Competitive advantage

Don’t Have Enough Cash For a Washing Machine? SEARS Can Help!

Posted on by spr1314jvillagomez

Many people nowadays don’t have enough cash on hand to make large purchases such as a washing machine or a refrigerator. For example, a newly married couple may find it difficult to purchase all the items they need for their new home all at once. Although most people would turn to credit cards to make such purchases, others are a bit intimated to do so. As a result, Sears Holding Corp. has recently launched a “lease-to-own” service, which will allow customers to purchase these items without credit. What this means is that instead of using a credit card as it is most commonly seen, people will be able to pay for the items they purchase over time whether it be electronics, furniture and/or mattresses. How is Sears doing this? The company partnered with WhyNotLeaseIt, a New Hampshire-based leasing service that allows customers to make monthly or bimonthly payments until the item they purchased is completely paid off.

This new service Sears is rolling out will be available by the end of May and will be an alternative to its current layaway service, which does not allow customers to take their items home until they are fully paid off. By using this service people will not have to wait and hope they qualify for a Sears credit card or wait weeks until they finish paying it off using the layaway service.

Sears is hoping that the introduction of this new service will help them boost their customer base after years of sluggish sales.

At the top of the list of the ten operations management decisions is the “design of goods and services”. The introduction of this new leasing service certainly falls under this category. However, the success from this service will also be dependent on other strategies that operations managers will have to think about. For example, should they consider a different layout strategy to make the items they offer more attractive? Perhaps placing signs throughout the store will make this leasing service more attractive to customers. Further, it is important to note that these big-ticket items also require constant maintenance, hence operations managers need to maintain inventory in the best condition to prevent any loss in value or have them end up on the “clearance” section. Managing quality also comes into play with the introduction of the leasing service. Operations managers need to decide whether they will be leasing the items they currently carry or will introduce new items that are better quality but more pricy because customers may decide that it is worth it to get an item of better quality since they wont have to worry about the cost right away.

Do you think the introduction of this new service will give Sears some competitive advantage?  What other OM decisions will Sears have to take as a result of the implementation of this program?

Continue reading “Don’t Have Enough Cash For a Washing Machine? SEARS Can Help!” →

Social Media: A Business Maker or Deal Breaker?

Posted on by spr1324bsteiger

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Social media is everywhere. For our generation especially, the Internet and networking sites are a part of our daily lives. People use social media to communicate with one another on both personal and professional levels. Businesses have begun using social media as a means of advertising and promoting their companies, so it’s no surprise that people are starting to consider it a tool for competitive advantage rather than something to do in your spare time.

Consulting firm Vivaldi Partners recently ranked a list of companies based on their use of social media and its effect on consumer awareness and purchases. Among the top 10 companies were household names like Amazon, Google, Target, and Dunkin’ Donuts.  These companies are smart in recognizing that social media is no longer just a small department within the company, but rather a main way to conduct business. And while it is true that larger firms (such as those mentioned above) have more economic resources to fund their social media sites, the true key to success is using your resources wisely.

Three big tips have been given to businesses that wish to improve their social presence and it’s effect on profits. The first is to have a strategy. Many companies get easily discouraged once the initial excitement fades away and immediate results aren’t seen. However, by planning ahead and tailoring your approach so that it will yield the results you want to see, one can easily increase their odds of success. To create an effective strategy, companies must consider not only the characteristics of the organization but also those of the audience, and tailoring their strategy to the social media site that best supports those characteristics.

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The second tip is to have plenty of content. In the fast-paced world of social media, companies must be able to bring new or unique ideas to the table almost daily. Content development strategies are absolutely necessary to keep your presence known online. By establishing what you want to accomplish and how you will get there, businesses will be able to allocate necessary positions to achieve this presence.

Finally, businesses must understand that success doesn’t happen over night. Social media presence may take months or years between design, installation, growth, and maturity. Companies should elect individuals to be in charge of watching trends, content development, calendar creation, writing, editing, photography, and video production, etc. Social media is extremely time consuming, with 43% of businesses stating it takes up 6+ hours of the workweek, every week.  Most likely, social media will become it’s own department in the coming years.

Overall, it’s obvious that social media is ever-present and is only going to continue to grow. Similar to operations, social media has become a product with a life cycle that has no foreseeable expiration date. It will continue to go through these cycles until a new product or platform is introduced.

While there are plenty of ways for social media to make your company, are there also ways in which it could break you? What are the disadvantages to having a presence on the Web?

http://www.businessweek.com/articles/2013-03-20/how-to-run-an-effective-social-media-program

Kroger’s Enhanced Technology for a Quicker Checkout

Posted on by spr1324ismal

We live in a society dependent on technology and in the world of business, technology has helped in developing various systems to improve day-to-day business activities and satisfy both the consumers and the producers.

Customers are always anticipating the endless wait in checkout lines.  Sometimes if feels like the line has not moved for the past 10 minutes, but switching to a different line puts them at a risk that it might be even longer. Is the item really worth waiting in line for? Is it easier to bail and just buy it online or at a different store? Numerous retail stores are trying to find new ways to get the shoppers through with ease as online shopping is increasing and as long lines threaten sales and loss of loyal customers. 

 Kroger Co., a supermarket giant, has installed infrared cameras to aid in lengthy checkout lines in about 2,400 its stores. The cameras, which detect body heat and have been used in the past by the military for surveillance purposes, are paired with Kroger’s in-house software in order to decide the number of lanes that need to be open. Not only has this new technology allowed the stores to operate with lower labor expenses, but it also has reduced the customer’s average wait time spent in line. 

Competition in the retail industry is high and for companies to enhance the shopping experience and speed up service for each of their customers is a top-notch priority. Since the checkout lines are the last thing the customer experiences, the longer the  time is wasted waiting in line, the less satisfied the customer is leaving the store. The ultimate focus for Kroger and any other business is its consistent customers, and according to Kroger’s surveys, the customers believe the checkout speed has been much quicker since the installment of the cameras.

Kroger’s system, QueVision, which is now in about 95% of its stores, forecasts the length of time customers spend shopping based on the time and day as well as determines the number of lanes that need to be open. In addition, QueVision data shows the amount as well as type of items purchased by the times of day, and by adding more express lanes and boosting certain orders, Kroger has improved its operations as sales have increased by 13% in the past year.

Kroger’s goal is to please their customers so that they enjoy their entire experience so much that they will come back again and again. They are gradually improving the QueVision software system to predict shopping behavior and fix the checkout lanes procedure in order to get the shoppers out more quickly and make the checkout experience the best that it can be.

The most important way to create loyal customers is to understand their shopping trips and make them as personalized as possible so they will always come back. Making improvements is a continuous process. What other approaches could retailers take to better the overall shopping experience?

Article: http://finance.yahoo.com/news/krogers-weapon-infrared-cameras-011800830.html

 

That’s the Way the Cupcake Crumbles: Is the market for the sweet delicacy crashing?

Posted on by spr1313krodriguez

Molly’s. More. Sweet Mandy B’s. Chicagoans may recognize these names as local eateries specializing in the most convenient of small pastries: the cupcake. Though recipes for these treats have been around for hundreds of years, and are a major staple at birthday parties and big celebrations, it was not until the early 2000s when the country started to develop a demand for gourmet cupcakes. You can thank the TV series Sex and the City (of all places!) for that; with the show prominently featuring the popular Magnolia’s cupcake shop, the nation went cupcake crazy. Today, hundreds of gourmet cupcake shops thrive in our city and throughout the country, rallying behind its industry’s largest leader, a New York-based publicly traded company called Crumbs Bake Shop. With mouth-watering flavors ranging from red velvet to cookie dough, you would think this market would continue to thrive off of our taste buds.

Unfortunately, that may not be the case anymore.

Source: The Wall Street Journal

At the peak of its success, Crumbs launched their initial public offering in June 2011 with a strong $13 per share. This past month in mid-April, though, its shares have sunk to $1.70, and they continue to fall at a disquieting rate. Because of this, the company adjusted their 2013 sales forecast from an initial $73 million to an unsettling $57 million. The declining performance of such a huge company as Crumbs has caused some analysts to claim that the market for gourmet cupcakes is beginning to collapse. A recent Wall Street Journal article poses the question, “Is the cupcake bubble that inflated relentlessly over the last decade finally about to burst?”

There are many factors that could have caused this impending cupcake recession. Probably the most apparent of these is the oversaturation of the market. Since the trend began, cupcake making became one of the prime choices for young entrepreneurs to kick-start their small business ventures. This has obviously led to increased competition and a staggering number of locations selling the same product; in Chicago alone, there are nearly three hundred different gourmet cupcake shops. But even these specialty stores have to compete with other establishments like grocery store chains, which are trying to attract the same market with their own cupcake concoctions. With all of this competition, the lines of differentiation start to blur, and it leaves consumers wanting a change of pace.

This change of pace is an additional factor contributing to the cupcake’s demise: consumers are growing tired of the fluffy delicacies and want to indulge in something new. The aforementioned Wall Street Journal article attempted to scour Twitter for the next big tasty treat. Responses differed from gourmet ice cream to mini-pies, but the uncertainty itself is pretty clear. Cupcakes are no longer king, and many successful cupcake shops are starting to feel it in their wallets… and their stomachs.

What do you think is the next big trend in the pastry/delicacy market? Do you think the “cupcake economy” will bounce back, or is it all heading down south from here?

Sources:

http://online.wsj.com/article/SB10001424127887324345804578425291917117814.html

http://stream.wsj.com/story/corporate-intelligence/SS-2-60962/SS-2-214382/

http://www.policymic.com/articles/35885/everyone-panic-the-cupcake-market-is-crashing

To Sell or Not To Sell? That is the Question.

Posted on by spr1323kobrien

            During these past few years, Chicago Public Schools (CPS) has seen a significant decline in students attending their schools.  This has lead to drastic action to “close 54 schools, which will leave 61 empty”. Closing the underperforming schools and filling other schools help cut costs and make it more efficient for the schools if they are full.  Yet, the problem is what to do with the schools that are closed and empty.          

             In a business, or operations management, the manager or CEO’s job is to find ways to efficiently use products or make the most profit, but most importantly, efficiently run the business.  This means not letting money go to waste.  CPS is trying to do that by not running a school that has low attendance.  It would be more money wasted to heat that school and pay taxes if no one is using it.  Yet, what CPS is trying to do is also sell the lot that these former schools are on in order to make money to pay for their other schools.  This is a great idea because these schools, instead of being empty, can be used as a safe haven for kids who need a place to go, or like a senior center.  This actually happened in Milwaukee.  A former school called Jackie Robinson Middle School was sold in September of last year and turned into a senior center called the Sherman Park Commons Senior Living Center.  This is a place where seniors 55 or older that have a low income can have a place to live. Seniors who can’t afford housing have found a place to live and the city of Milwaukee was able to convert an old school into a beautiful place for others.  Yet, there is a catch.

            First of all, before this former middle school was sold to a developer, it was vacant for five years. Also, the groups that buy the school are mainly “[c]harter schools, other government agencies and nonprofits” who can afford to pay the money to first buy the property and then renovate it.  Yet, most importantly, there is a process that the qualified buyers must go through before they can buy the property.  The buyers go through meetings to describe about the renovations of the former school and what it will become, but also a selling price must also be negotiated as well.

            It is good that CPS wants to fix up these schools to cancel their debts and create efficiency, but who is getting hurt is the kids.  They are losing their relationships with their friends and teachers because they are forced to go to new schools because their old schools are underperforming.  Also, they are also scared to ask questions because they are not used to this new school and their new teachers which could hurt their grades in the future.   

 

Should Chicago Public Schools close and sell their schools so that that building could be used for other purposes or should the schools stay open?

Source:
Nix, Naomi. “Schools Often a Hard Sell.” Chicago Tribune 21 Apr. 2013, Final ed., sec. 2: 1+. Print.

Limiting Upgrade Availability

Posted on by spr1321eboillot

Think back to when the iPhone 5 was introduced to the public.  The expectations of the new device from Apple were at an all time high, and the public’s anticipation to buy the phone was unbelievable.  Sales margins are expected to be higher during periods where new products are introduced, but an aspect that can be overlooked is whether the company will have to provide subsidies for the purchase of the new phone, or if the purchase is made without an available upgrade and at its full retail price.

If a customer has an upgrade available, they may be more likely to purchase a new phone because the company will provide a subsidy that will lower the price.  Without an upgrade the product would be purchased at retail price, and the company earns more.

The service contract is a signed commitment to remain loyal to the provider for 24 months.  This requires that the services on the device, including Internet, text messaging, and phone calls will be paid for throughout the two year time period. An average length of time before a phone upgrade is available is 20 months.  This differs from the signed 24-month contract, and requires that the company provide subsidies more often than the customers renew contracts.

When an account has an available upgrade, the service provider offers a subsidy, deduction of the retail price, towards the purchase of a new phone.  If the customer is upgrading to a smart phone on an account that did not previously require data usage, the service provider will generate revenue on the sale.  This is because the cost of a data plan to the customer is greater than the cost of the subsidy to the service provider.  However, with the increase in smart phones in past years, these sales margins are declining because the customer does not require an increased data usage plan.  While the sales of newly released products increase sales margins, the company often loses out on the subsidy provided to purchase a new phone.

Verizon Wireless has released plans to extend the length of time before upgrade availability to 24 months.  The intent is to lengthen the amount of time between when the company is required to offer upgrade subsidies.  The 24-month period would align with the length of time between contracts and would allow for the company to earn revenues on contracts and acquire subsidy expenses simultaneously. If this change is made, the structure of Verizon’s project management would change.  The company would  likely change its strategy from the introduction of new products to a focus on customer retention.

While this plan would make financial sense for Verizon Wireless, it is different from their competitors. Would lengthening the time between phone upgrades influence your decision to enter into a new contract with Verizon?  How important is the availability of an upgrade to you when considering purchasing a new phone? How could this change in Verizon’s contracting process be debilitating? Would this change give Verizon a competitive advantage?

 http://www.foxbusiness.com/technology/2013/04/12/verizon-wireless-delays-phone-upgrade-eligibility-to-24-months/

Improving Service by Cutting Costs

Posted on by spr1321bavitia

Airlines are often seeking ways to cut costs. A Canadian airline, Transat, is implementing new changes to their airplanes, which aims to lower overall costs. One of the ways an airline can lower costs is by reducing the weight on airplanes, which ultimately lowers fuel costs. Transat plans to use slimmer seats to reduce weight on planes. “We can’t say it’s more space, but it’s a better experience,” says Joseph Adamo, the vice president of marketing. The seats will be using less cushioning and material, which will make the seating roomier.

Aside from the seat changes, the airline is also adding new entertainment systems, which will replace its outdated systems. They will be adding touch screens so that passengers can easily enjoy movies, books, and games. Transat will also add LED lighting inside their planes that can switch colors. All changes will reduce plane weight by about two tons, which will result in about $300,000 savings annually, per plane.

Transat is hoping to increase profits this year in order to stay competitive. Some of their competitors include Sunwing and WestJest Vacations. Transat had a difficult year during 2012 due to customer discounts significantly reducing their margins.

In 2012, because of financial problems, employees delayed wage increase payments. Staff also recently planned to eliminate one flight attendant on planes in order to increase savings. Additionally, Transat reduced their number of routes, which may be a poor decision considering summer, a popular travel season, is approaching. However, Adamo says Transat is still attractive to consumers because they offer direct flights from many Canadian cities to 28 destinations in various countries. There are no layovers due to their direct flights, which means there is no lost baggage and passengers can get to their destination quicker, according to Adamo.

Eventually, Transat plans to reduce its number of planes from 21 to 16. Transat is taking measures to reduce costs. They are doing this in a way that does not negatively affect passengers’ experience; in fact, it may improve their experience. This strategy seems to be an effective one because they are trying to provide the maximum value for customers.

Transat is making changes to their service in a way that benefits not only the company, but the consumer, as well. After a difficult year in 2012, they must also be seeking a competitive advantage. Transat is bettering their service so that they can stay competitive and keep up with other airlines.

Should Transat be adding new technology even though they have been struggling in the past few years? Should they focus on other ways to significantly cut costs? Will making many changes alter the experience for passengers? What else can Transat do to gain a competitive advantage?

 

Original article: Transat article

Starbucks Cuts Prices on Bags of Coffee

Posted on by spr1321jcastiglione

As we discussed in Chapter 2, cost leadership is one of the keys to achieving a competitive advantage over the opposition.  Having the lowest cost, as perceived by the customer, without sacrificing quality, is the key to beating the competition.  Starbucks is attempting to do just that by cutting the price of its bags of coffee by $1 per bag this year.  This reduction in price would make the cost of their bags of coffee comparable to those sold by Folgers, Maxwell House, and Dunkin’ Donuts, all of whom cut their prices this year as well.  Ultimately, Starbucks’ goal is to draw sales away from their competitors, even if they aren’t making as much money per bag of coffee.

The rationale behind the cut in price is to attract a new demographic to purchase their product.  Currently Starbucks’ in-house coffees are among the most expensive, yet they continue to outsell the competition.  By selling their bags of coffee for about the same price as their competitors, they are able to attract the lower end of the socioeconomic ladder, as opposed to just the upper end.  Assuming they aren’t sacrificing quality, the Starbucks brand bags of coffee would be the best available option to these consumers.  Overall, they would be reaching a much wider market then their competitors.

In order to earn as much revenue on bags of coffee as they did last year, Starbucks would have to sell 65% more bags at the new price.  Starbucks knows they probably won’t achieve those numbers, but if they continue to steal customers from their competitors, they will eventually reach that number and eventually sell even more.

The move also forces Starbucks’ competitors to make a tough decision.  Either they can keep prices where they are at, or they can continue to cut their prices and trim profits.  Another possibility is that they can cut volume.  Either way, Starbucks walks away a clear winner.  At the rate they are going, Starbucks is slated to run its competitors out of business.

I think this is a great move by Starbucks.  It’s no mystery that a majority of Americans prefer Starbucks coffee to other brands, and by making it more widely available, they can increase their sales exponentially.  Sales won’t increase immediately, but in the long run they most likely will.  Once consumers realize they can get their favorite, high-quality coffee for the same price as lower-quality brands, odds are they’ll opt for the higher quality product.  And even though the profit margins won’t be as high for the bags of coffee, they will still be huge on the in-house brews.  In the end, Starbucks has the highest quality coffee on the market as chosen by consumers, and at its new low price, Starbucks will have the competitive advantage as well.

Source:  http://www.businessweek.com/articles/2013-04-12/the-game-theory-behind-starbucks-big-coffee-price-cut#r=nav-r-story

97 Month Loan? No Problem.

Posted on by spr1311kfelix

After taking several finance courses at DePaul, I have gotten to know what a good deal would be and how to fall into the trap of a salesman.  A woman in Northbrook Illinois recently took out a car loan for 97 months. The reason she said she did this was because she has a child on the way and would like to pay for childcare and keep her payments affordable. As the years have passed and the costs of cars are rising, people need to take out loans that are longer in length in order to be able to afford them. This should interest all students and new car owner because it should make you stop and think, am I really saving money by taking out longer loans? The answer will always be no but not everyone will be able to afford the luxury of paying off a car quickly.

 

Banks and dealers are really taking a risk by letting consumers take out these long loans. By the time the car is paid back it will be worth so much less to the consumer. Also if the consumer does not pay the loan for example after five years of having the car, the dealership will not receive nearly as much as they should if they have to repossess the car. The women in the article took out the loan for 97 months and the difference in payment per month was only $5. That was fascinating to me because that is less then what an average person spends on lunch.
In our class textbook it talks about strategic approaches to competitive advantages.  Toyota has definitely stood out by making this 97 month loan and will now either force its competitors to lengthen their financing time or lose the business. This long term loan is going to appeal to a vast majority of our population and will therefore bring more business to the car dealerships. Being the first ones out there with this long term loan is going to push that Toyota ahead because the other dealerships will still have to contemplate if this would be the right move for them or if they will in fact be losing out.

 

Another issue that can arise from taking out a loan for such a long period is that people will keep their cars longer. The turnaround time for a new car is now extended and while the dealerships will be getting in business now they may have to wait longer for returning customers. Think about how often people in your life buy new cars? Will there be a large spike in people purchasing cars? Will this be an affordable option for newly graduated college students or lower income families? We will see.

Reference:

http://autos.yahoo.com/news/introducing-the-97-month-car-loan-202203365.html

Differentiating through the Demand of Dogs

Posted on by spr1321rdickey

 

DirectTV is catering to not only humans, but to dogs as well. My dog would be thrilled! How about yours? The only option available to my pup right now is the Puppy Bowl, which we have to record so he can watch all year long. Today, dogs have their own parks, Facebook pages, stores, so why not a TV channel as well?  DirectTV is not only catering to the dogs but also providing help for the families they belong to. The new DogTV will keep these puppies occupied while moms, dads, or children can keep up with their daily tasks without any barking or begging. DirectTV is definitely differentiating from other cable providers with this strategy.

In class, we discussed the strategy of competing through differentiation. I have learned about differentiation in the past, but it is always interesting to see examples of companies using the concept to their competitive advantage. Through their new channel, DirectTV is now implementing this concept and can be seen through the Chicago Tribune’s article, “DirectTV to broadcast channel for dogs.” Differentiating, as discussed is the advantage of being better or different in regards to a company’s product or service. No company wants to be like another so, differentiating is the concept designed to compete through uniqueness.

As mentioned in the article, DogTV is currently only available through online streaming or for select subscribers in California. Is DirectTV testing out their new channel in case it fails to provide the benefits that it hopes for? As one of the larger cable providers, this could solely be a test run for all the other companies as well. If DogTV were to fail, other companies such as WOW or AT&T Uverse will be able to see if there is a demand for this type of channel without hurting their company. But, if DogTV does in fact succeed, these similar companies may need to expand on their differentiation strategies in order to remain in the competition. While it is hard to believe that a channel for dogs could change the face of cable television, DirectTV is currently taking a big risk with this target in either helping or hurting those other companies within the market. Once or if available nationwide, will this create a demand for DirectTV as households’ main cable provider? Through reading the article and understanding the new concept, I thought about whether or not DirectTV is trying to create a higher demand for their service through creating a demand for dogs. This idea may seem silly but could also provide success. We will find out this coming fall when the company is supposedly launching the availability for this channel nationwide. Again, further information on this topic can be found here.