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Nike and Michael Porter – generically speaking I think it’s somewhere in between…

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The French football team revolted yesterday and refused to train, football powerhouse Germany lost to Serbia, defending champions Italy failed to beat football minnows New Zealand and England were embarrassing in their game against Algeria on Friday.

At least Nike seem to be getting it right though.

Last week we blogged about the Bavaria girls and their ambush marketing at the World Cup in South Africa.

Nike, which was established in 1962 by Phil Knight who incidentally was an accounting major,  is one of the best companies in the world in terms of getting its marketing just right.

They have a long history of having a certain flair for marketing. After the 1972 Olympic marathon trials for example they proudly announced that 4 of the top 7 finishers had worn Nike shoes. They neatly ignored the fact that the top 3 were wearing Adidas shoes!

Although Adidas are the official sportswear sponsors of the World Cup, Nike are doing rather well in terms of their profile.

Anyone that has seen a World Cup match will no doubt have been drawn to the orange Nike boots that a lot of top players such as England’s Wayne Rooney and Portugal’s Cristiano Ronaldo are wearing.

These boots, or Nike Mercurial Vapor Superfly II Elite boots (retailing at GBP 275) as they are officially known, are arguably catching people’s attention more so than any promotion that Adidas have done at the tournament.

Students of strategy papers will be aware of Michael Porter’s generic strategies whereby organisations compete either by way of cost leadership or differentiation (see our ExPress notes for a refresher if you’re unsure about these terms).

It can be argued however that Nike take the best of both of these approaches.

They focus on the differentiation side of things by investing heavily in R&D, design and marketing. As a result they can charge a premium for being “different”.

On the cost leadership side of things then Nike use external manufacturers rather than internal production. This means that they can source their manufacturing via approved suppliers which they will select for each product on the basis of the best price offered by these suppliers. It enables them to shop around for the best price whilst still guaranteeing the quality.

All in all a very smart business model but I’m sure that fans of the World Cup are more interested in the goals that are scored with these boots rather than the business model behind them.

So, how will Tom be impacted by the scanning of the outbound logistics?

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Tom, the postman that delivers letters to our street always seems to be happy and full of the joys of life. Whether it’s the middle of a cold and wet winter or during a hot summer (admittedly in the UK we don’t get a lot of hot summers but that’s another story!) he’s always smiling and ready for a quick chat.

I wonder whether he knows though that he is in fact part of the “Outbound logistics” of the Royal Mail’s Value Chain.  Value Chain Analysis is a model by Michael Porter and provides a “bird’s eye view” of a business.

The postal service in Finland has recently announced that they will be running a trial where individuals can sign up for a pilot programme which would allow the postal service themselves will open the individual’s letters, scan them and then store them electronically on a password protected  electronic mailbox.

Individuals who use this service will then be sent a text message or email telling them that they have received mail and they can then log on and decide whether the mail item should be shredded or sent to them via the postal system.

This is a novel way of changing the outbound logistics of the value chain. As well as potential costs savings for the postal service in terms of transport costs it would certainly enable people to reduce the amount of junk mail that they received.

There will be obvious issues to address such as confidentiality when the letters are opened and scanned but this is certainly a pilot programme which will be worth watching to see how it develops.

I mentioned to Tom about the pilot programme in Finland and he didn’t seem at all bothered by it – his view was that he’s getting older so the less junk mail he carries the better it would be for him!

Is it really an auction for 3G licenses or is it an auction for the ultimate barrier?

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Mobile phone companies have recently started placing bids in the auction for India’s 3G phone licenses with the government likely to receive over $8 billion in the process.

3G technology provides users with the ability to download content such as music and internet pages at higher speeds.

There has been a dramatic increase in the number of mobile phones in India over recent years with the number of phones sold increasing from 35 million five years ago to 130 million last year.

This is going to be an interesting auction but what exactly will they be bidding on?

Most people will say that they are trying to buy a 3G mobile license but students of Porter’s 5 forces will argue that they are in fact buying a barrier to entry. One of Porter’s 5 forces is “Potential Entrants”. A key element in connection with this force is the concept of barriers to entry. As the name suggests these are barriers that can either prevent or make it difficult for new entrants to enter a particular market.

The 3G licenses are great examples of barriers to entry as without the license it is simply not possible to enter the 3G mobile market. The license is the ultimate barrier.

In summary therefore, surely the headline should be “Companies in bids for barrier to entry”?

Christmas parking and Michael Porter.

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You’re all no doubt undertaking some “last minute” revision in the run up to the P3 exam next Wednesday.

Christmas is fast approaching and I always tend to leave my shopping to the “last minute”. Christmas Eve for me is normally a mad rush around the shops trying to buy presents before the shops close. This year I’m determined that it’s going to be different.

I drove into town nice and early yesterday to try to beat the rush of Christmas shoppers but alas it seemed that everyone else had the same idea. Parking is always a problem near Christmas but there were two temporary car parks that had opened up for Christmas.

One was a large open area about 20 minutes walk from the main shopping area. You paid your money to park and simply parked wherever you could. The other one was closer to the shopping area and they actually washed your car whilst you were shopping.

Whether it’s me still being in the P3 mode but the first thing I thought about when I saw the car parks was Porter’s Generic Strategy. Out of the two car parks which one do you think was a cost leadership approach and which one was a differentiation approach? Put it this way, the car park close to the shopping area where they washed your car was 3 times the price of the other one so one of them was charging a premium price for a “different” product.

Best of luck in your exams on Wednesday!