Thinking of Christmas already?

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Pricing is an important area of ACCA and CIMA. There are a variety of pricing methods discussed in the syllabus including customer based pricing and competition based pricing. Broadly speaking, the former is based on the amount that customers would be willing to pay for benefits whilst the latter involves setting prices based on the prices of competing products.

In the UK, the Toy Retailers Association has just released their list of the top 12 toys that they expect to be most in demand in the UK this coming Christmas.

The interesting thing about the list is that the average price of the toys is just over £26. This compares to an average price of £32 in the Christmas 2007 list. This represents a fall of nearly 20%.

Has this fall been driven by cost savings by the manufacturer on labour or material? Or maybe reductions in transport and storage costs?

My guess is that the toy manufacturers are aware of the recession and the impact on parents buying power (customer based pricing issue). They are also aware that the toy industry is an extremely competitive industry and at the moment their competitors will be offering cheaper products (competition based pricing).

Either way, I’m sure that there won’t be a lot of children debating this issue on Christmas day when they open their presents!

A strategic alliance with local farmers.

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I always tell my students that they need to look around at their surroundings to see what is happening and see if they can link it with the  syllabus in any way. Doing this will make it easier to remember concepts and ideas.

I was lucky enough to visit Germany recently to do some work. I noticed an unusual vending machine and it made me think of strategic alliances.

Strategic alliances can come in a variety of forms including the very large formal Joint Ventures such as Sony Ericsson (a 50:50 JV between Sony and Ericsson) and co-operation agreements such as the airline alliances of Sky Team and Star Alliance.

What was unusual about the vending machine that I saw? The thing that caught my eye was that the vending machine sold fresh farmers produce such as milk, eggs and sausages rather than the typical selection of snacks that you would find in vending machines.

Farmers are facing a tough time at the moment. Distribution channels can be a problem for farmers. If they sell through the large supermarket chains they can end up in a weak negotiating position. Selling direct to the customer is something that a lot of farmers don’t have the skills or facilities to undertake.

Some further investigation found out that a number of farms have collaborated with a vending machine manufacturer to stock these machines in several towns in Germany. This alliance is helping both parties. The farmers for example now have a great new distribution outlet. The customers also appear to be pretty happy as they get fresh local produce in a convenient location. The fact that the “middle man” is removed also means that the produce is priced very competitively.

Will we see this expanding to other items and other parts of the world?

Iceland, Computers and PESTEL Analysis

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One of my best ever trips was when I visited Iceland. It is a fantastic country with some great people and some truly dramatic scenery. There are also some very large whales and some very cute puffins!

Their financial crisis has been in the headlines over the last year or so but there was an interesting piece of news that was recently reported. Iceland has a year round cool climate and chilled fresh water. At the same time the number of computer servers that are needed around the world to store the ever increasing amount of data that the world is generating is growing rapidly.

A key component of data storage is to keep the servers cool. With Iceland’s below average temperatures it means that the cost of cooling servers is significantly less than in other countries with average or above average temperatures. Some businesses are now putting the cool Icelandic climate and the increasing server storage demands together and data parks are being designed and built in Iceland.

The cool temperatures and developed business environment in Iceland make it an ideal place for such a scheme to work.

Now, back to the exams. What exactly does this news have to do with exam? Given the exam is just around the corner I’m hopeful that I don’t need to explain what PESTEL analysis is and I’ll leave it up to you to decide which out of P, E, S, T, E and L the cool climate of Iceland relates to!