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What has Liverpool FC got in common with an American newspaper?

John W Henry is the principal shareholder of the Fenway Sports Group. The company owns the American baseball club the Boston Red Sox as well as the English football club Liverpool FC.

Liverpool Home KitIn addition to his interest in sports teams, Mr Henry has recently purchased another business. This business though is a far cry from the hallowed turf of Liverpool’s famous Anfield ground.

Mr Henry has just purchased the American newspaper, The Boston Globe for $70 million.

The Boston Globe is one of America’s best-known newspapers and Mr Henry purchased it from the New York Times Co.

Was selling it for $70 million a good deal for the New York Times Co?

It won’t come as too much of a surprise to most of you but the newspaper business has been hit hard by the rise of the Internet. Newspaper readers are now going online to get their news and in a lot of situations the news websites are free. Why should people pay for a newspaper when they can get their news free of charge on the Internet?

The end result for newspapers is that their readership has fallen dramatically over recent years and importantly their advertising revenue has also fallen. Advertisers are now moving their advertising spend elsewhere – for example, spending money on Google adverts rather than newspaper adverts.

Just how much has all of this impacted on the value of a newspaper?

To put it into perspective, last week the New York Times sold the Boston Globe to Mr Henry for $70 million.

20 years ago the New York Times acquired the Boston Globe for $1.1 billion.

In other words, the value of the newspaper has fallen from $1,100,000,000 to $70,000,000.

That’s a big drop in value and for those of you that like to visualise things, if you had a briefcase with $1 million in it, the value of the Boston Globe has fallen by an amount equal to over 1,000 briefcases full of a million dollars.

So, did Mr Henry get a bargain when he bought the newspaper?

Only time will tell but for any Liverpool supporter out there you’re maybe thinking that Mr Henry should have bought the Tottenham player Gareth Bale who is currently on the verge of moving to Real Madrid.

Then again, Mr Henry bought the Boston Globe for $70 million and Gareth Bale is reportedly valued at $135 million – nearly twice the value of the Boston Globe.

You can remove this barrier to entry but it may well kill you…

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Any organisation that can create a barrier to entry which prevents new competitors entering the market can, in theory, keep prices high.

Economies of scale (think Airbus or Boeing), branding (think Apple) and distribution channels (think Coke) are all excellent examples of barriers to entry but one of the toughest barriers to break through are government licenses.

If a licence is needed to operate in that industry then that is the ultimate barrier. After all, without the license the company can’t operate.

Japan is the home of sushi and as you would expect some of the top sushi restaurants can be found in Tokyo.

Sushi is fish and we all know that fish is healthy for you. It may come as a surprise then that one particular sushi delicacy in Japan could end up killing you rather quickly if it is prepared incorrectly.

Certain parts of the poisonous blowfish are considered by many to be the ultimate in sushi. It tastes gorgeous although to be honest I’ve never tried it so I’m taking somebody else’s word for this.

I’ve never tried it because I’ve never had the opportunity although even if I did have the opportunity I would have a few doubts. The reason is that as well as the edible parts of the fish, some of the organs of the fish are filled with poison called tetrododoxin which is more deadly than cyanide.

Now, if you’re eating blowfish then one thing for sure is that you want the chef to know what he or she is doing. You don’t want them making a little slip of the knife and including by mistake some of the poison as before you have a chance to say “does this fish taste a bit funny to you?” you would be on your way to a quick death.

The Japanese government have therefore heavily regulated this part of the sushi industry and there are only a handful of locations that have a licence to prepare and serve blowfish.

In October though new laws are coming into place which remove the need for a licence (or to use business strategy terminology, remove a barrier to entry).

So the good news for anyone that fancies trying some of the blowfish is that it’s likely to become a bit cheaper after October. The question though is whether price will be the key decision making factor when people are deciding to eat a meal which if prepared incorrectly could quickly kill you…

Bad news. You can’t buy a Ferrari because…

Do you drive a Ferrari?

Now whilst some of you may be lucky enough to say “yes” and some of you may be ambitious enough to say “not yet”, my guess is that most of you will answer “no” to that question.

ferrari-pricingIf you do however happen to be in the enviable position of being about to buy a Ferrari then I’ve got some disappointing news for you in that Ferrari has just announced that they will be limiting the sales of their luxury sports car.

Restricting sales of your product is a pretty unusual approach in business as most companies are keen to sell as many of their products as possible.

It’s quite a clever move by the Italian sports car manufacturer though as the reason they are scaling back on production is to limit the number of new Ferrari cars on the roads and to try to protect the Ferrari brand’s image of exclusivity.

The argument is that the more Ferraris there are on the road, the more common they will be so people won’t see them as prestigious exclusive items and won’t be willing to pay as much for them in the future. Limiting their production will enable Ferrari to keep their prices high.

The number of Ferrari cars sold in the first quarter of this year was up 4% with the company having a net profit of Euro 80m (an increase of 42% on the same period last year).

A very successful start to the year and in an attempt to continue the success the production will be limited to below 7,000 cars in 2013 compared to 7,318 in 2012.

So, sorry to break the news to all of you that were in the process of deciding what colour your new Ferrari was going to be but the good news is that they don’t appear to be restricting the number of Ferrari T-Shirts and baseball hats that are being sold.

Would you have ridden this wave differently?

I’ve got a couple of friends who are keen surfers. If you speak to them they will tell you that successful surfing is all down to getting the timing right and catching the wave at the right moment.

billabongIt looks like timing is also an important issue if you happen to hold shares in one of the world’s largest surfing brands.

Billabong is Australia’s largest surfwear company and is currently the target of a takeover bid.

Billabong was set up by Gordon Merchant in 1973 when he started making surf shorts on his kitchen table and selling them to local shops.

The company rode the waves of success over the following 35 years and developed a strong following amongst fashionable surfers (as well as a strong following amongst people who had never been near the sea!)

Back in 2007 the company was valued at A$3.8 billion (approximately £2.5 billion at today’s exchange rate) but unfortunately for the shareholders the global recession bit and faced with increased competition from other fashion brands the sales of Billabong products fell dramatically.

Last February the shareholders turned down an offer of A$842 million (£560 million) to buy the company.

Earlier this year the company reported their largest ever loss after writing off most of the value of its main brand.

It’s not exactly smooth water for the company and they are currently in sale discussions with a consortium made up of a former director and a private equity company. The value of the offer on the table at the moment is A$287 million (£190 million).

£2,500 million to £560 million to £190 million.

As they say in the surfing community, it’s all in the timing.

Would you lose weight to get a cheaper ticket?

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.

What have Louboutin shoes and Cadbury chocolate got in common?

Whilst wearing Louboutin shoes and eating Cadbury chocolate would probably represent a pretty good night out for lots of women around the world, they are two very different products.

Louboutin shoes are top of the range designer ladies shoes that can cost well in excess of £1,000. They are worn by female auditors undertaking inventory counts in dusty warehouses some of the most famous (and wealthiest) women in the world.

Cadbury on the other hand are a UK company that has been producing chocolate bars since 1824.

So, what have they got in common?

The answer is colour and both companies have managed to get a trademark for the distinctive colour that is used in their products.

Most major companies will have trademarks on their name or logo but having a trademark on a colour is pretty unusual.

Louboutin shoes have a distinctive red sole and a couple of years ago they were successful in trade marking these red soles.

Cadbury has just been successful in registering its right to use their distinctive colour purple on their chocolate packaging. It wasn’t an easy process though as they first registered their right to use the colour purple back in 2004.

After they applied for the trademark 8 years ago, Nestle, a major competitor to Cadbury argued against the registration by Cadbury and the matter went to court.

The court case was finally settled this week with the judge deciding in favour of Cadbury.

This means that Cadbury are now the only company in the world that can have chocolate wrappers with the colour purple. Well, to be precise, they are the only company in the world that can have the Pantone 2685c purple colour on their chocolate wrappers.

Now, I’m an accountant and not an artist or designer but I do wonder just how different the Cadbury trademarked Pantone 2685c purple is from Pantone 2684, 2686, 2687…

Will this tablet give you a headache?

Has your computer ever frozen on you? Of course it has but don’t worry, it even happens to the experts.

We’ve all heard of Microsoft and their arch rival Apple.

Although they are often classified together, up until this week there was a major difference between them.

Apple is mainly a hardware company (think iPods, iPads and Mac computers) whilst Microsoft is a software company (think Windows operating systems and Microsoft office software).

It may have come as a bit of a surprise therefore that last week saw the announcement that Microsoft would soon be selling their own tablet computers. At a launch in LA, Microsoft showed their upcoming tablet which goes by the name of mPad (actually, I made that last bit up about the name mPad as it is in fact called “Surface” but personally I prefer mPad).

As a strategic business move this is quite risky. Using their software in their own hardware will have obvious advantages in terms of the potential to win some of the market share from Apple but do they risk upsetting some of their major customers?

OEM’s (Original Equipment Manufacturers) such as Hewlett-Packard and Acer use the Windows operating system in their PCs.

Putting it another way, companies like Hewlett-Packard and Acer have a supplier (Microsoft) who has now suddenly become a competitor.

Are they going to be happy paying a supplier who is now directly competing with them?

Maybe the question is irrelevant though as after all, what other operating system could they use?

The other interesting thing was that the launch was very “Apple like” with the presentation being very slick.

Well, I say very slick but there was one moment when Microsoft boss Steve Sinofsky had just explained to the audience how users could “browse smoothly” when you guessed it, the device froze.

The video below shows Mr Sinofsky in action when the new tablet froze at the opening presentation.

Would a pizza encourage you to get a vasectomy…

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Companies often offer incentives to encourage people to sign up for their products or services.

BOGOF is a term that’s well known in marketing circles.

It stands for “Buy One Get One Free” and as the phrase implies it is a sales promotion encouraging people to buy a product or service. If they pay for one they’ll get the other one free.

In a somewhat unusual approach to promoting a particular service, a doctor in Massachusetts in America is currently offering a free pizza with every vasectomy.

Now, call me old fashioned but the decision as to whether or not you get a vasectomy should in my opinion be driven by other factors other than the offer of a free Spicy Meat Feast Deep Pan Pizza.

Evan Cohen, the manager of Urology Associates who are offering the promotion was quoted as saying that March is the most popular month for vasectomy operations.

Apparently the Spring weather offers a more comfortable recovery period than other months and also for sports lovers March has what is known as “March Madness” when the NCAA’s college basketball tournament takes place. This tournament features 68 basketball games on television throughout the day and evening for most of March.

So, there you go. Who needs a BOGOF promotion as what better incentive can there be to have a vasectomy done that sitting at home with your feet up watching basketball and eating a free pizza??

The TV commercial by Urology Associates advertising the free pizza offer is below.

Fast food or slow drinks?

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What price should you charge for your products?

As any professional business qualification student knows, there are several different pricing strategies that can be used when setting the price for your product.

vodkaYou could for example base it on the internal factors of how much it costs you to produce (cost plus pricing) or you could use external factors such as how much a customer is willing to pay for it (perceived value pricing).

So if you owned a cafe what pricing strategy would you use?

Well over in Moscow in Russia a new cafe has taken an unusual approach to pricing.

The trendy Babochki Anticafé does not charge for food and drink. Instead the customers are charged according to the time they spend at the cafe.

Customers pay one ruble and 50 kopecks for each minute they spend at the cafe. This works out at approximately £2 per hour.

Now this got the accountant in me thinking as I must admit that I am partial to the occasional social drink and there are some very good Russian vodkas out there.

A pleasant evening spent drinking some of the top (and very expensive) Russian vodkas at £2 per hour seems like a good deal (even allowing for the charge for the time when I fall asleep in the cafe at the end of the evening)

Alas for anybody thinking of grabbing a drinking bargain the refreshments are limited to tea, coffee and deserts.

Still, it’s certainly a novel approach to pricing food and drink and we wish the Anticafé well.

What would you do if your credit card balance was this big?

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Sometimes it’s difficult to get a feel for economics and the concepts and amounts involved.

A friend sent me an email that’s doing the rounds on the internet and it emphasises rather nicely the issues behind the financial problems that the US currently faces.

It moves away from “grown up economic terms” to instead use an example about the US financial problems which people will find easy to understand.

They may also however find it a bit shocking.

The US financial position can be succinctly stated as:

1.    US Tax revenue: $2,170,000,000,000
2.    Fed budget: $3,820,000,000,000
3.    New debt: $1,650,000,000,000
4.    National debt: $14,271,000,000,000
5.    Recent budget cuts: $38,500,000,000

Now, if you simply remove 8 zeros and imagine it is a household budget you’ll get the following:

1.    Annual family income: $21,700
2.    Money the family spent: $38,200
3.    New debt on credit card: $16,500
4.    Outstanding balance on the credit card: $142,710
5.    Total budget cuts: $385

There. It’s easy. Who said economics was difficult?

Now, how do we go about extending the credit card limit again?