 18%.

If you look behind the figures there are some interesting strategy issues which may give some clues behind what the market thinks of the prospects of the companies going forward.

A lot of the success of Ted Baker over the last year can be put down to a classic Ansoff’s Product – Market mix market development strategy (Ted Baker stores were opened on New York’s trendy Fifth Avenue as well as in Canada, China, Germany and the Netherlands).

This expansion into new territories is likely to boost Ted Baker’s earnings in the medium term and should be good news for their shareholders.

Mulberry however issued a statement saying that whilst their sales over the Christmas period were in line with expectations, their sales in the 10 weeks after Christmas were lower than expected. This was mainly put down to there being fewer big spending tourists from Asia visiting London than expected in this period (a classic external environmental PESTEL impact).

fashion-designers-financial-resultsThese high spending tourists from the Asian market have historically been major buyers of the luxury Mulberry handbags, including the £5,500 bag made from Ostrich leather.

Mulberry’s trading update was accompanied by a statement from Bruno Guillon, their chief executive officer and amongst other things he stated:

“We are focused upon optimising the distribution network and adapting our tactical marketing strategy to drive international brand awareness.”

“Optimising the distribution network” and driving “international brand awareness” – are we about to see a market development strategy from Mulberry?

If they get it right then it could be good news for their shareholders. As for Ostriches around the world however then maybe it’s not so good news…

Surely somebody should have registered this website?

Published on: 21 Mar 2013

Oh dear. Some unfortunate news for the world famous Michelin Guides.

Michelin Guides were first published in 1900 and are annual restaurant guides published by the top French firm Michelin.

michel-platiniNow, whilst the company has an undoubted level of expertise in reviewing restaurants, what they don’t appear to have is a similar level of expertise in registering websites.

One of the critical success factors for a lot of businesses nowadays is an up-to-date, informative and easy to find website.

Unfortunately for Michelin Guides though if you go to www.michelinguides.com you won’t find any details of the famous French firm or their products. Instead you’ll find some rather unusual photos of Michel Platini, the former French international football player and the current president of the Union of European Football Associations (UEFA).

It’s been reported in the press that 28 year old Adam Mascall managed to buy the domain name for £6 and has set up a humourous website which pokes fun at the UEFA president.

The website contains photos of Michel Platini which have been changed to show him in various “guide” situations. Mr Mascall claims that the website is a homage to Michel Platini and reads “Michel in guides” rather than “Michelin Guides”.

The French firm are understandably not happy about this and have threatened legal action against Mr Mascall. As at the date of writing though www.michelinguides.com doesn’t have any information on restaurants but does have some rather fetching pictures of Mr Platini.

So in conclusion, the business lesson to be learnt from this is to make sure all important website names for your business are registered and re-registered when they expire.

Otherwise you take the risk of a 1980s French Footballer appearing in front of your customers rather than your products…

Will her next murder mystery novel involve an accountant?

Published on: 18 Mar 2013

She is one of the most successful authors in the world and has sold over 100 million books featuring the character Dr Kay Scarpetta. She’s earnt a lot of money from her writing and has estimated earnings from her writing career of £300 million.

Patricia-CornwellIn the 4 years to 2009 alone she earned more than $40 million but when she checked her records from her accountants that were looking after her affairs, the famous author Patricia Cornwell found that her fortune was reduced to just $13 million.

As a result of this discovery the author sued her advisors Anchin, Block and Anchin, a New York accounting company for negligence and breach of contract.

Amongst other things she argued that her accountants had borrowed millions of dollars in her name without telling her, that money from the sale of one of her Ferraris was unaccounted for and she had had to unnecessarily pay taxes of $200,000 on the purchase of a private helicopter.

Perhaps the most important claim by the unhappy author was that the negligence caused by the accountants was so distracting that it caused her to miss a deadline for writing one of her books. This missed deadline cost her $15 million in non-recoverable advances and commissions.

One of the fundamental principles of codes of conducts for accountants around the world is “professional competence and due care” and although I haven’t followed this case in detail it does seem that the accounting company involved hasn’t followed this principle particularly well.

Ms Cornwell’s case against her former advisers reached a conclusion this week in Boston over in America and the judge presiding over the case agreed with the author and she was awarded $51 million for breach of contract and negligence.

After the drama of this court case I wonder whether we’ll see one of Patricia Cornwell’s future murder mystery novels involve the victims being accountants that lost a lot of money for one of their clients…

Is your corporate logo truly global or does is only stretch to cover a single continent?

Published on: 18 Mar 2013

104 years ago Theodor Tobler and Emil Baumann invented the chocolate bar Toblerone. The name is a play on the names “Tobler” and “Torrone”, the Italian word for honey and almond nougat.

tobleroneIt is one of the most recognizable brands in the world and anyone that has travelled through a major airport will almost certainly have seen the famous chocolate bar produced by Kraft Foods for sale in one of the duty free outlets.

One of the most important aspects of a successful brand is the logo.

The Toblerone logo is well known but do you see an animal hidden inside it?

Toblerone originated in Bern, Switzerland – a city whose name is rumored to mean, “City of bears”. Look at the logo again closely and you will find a bear facing to the right and stood on its hind legs.

Although I’m biased I love the ExP logo. According to the designers it is fresh, sharp, simple and easy to remember. Also, the “ExP Man” in the middle emphasises the people aspect of the business.

It’s great but there is another logo which I think is extremely clever.

If you look at the Yoga Australia Logo what do you see?

At first glance the logo may look like a simple picture of a woman doing her yoga exercise but if you look at it carefully the body posture is creating the Australia Map.

A great design and thankfully I didn’t pose for it as the map would have looked like a crumpled mess.

Forget your Gucci handbag, you’ll just be scratching the surface…

Published on: 13 Mar 2013

We all know that the pharmaceuticals industry is big business.

The industry is facing considerable challenges however, with a large proportion of the “blockbuster” drugs due to come off patent in the next few years.

risk-exampleDrug companies are all too aware that they might well need a big breakthrough soon in order to sustain their historical levels of shareholder return.

A lesser known threat to the industry, and more direct threat to us individually, is the rapid growth in fake prescription drugs.  Patents protect a patent holder against a legitimate business from copying their product.  It’s not much use against criminality.

Fake Gucci handbags may be an annoyance to Gucci, but nobody dies when they are purchased.  Fake drugs can be sufficiently dissimilar to the real product to allow diseases to build up resistance to the genuine drug.  An overdose may be fatal in the short-term; an under-dose may be fatal in the longer-term.

So there’s a significant incentive for all concerned to maintain integrity in the production and logistics chain that gets the genuine drugs to those in need.  Countries where prescription drug usage is culturally common and poorer countries are probably most at risk.

A Ghanaian company, mPedigree, has come up with an ingenious and simple solution.  Working in conjunction with bona fide drugs manufacturers, it assigns a code to each packet of pills.  This is then added to the box, in the form of a scratch card.

When customers buy the product, they scratch off the scratchcard style covering on the box and then send a free text message / sms with that code.  If the product’s codes are genuine, a text message is immediately sent back to verify their authenticity.  If not, the customer knows that they have just been sold a potentially dangerous dud.

Of course, there will be risks to this process, such as criminal elements infiltrating the process of allocating codes, but this is a smaller risk to contain than the wider risk of fake drugs, but this is a process that an auditor could even give an assurance opinion on.

Given the worldwide very high penetration of mobile phones and the cheapness of text messages, this is a fascinating solution to a big problem.  Maybe in future it could be refined to also warn if drugs are genuine but beyond their sell by date (time expired drugs can also become dangerously lacking in efficacy).

What a wonderful, simple idea.

What does your car number plate tell us about you?

Published on: 07 Mar 2013

The US state of California has a lot going for it.

car-advertisingIt has some of the most scenic coastline to be found anywhere in the world, some great wine and with Hollywood and Silicon Valley it  has a wealth of artistic and creative minds.

What it also has however is a budget deficit of around $20 billion.

Arnold Schwarzenegger, the former actor and now the Governor of California certainly has a challenge on his hands to reduce the deficit.

One idea that is being discussed though is in my opinion really rather clever and introduces us to a potentially new form of advertising medium.

The State is considering introducing digital adverts onto car number plates. The idea is that the digital plates would look like normal plates when the car is moving but after it has been stopped for more than a few seconds at traffic lights or in a traffic jam the device would switch from showing the car registration number on the plate to showing a digital advert.

When stationary the registration number would still be shown but would be smaller and the advert would take the dominant position.

In effect, the car would become a mobile billboard with significant advertising revenue being generated for the state. Advertising Agencies in California are no doubt licking their lips in anticipation at the opportunities that this would offer in terms of creativity.

Whilst on the subject of creative adverts involving vehicles I think that the following advert for Copenhagen Zoo that appeared on a bus in the Danish capital will take some beating.

For those of you with a nervous disposition rest assured that it’s only art work on the outside and not a 100 metre long Boa Constrictor taking on a bus.

What’s in a pair of shoes? Quite a bit if it’s a Jimmy Choo shoe but…

Published on: 06 Mar 2013

With celebrity clients such as Angelina Jolie and Victoria Beckham, Jimmy Choo is one of the most famous shoe brands in the world.

It is a real success story having been started 14 years ago by Tamara Mellon, a former editor at Vogue magazine, with a loan from her father of £150,000. There are now reports that it could be sold for up to £500 million.

Ms. Mellon started the business after meeting a shoe maker called Jimmy Choo during her time with Vogue. Mr Choo used to make a small number of handmade shoes which the magazine used for photo shoots. Ms. Mellon saw the potential in scaling up the business and 14 years later there are now over 100 stores around the world with prices for some shoes being well in excess of £1,000.

So, why has the business been so successful?

Whilst design and quality are obviously key features, the brand arguably took off when famous celebrities such as Julia Roberts and Beyonce started wearing them.

But it’s not just shoes that they sell. They have also expanded into items such as handbags, sunglasses and scarves.  In business speak this is referred to as “brand extension”.

A further example of brand extension is also in the pipeline for Jimmy Choo. Last year they signed a licence agreement with Inter Parfums for producing and distributing perfume under the Jimmy Choo brand.

Another well known footwear manufacturer is Cat®. They are renowned for producing tough, hard wearing “work boot style” footwear.

The brand itself came about as a brand extension of Caterpillar® Inc, the construction and mining equipment manufacturer.

The key thing that needs to be present for brand extension to be successful is the “fit”.

Glamorous Jimmy Choo shoes work well with fashionable sunglasses and high quality perfumes whilst the “toughness” of Caterpillar® Inc equipment works equally well with rugged work boot style footwear.

Will we see Jimmy Choo expanding their brand into mining equipment? Somehow, I don’t think so.

If you wear a fluorescent jacket at work you’re not necessarily an engineer.

Published on: 04 Mar 2013

Health and safety procedures can be vital for safeguarding workers.

If you happen to be driving by the town of Els Alamus near Barcelona in Spain though don’t automatically assume that the workers in the road wearing the yellow vests are repairing the highway.

Women wearing very little clothing and standing by the roadside on the outskirts of major towns and cities are a common sight in Spain. There are an estimated 300,000 women working in the country as prostitutes.

Sex workers in the town of Els Alamus though have recently faced a significant number of fines.

Surprisingly, these fines were not for the prostitution itself as this is currently legal in Spain.

Instead, they were fined for breaching a 2004 law which states that workers on major highways must wear high visibility clothing. A classic health and safety policy which helps protect road workers and drivers from harm.

Not to be outdone by the legislation the sex workers have simply decided to wear fluorescent vests when looking for their customers.

Looking on the bright side for these ladies, the wearing of bright yellow vests not only enables them to satisfy health and safety rules but it also makes it easier for the reported one in four Spanish men who have paid for sex to spot them.

The ExP Group