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Fig salad for starters and I’ll have 2 doctors and 4 nurses for dessert.

A top boutique hotel has just opened in London that performs surgery.

Actually, that should really read a top hospital has just opened in London that has all the features of a luxury boutique hotel with the added advantage that it can perform surgical operations.

BMI Weymouth Hospital, just off the world famous Harley Street in central London, has opened with a target market of wealthy (and ill) people. It’s an exclusive private hospital with only 17 beds but 4 state of the art operating suites.

As well as having all the latest medical equipment and medical experts that would be expected at a top hospital it also boasts top chefs and en-suite custom designed rooms with all the latest entertainment systems and original artwork.

Fans of Michael Porter’s generic strategy will recognize this as a clear example of differentiation strategy whereby a “different” service is being provided and hence a premium price can be charged (as opposed to the opposite end of the spectrum where cost leadership exists).

It must be said though that although the hospital certainly looks very luxurious I’m sure that most of its guests would rather they didn’t have to check in.

The Starbucks experience

I’m currently sat in a Starbucks coffee shop enjoying a nice coffee and making use of their wifi. It’s got me thinking about the Starbucks phenomena and what strategy they have adopted in terms of growing their business.

CoffeeIt’s an interesting approach and whilst it undoubtedly has been very successful there are commentators that would argue that Starbucks is caught between various approaches.

There are numerous areas of the syllabus which we can link with Starbucks.

To the man on the street, when Starbucks first opened it was different and arguably felt like a very “differentiated approach” (Porter’s generic strategies) to drinking coffee. It served great coffee in a relaxed atmosphere. Good music was played and it felt like a special treat to drink coffee in a select coffee shop.

Their growth plans largely involved a classic market expansion whereby they expanded an existing product into new markets. There are now over 15,000 stores in nearly 50 countries.

They have however had some problems. Last year, they announced that they would close 300 underperforming stores in addition to the 600 closures they announced the year before.

Some people have argued that the expansion of Starbucks resulted in it feeling less “special” and as a result consumers were less willing to pay a premium price for what many felt was a standard product. Was it a case of over-expansion? One memorable headline in the US magazine “The Onion” joked that “New Starbucks Opens in Rest Room of Existing Starbucks”!

Whatever the outcome of their strategy, one thing for sure is that their coffee is nice but not quite as nice as their muffins!

Is it better to spend a penny or save a pound?

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Love them or hate them but low cost airlines such as Ryan Air and EasyJet are here to stay.

Since low cost airlines entered the airline industry 20 odd years ago they have shaken up the industry.

Easyjet for example now carry more passengers than any other UK airline and the Irish airline Ryanair long ago surpassed the Irish national carrier Aer Lingus in terms of revenue and passenger numbers.

These airline’s business models are classic no-frills low cost models where passengers don’t pay a lot but in return don’t get a lot.

In effect they only get the flight and they have to pay for everything else. Ryanair passengers for example that don’t print out their boarding card at home are charged the princely sum of £40 to have it printed at the airport.

There are reports though that Ryanair are considering taking the no-frills approach to a new level.

To keep the cost of training crew and maintaining spares at a minimum, Ryanair only have one type of plane – a Boeing 737-800. This model of plane has 3 toilets on board but Ryanair want to remove 2 of these toilets so that they can fit an extra 6 seats on the plane. This will then free up space for 6 more fee paying passengers.

Their existing capacity on their standard plane is 189 so removing 2 toilets will raise their passenger capacity by 3%.

Ryanair have reportedly said that the additional revenue generated by this extra passenger capacity could result in the average price of a flight ticket being reduced by £2. There would of course no doubt be extra profit for them as well from these extra passengers.

This extra revenue for them would be pretty good but if you look at it from another viewpoint there could be some uncomfortable logistical issues on board.

With 195 passengers and 6 crew all sharing the one toilet there could be a fairly long queue of people going down the aisle of the plane waiting for the toilet to be freed up.

The risk of a certain type of mid-air accident will no doubt increase although the real worry of course is if you see both pilots at the back of the queue hoping up and down with their legs crossed…

Would Michael Porter sleep in this bed?

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Michael Porter is arguably the world’s most famous management theorist. His theories such as the 5 forces model and Value Chain Analysis are key parts of the syllabus for several ACCA and CIMA papers.

His generic strategy approach of “differentiation” and “cost leadership” has been around for a number of years and whilst there is a clear argument that a significant proportion of companies are nowadays trying to combine both approaches by aiming to differentiate the product or service whilst at the same time focusing on cost reduction, there is one particular segment of the hotel market that almost certainly has to differentiate to survive.

The boutique hotel segment inherently struggles to compete with the big national and international chains of hotels on the cost leadership approach (these bigger hotel chains will have significant economies of scale for example).

Instead, they will need to be “different” in terms of for example location or “friendliness”.

When it comes to differentiation, the aptly named Jumbo Stay Hotel will be hard to beat for people that are keen on airlines.

Located on a disused runway at Stockholm Arlanda airport, the Hotel is in fact an old Jumbo jet that that has been converted into a luxury hotel. The Jumbo Jet hotel has 27 bedrooms with 76 beds but the best room has to be cockpit which has now been made into a luxury suite with panoramic views of the airport.

The upper deck of the plane which used to house business class passengers is now a cafe serving fresh food and drinks.

We’ve blogged before about Ryan Air’s cost leadership approach to their flights and it’s nice to see a differentiation approach to another part of the airline industry.

Does $300m mean bigger is better?

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Here’s an interesting development. MP3 players such as the iPod Nano are getting smaller and smaller but due to advances in technology the sounds that they emit are getting better and better.

Whilst music fans are appreciating the portability of the smaller MP3 players together with the flexibility of having quality music players on their phones there’s a trend at the moment of the headphones getting bigger and bigger.

It used to be bigger players and smaller headphones but now it’s the other way around.

As is often the case it’s the fashion conscious younger generation that are driving the change.

HMV, the UK chain of music shops where people used to flock to to buy the latest CDs has unsurprisingly seem a dramatic drop in sales of CDs as more and more people are now buying their music online via Apple iTunes for example.

There is some short term hope for HMV though at least in terms of their sales of headphones and it’s been reported that their sales from headphones and other technology will shortly exceed their sales of CDs and DVDs.

Now these headphones aren’t cheap. Some of the better known high end headphone brands such as Dr Dre go for in excess of £350. That’s quite a lot when you consider the iPod Nano that the headphones could be plugged into retails for less than £100.

Manufacturers have started to segment the market nicely for headphones with for example the Bob Marley Reggae inspired “House of Marley” headphone range recently being launched by Bob Marley’s son Julian.

So, what’s next on the horizon in the business world when it comes to headphones?

I mentioned one of the best known brands of headphones Dr Dre earlier and you’ve no doubt heard of HTC which offer very good Smartphones and are in competition to Apple and their iPhone.

Well, earlier this summer HTC paid $300 million for 51% of a US company called Beats Electronics. What’s the main brand that Beats Electronics has? Yep, none other than Dr Dre.

This could be quite a smart move by HTC.

They are building up their technology and design on the Smartphone side of things and by buying Dr Dre they are getting a sudden jump up in headphone technology.

Will this be the sweet sound of success for HTC?

Goodbye to a visionary and creative genius.

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Born to an unmarried interracial couple, adopted at a young age, dropped out of college and fired from him first major job. Steve Jobs went on to build two billion dollar businesses.

Unfortunately, the iconic face behind Apple lost his battle with pancreatic cancer on Wednesday and the world lost one of the true business greats.

In terms of his impact on business as well as people’s everyday lives, his legacy will be right up there with the likes of other great visionaries who introduced “life changing technology” such as Henry Ford and the mass motor car.

Steve Jobs taught the world many things and whilst there have been, and no doubt will be, lots written on his business methodologies one particular approach of his stands out as far as I’m concerned.

His creations really encase the concept of providing great products but importantly offering real “value” for these great products.

By “value” I don’t mean that they are the cheapest. In fact, they are far from the cheapest but what Apple do provide are excellent products which customers will pay a premium for as they perceive that this additional value the products offer is worth paying for. In classic Michael Porter terminology this could be referred to as “differentiation”.

Steve Jobs had an uncanny ability to spot the next great thing that customers would want and then to develop a product which although relatively expensive would create such “value” that customers would purchase it instead of cheaper options.

If Apple had competed purely on price then there would always be another company which would come along and offer a similar product for a lower price.

As well as the innovative Apple products that have hit our shelves, Steve Jobs will also be associated with the black St. Croix Collection turtleneck sweater that he would wear at product launches.

Since his death there has been a run on people wanting to buy these sweaters and the company that manufactures them, US based Knitcraft Corp has reported a surge in orders in the last 24 hours. Despite a total order run of between 4,000 to 5,000 sweaters many St Croix stores have now run out of stock.

Rest in Peace, Steve Jobs.

She’s good looking but she won’t speak to you.

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If you are a singer or a member of a band there was a time when your ability to sing was the most important thing.

Now there’s a bit of a debate out there as to whether the music industry is too busy creating “artificial talent” rather than identifying the people that can really sing.

The rise of reality TV shows such as “the X Factor” where pop stars of the future are identified has driven this accusation of creating “artificial stars”.

Using Michael Porter’s well known strategic business model, the Value Chain and you could argue that a few years ago the key primary component was “Inbound Logistics” where the naturally talented performers were identified. Nowadays it’s arguably more the case that it’s the “Marketing & Sales” component of the chain where the real value is created.

There’s an interesting current development on this debate over in Japan.

Japan’s biggest girl band at the moment is a group by the name of AKB48. They are big for two reasons – firstly, in terms of their success (they have had 8 number one singles in Japan) and secondly, in terms of the number of girls in the band (currently a total of 61!).

The interesting thing though is that the latest addition to the band is a lady by the name of Aimi Eguchi.

Aimi was originally introduced on the group’s site as normal 16-year-old from a town north of Tokyo.

Sharp eyed fans though spotted the fact that she looked very similar to some of the other group members and AKB48’s management subsequently announced that she didn’t really exist and was a fake.

She was in fact a computer generated creation that was made up of the features of 6 of the other band members.

Now whilst some people would say that you’re likely to get more sense from a conversation with the fake Aimi than some of today’s pop stars, it’s worth asking whether this is a sign of the way forward in the music industry?

Will the “inbound logistics” of scouring the music clubs to identify the next big group be replaced by the design services of computer programmers?

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Get rid of the Michelin star and you’ll be a better restaurant…

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Running a successful restaurant is tough.

Whilst a good restaurant can me it look easy, there are a lot of things you need to get exactly right to be successful. Everything from the ingredients, the menu, the chef, the ambiance and the waiting staff have to be just right.

Plus don’t forget that it’s a very competitive industry with new restaurants popping up all the time.

Perhaps one of the best differentiators a restaurant can hope for is to earn the renowned Michelin star. This award it only given to the most elite of restaurants.

As with a lot of businesses that adopt Porter’s generic strategy of differentiation, creating differentiators comes at a cost.

La Lisita restaurant in the French city of Nimes is run by top chef Olivier Douert and received its first Michelin star in 2006. It has however just done something that many people would consider unthinkable.

Namely, they have voluntarily given back their Michelin star and reverted to a “standard” restaurant.

Surely this is commercial suicide?

Giving up the most prestigious award a restaurant can achieve can’t help the restaurant, can it?

In fact though they may well be better off as a result.

The restaurant has given up the star so that they can reduce their costs to a more reasonable level. There are several requirements for having a Michelin star. These include having a minimum ratio of one waiter for every five to six customers compared to a standard restaurant where the ratio is closer to one waiter for every twenty customers.

It was proving difficult for La Lisita to recover these additional costs as higher spending customers weren’t visiting as often as they were before the financial crisis so they decided to drop the star.

They are still planning on serving great food but under a slightly different model.

Could this be the first of many restaurants that obtain the Michelin star to prove that they can but then revert to a different model to make more money?

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Will you drive your customers towards you or away from you?

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How easy is it for you to get your product or service to your customers?

Tesco, one of the world’s most successful retailers, have just released a new service which makes it easier for their customers to buy from them.

They were one of the first supermarkets to shake up the “outbound logistics” of their value chain when they launched tesco.com a few years ago. Their website has now gone on to be the most successful grocery retailer website in Europe and they currently deliver shopping to more homes than any other grocery retailer in Europe.

But they have now gone a step further and introduced another clever option for making it easier for customers to buy their products.

They have identified that some people want the convenience of buying their groceries on the internet but don’t want to have to wait at home for the delivery during the 2 hour “delivery window” that Tesco offer.

Busy executives for example, may not want to have to walk around the shop or wait at home for the delivery. A good alternative for them would be to order their shopping at any time of the day and then pick up their groceries on their way home from work whether this is at 6 pm or 10 pm.

As a result Tesco are piloting “drive through shopping” at some of their stores.

This works by the customer making their order online and then driving to their chosen Tesco store to show their order reference number and then pick up their shopping. In fact, they don’t even have to physically pick up their shopping as their groceries will be delivered to the car by a Tesco employee.

Tesco are charging a “pick and pack” fee of £2 per order for the service.

A nice idea by Tesco to make it easier for people to buy from them and raises the thought as to what other companies could benefit from providing “drive through shopping”?

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Does your mum know about Procter & Gamble and does she trust them?

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Procter & Gamble is one of the world’s biggest advertisers but it was only last month that they started promoting their own corporate brand in the UK.

P&G is the company behind numerous household brands including well known names such as Ariel, Duracell, Gillette, Pampers and Olay. Last year it reportedly spent nearly £190 million in the UK alone on advertising these brands.

Interestingly however, they didn’t advertise their corporate brand of P&G in the UK.

This changed last month though when they started their “proud sponsor of mums” advertising campaign on Mother’s Day Weekend.

The TV and print campaign saw P&G communicating for the first time that it is the company behind all those famous brands.

P&G is a truly global company with worldwide sales in 2010 of $79 billion. Over 4 billion people in more than 180 countries around the world use their products.

So why the change to highlight the corporate brand of P&G rather than stick to advertising the household product brands?

It’s a clever move and is tied in with P&G’s sponsorship of the London 2012 Olympics as well as subsequent Olympics up to 2020.

The aim is to create awareness of the brands owned by P&G in the hope of spreading consumer trust across all their brands. The idea is that if a consumer trusts and values one particular brand, once they realise that another product is a “sister P&G brand” they will hopefully be more likely to buy that other product.

In simple terms, the hope for P&G is that this increased trust of the brands under the corporate umbrella brand of P&G will result in increased sales of all their products.

P&G’s first advert in the UK for their corporate brand is shown below and is really rather nice. It seems to go for the emotional angle and in fact may be so emotional that some people will be reaching for their Kleenex tissues to wipe the tears away.

In fact, it’s probably best not to reach for the Kleenex tissues though as I think they are a brand of Kimberly-Clarke as opposed to P&G.

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