Sunday, March 29, 2009

Laptops, Netbooks, and Apple

In recent news, it was reported that Apple's US sales were down, while PC manufacturers sales were up. As many of you know, Apple's products are more expensive than most PC units. As I've stated in other entries, this economy will force most manufacturers to make significant shifts in their product lines - in an immediate but unknown period of time. Yes, the products will get cheaper (not less expensive), and the "nice-to-haves" will come at a premium.

Wired Magazine recently reported the unexpected success of the Netbooks. It appears that Netbooks are, and will continue to be, a force to be dealt with in the PC industry. Much ahead of the curve, the Netbooks have addressed the new business model, as it relates to product life cycle of the computer industry. For some reason, it was somehow assumed that consumers needed the works - for everything. NetBooks have countered this theory by dealing with the consumers core needs and leveraging the new platforms, such as online applications by Google.

In order for Apple to thrive, or survive, during these interesting times, they need to find a way to produce a list of products at a low cost, while keeping the aspects unique to Apple. It's an interesting product mix that requires all hands on deck. It will be interesting to see how Apple answers this new challenge.

Where's the RISK?

It's amazing to understand it all, but most of it makes pretty simple sense. As complicated as most business analyst are trying to illustrate the reason why the American economy is "hurting", one factor really baffles me. It's the plan for growth - and growth only. It seems the reward for maximizing growth is greater than the punishment for minimizing losses.

Are we being realistic as leaders? Are we truly good visionaries if we fail to miss the enormous pitfall a few miles down the road?

Give me your thoughts.

Dollar General: In Position

In recent news, the Dollar General Corporation was noted for outstanding financial performance during this economic downturn. Known as a business model ideal for low-income shoppers, many forget that Dollar General addresses the needs of most consumers during times of negative GDP.

Most business models position themselves for either a strong economy or a weak economy. However, most fail to position themselves for both or neither. Dollar General is the exception to the rule, by doing "okay" during the economic booms of recent past and doing exceptional in a historical time such as this one.

In a time when many companies are considering the viability of their business model in tomorrow's economy, Dollar General provides an example on how moderate growth strategies lead to aggressive growth in certain periods. Translations - there's no need for the grand slam if you are making use of base hits.

Thursday, March 26, 2009

Short Arms/Deep Pockets Follow-Up

After reviewing the web traffic statistics on the blog, I've noticed the blog entry related to "Short Arms and Deep Pockets" has been, by far, the most interesting article to the public. I would like to know why it's so popular.

Please give me your comments.

Saturday, March 21, 2009

CDS & CDO: A Matter of Mathematics

While on this spring break trip for my daughter, I discovered probably the best article related to this current economic storm. I found it in Wired Magazine. It's an article written by Felix Salmon, titled "A Formula for Disaster". Most of you understand the factor greed played in this global disaster. Most of you understand how excessive borrowing poured a little salt on the wound. Almost everyone knows how the housing market functioned as the stage for the worst show ever. But if you are like me, you're wondering why would the driver and the passengers knowingly drive the car in the off a cliff?

The answer is apparently simple. First, you hire some Quants (math geniuses) to find a new way to understand something that's already understood. Second, you take the new discovery, which you don't understand, and create new products without the consultation of the Quants. Third, you just keep repeating steps one and two. To make this more simple, the math geeks were used to remove the factor of risk by using correlating factors (Gaussian copula function) in a narrow window of time. Translation - Johnny who always pays his bills on time, Tommy who normally pays his bills on time, and Billy who never pays his bills can be joined together to form a portfolio of borrowers who always pay their bills on time. If only the numbers guys and loan sharks had this nugget in their toolbox.

The other question that was answered dealt directly with the magnitude of Credit Default Swaps (CDS) and Collateralized Debt Obligations (CDO). How can a handful of bad mortgages equate to a mountain of bad debt and global financial crisis? Salmon explains this in a clear and scary illustration. As a financial institution, you can make money two ways - (1) loan money to the borrower, or (2) sell creditors insurance against the borrowers. The difference between selling a mortgage and a CDS is that you can sell multiple CDS against one single mortgage. That's where a billion dollar issue has turned into a trillion dollar problem. That's right, there's no constraint on the CDS market, but the bond market has a finite quantity. John Stewart put it best, this is a complex problem derived from a linear issue: mortgages.

If you have time, please give me your thoughts on this article, and how leadership messed up in the matter.

Thursday, March 19, 2009

Mr. Garrett

On March 18, Mr. Larry Garrett past away. It's not surprising that you may have never heard of him. But I think it's necessary that I tell you a little about him to understand why he deserves a blog entry. I'll spare you his biographical details, by providing a helpful link. For me, he was the first person to give me a chance in my career as a hopeful creative professional.

In those days, I struggled to get a job paying $8 an hour - even being turned down for one paying $6.50 and hour. I packed my bags and lived on my friend's couch in Atlanta waiting on a breakthrough, and it came in a little company in the suburb of Duluth. I had dreams of working on Madison Avenue one day - being a superstar creative genius. Instead, I found myself at an family-owned company where the closest restaurant was a Waffle House and a Checkers. Who would have imagined the experience I would have at that company? When others had no interest in me, it was Mr. Garrett who believed in me. Some people thought I was being used, but he was the only one who found any value in me. For that, I owe him a great expression of thanks.

I learned so many things from this little Scottish man. I learned the basics of business, entrepreneurship, and politics. As the first African-American in the head office, I learned that performance always has value to those who manage the bottom line. I learned that you can do a lot with a little. I learned what to do with opportunity.

Thank you Mr. Garrett. May you rest in peace. My prayers are with the family, and the entire Formetco unit.

Sunday, March 15, 2009

More on Cramer/Stewart

I have to give Rick Santelli credit. He left it alone. Although Santelli's comments are very debatable, he chose to leave the comments there on the trading floor in Chicago. But Cramer, on the other hand, couldn't let it go, and he walked into a snake pit.

Here's what a writer from USA Today wrote about it.

Cramer vs. Stewart

Please start with this one. It's part 1 of 3. Give me your thoughts.

Direct Link

Tuesday, March 10, 2009

Mariza: The Follow-Up

I have to admit, it was a great concert. Even better, I've finally found a venue in Nashville that works for music and music appreciators. I highly recommend seeing Mariza, and her musicians are wonderful.

Sunday, March 01, 2009

Dunkin Is Dipping Into Consumer Opinion

e-Marketer has reported that Dunkin Donuts has made good use of social networking to better connect with their customer base. According to the article, the donut retailer has utilized FaceBook, where they have almost four hundred thousand fans, to facilitate a forum on their new healthy menu - DDSMART.

As many of you know, Starbucks has been having some competitive challenges with Dunkin Donuts in the coffee game. Unlike Starbucks, Dunkin donuts has a few advantages that really work in their favor:

  1. Older and more established brand

  2. More retail space

  3. Stronger B-2-B ties

  4. A real food menu

It's not quite sure if Starbucks has run out of steam, ran into a dead end, or been clueless about their sustainable competitive advantage. One would assume this fast-growing organization would have a counter measure to fight off the very aggressive Donut king. For now, it doesn't look good for the coffee superstar, which leaves many questions about the six sites per square block strategy. How much will it cost to retreat? What is a realistic level of demand? How can they regain growth with limited product and square footage? These are just a few questions that need to be answered internally and externally.