Added Value Facebook IPO

Facebook, the most popularised social networking application, provides the foundations for A Small World. Its an exclusive, by invitation only, networking application for the rich and famous.

It is looking to launch an IPO to raise between $6 and $8 million dollars to fund growth, albeit at a much smaller rate that the social networking sites of the mass market. Given the current turmoil in financial markets and the credit crunch management decided to delay the European IPO instead focus on advertising revenue from the worlds most luxurious brands.

They believe that each of their current 265,000 members are worth more than the $300 (as proposed by mass market social networking sites), in terms of advertising spend, which gives an implied valuation of at least $78 million dollars. Who knows exactly how much it is worth and maybe we should all just sit tight and see what happens if and when Facebook launches an IPO?

Data Centre to Replace Tiawi Point?

I talked earlier this month about the impacts of the proposed ETS in "ETS - Can Tiwai Point Survive" which relates to some interesting articles I read today from The Economist about computer data centres. The link lies in the amount of power that each uses - it's comparable. So if Rio Tinto decides to leave maybe we can replace it with a data centre, just like the ones that power Google?

Down on the server farm explains that the rise of web based applications is increasing the amount of computing power required to run the world wide web. It is data centres at the other end of the fibre that will become increasing important as we embrace "cloud computing." Football sized warehouses filled with thousands of computers are needed and it may become a bit of a surprise as to the location of such structures.

As more and more servers and systems are required the more energy they will require. Thus energy is a major consideration when deciding on a server farm location because it must not only power the computers but cool them also. It is therefore understandable that geographic locations with cool climates are being investigated. Iceland may be an option? Maybe Bluff?

So Bluff maybe the right location, but how does it stack up against the ETS? At present, not as great as one would think. I have always thought of a web business as having a low impact on the environment but if current cloud computing trends hold some estimate that by 2020 its carbon footprint will be larger than aviation!

If you read my blog Think Smarter Not Harder you will be aware of the big impacts of relatively small increases in efficiency. Well the same is true here. It appears that companies that supply to data centres are playing on these estimates because guess what? They can provide a solution!

According to Buy our stuff, save the planet many servers are not running to capacity and those controlling them only have a vague idea what is happening on each computer. By increasing efficiency, through matching computer requirements and availability the estimated carbon footprint would be significantly smaller.

Skycity Divestiture of Non Core Assets

Corporate strategies change over time as internal and external forces act upon the firm. As strategies change the factors of production within the firm must change also. When this occurs it is likely that firms will sell off assets that do not contribute to the emerging strategic direction. The selling off of assets, for this reason, is often referred to as the divestiture of non core assets.

Yesterday the Dominion Post reported that Skycity was progressing through a deal to sell off its cinema division to an American firm, Reading Cinemas. Skycity, primarily a Casino and Hotel operator, acquired cinema assets as it moved towards a diversified entertainment portfolio. Since then Skycity have begun to distance themselves from this strategy to return their focus to the casino and hotel industry, its core competency, as the following remarks from New chief Nigel Morrison explain:

"There was good rational for acquiring those assets several years ago. But as the board has already recognised they are not a core asset for us. Going forward it does make sense to divest that business." NZ Herald

Although assets may become 'non core' it does not mean that they are unprofitable. So why then should they be sold?

In the long term, the corporate strategy is more likely to drive bottom line profitability than individual assets. The value generated from a corporate entity, or any business entity for that matter, is driven by the combination and application of assets towards the goals of the under riding strategy.

As the environment changes we must change in order to capture the opportunities around us.

Rob Fyfe at the Coal Face

A few weeks back I posted “Clearer From the Coal Face” and in today’s Sunday Star Times I read “Carrier Gets the Staff on Board” in which CEO Rob Fyfe describes his methods to increase customer awareness. To understand both his staff and their customers, once a month he spends a day a month working in overalls in the hanger or pouring tea on flights. He places a great deal of value on these experiences and as a result is better positioned than most CEO’s in terms of the needs and behaviours of his staff and their customers.

As economic times tighten understanding ones customers is of prime importance and can lay the foundations of a customer focused organization, which Air New Zealand sees as their competitive advantage.

It is clearer at the coal face and I just wonder how many coal faces I can visit?

Can China beat the duopoly?

As a New Zealander I am aware of the duopoly market every time I send a text or visit the supermarket. Defined as a market in which two firms dominate, duopoly markets around the world include Coca-Cola & Pepsi, Gillette & Schick, Moodies & S&P, and Airbus & Boeing.

The Economist article Flying the flag outlines the launch of Commercial Aircraft Corporation of China (CACC) by the Chinese government which, it hopes, will reduce the reliance on Airbus & Boeing for its national air transportation needs.

Who could blame them? Communist countries have always been blindly nationalistic and the Chinese prime minister announcement was in line with his launch statement:

“The Chinese people must use their own two hands and their wisdom to manufacture internationally competitive large aircraft. It is the will of the nation and all its people to have a Chinese large aircraft soar into the blue sky.”

There are predictions of double digit growth until 2012 when it will slow to 9 percent. Airbus predicts that they will need 2,800 new planes by 2026 ... what an opportunity! Will China be able to take on the aerospace duoploy and produce an aircraft that Chinese airlines will commit to?

Firstly, what does China know about the aircraft industry? The business model for aerospace industry mean Airbus & Boeing rely on a global supply chain, of which China has been a been a part of for the last 20 years, building their knowledge base ever since. Even though the distributed supply chain has caused delays for both major manufacturers their must be some well grounded arguments for both to switch to a global manufacturing process. So can new players compete?

Secondly, lets look at history to give context. The only successful emerging market producer of aircraft is Embraer from Brazil. It was a 30 year cash drain, and is just producing a competitive product after a long and troubled road. However, Embraer is the exception. Indonesia has tried but failed just like Japan. Question: How long is China's pipeline?

CACC inherited a 70 seat regional jet program from China's previous attempts which it hopes will be a starting point for its 200 seat rival to the Airbus 320 and Boeing 737. More recently Airbus also announced a joint venture with a Chinese firm, unsurprisingly associated with CACC, who see the transfer of knowledge as a cost of doing business in China.

Government subsidies could define the success of CACC and knowing this Boeing highlighted WTO rules which discourage market distorting subsidies. This raises an interesting point: Have Airbus or Boeing received such subsidies in the past?

Ultimately, to be successful, CACC needs to produce aircraft that airlines want. If Airbus or Boeing can provide a better offering to Chinese airlines then only extreme government intervention will produce a successful company to challenge the current duopoly.

Incremental Innovation

Austrian economist Joseph Schumpeter popularized creative destruction which has come to mean radical innovation. It comes as a great relief to me that we do not live in a world of constant creative destruction which could foster the haphazard evolution of our society. However, I am extremely pleased to be living in a world of constant incremental innovations, with creative destruction providing the spice of life.

Reading my RSS feeds I happened upon "A Need for speed: The path to a faster loading start sequence" from the Official Gmail Blog which delineated the process by which the Google team went about making incremental innovations to its Gmail service.

They tested and broke down the processes into its components (the flow of data between client and server) and thought about a different way of doing things, a more efficient way. As a result they managed to reduce the number of HTTP requests from 14-24 to 4. Well done!

The information technology space is characterized by creative destruction and incremental innovation. Let’s look at web-based email as a radical innovation. Hotmail was first, soon to be followed by countless imitations, all a little bit different but all utilizing a web-based model. Perhaps this creativity caused the destruction of client based applications, especially in the personal email space. So from the launch of Hotmail in 1997 incremental innovations have taken place to strengthen and develop the body of knowledge that supports web-based email systems.

As a regular user of such systems I have seen first-hand these changes, all of which have greatly increased my efficiency and ease of use. Incremental innovation may be subtle, even the blog points out that you may not notice the difference, but with each change comes room for another change until another creative destructive event occurs … exciting!

Come on stuff.co.nz, be positive!

I use Google Reader to keep up-to-date with headlines and RSS feeds and it was interesting to see the difference between the headlines regarding the Xero first year profit announcement today. The stuff.co.nz headline reads "Xero posts $4.3 million annual loss" where as the NBR released "Xero beats forecasts but receipts lower." Essentially both articles had all the same facts and figures so the only real difference between them was the writers opinion of Xero.

Personally I like the positive approach that NBR took on this headline which shows their attitude towards fostering business success in New Zealand, unlike Fairfax. Maybe they just don't like new things or its founder Rod Dury ... who knows? I know that from now on I'll be checking my NBR feeds long before any from stuff.co.nz because I like to be in a positive frame of mind.

ETS - Can Tiawi Point Survive?

The implementation of the Emissions Trading Scheme (ETS) may will impact deeply on heavy industry in New Zealand. Rio Tinto, the owner of Tiwai Point aluminium smelter, said on Tuesday that hundreds of jobs could be lost if ETS requirements mean that Tiwai is longer the most cost competitive location.

It is a difficult situation and Rio Tinto's moves could even be considered as holding the government to ransom as they suggest a double standard by seeking to be excluded from the scheme. The government has proposed a concession of tax credits to the same value of carbon but this will be phased out by 2030. Rio Tinto say that this is not enough and that they need the tax credits until other countries face the same carbon treatment. So are we about to see another large manufacturer shift offshore, just as Fisher & Paykel announced in April?

We all know that we need to reduce pollution and our emmissions and a recent study said that 71 percent of businesses believed that large polluters should pay. This is a very reasonable view as heavy industry are likely to produce higher proportional pollution, which means that if they reduced then the reduction on national emissions would be far greater.

Given this announcement I wonder what effect the ETS implmentation will have on Holcim's proposed concrete plant near Oamaru. They do have some information on climate change here that is probably propaganda but interesting none the less.

New Zealand, an early adopter of an ETS system, needs to weigh up what it can do to protect industry but also the environment. No easy challenge. The survival of Tiawi seems to be in the hands of the government.

Everything is online!

Earlier this month it was possible to download the 2005 income tax returns for the entire Italian population. You may think that this is an impossible misprint, like I did, but this is the truth! At first I thought the information must have been stolen but it was the tax authorities themselves who published these figures. When something as unbelievable as this happens we must delve into the history of the situation to see what events transpired to make this so.

In their defense the Italian government told the press that this information has been available to the public since the 1970’s as annual data is display in town halls around the country. Therefore the only change that I can see is the channel by which the information is disseminated to the public.

The moves of the tax department have angered Italians, with many seeking compensation. This fiasco demonstrates the speed and publicity that internet can create and if Google’s vision is to ring true then this may just be the start!

Google's mission is to organize the world's information and make it universally accessible and useful.

Indices - Useful comparision

It seems that prices are rising almost daily at the moment, especially diary and oil derived products. One may feel that that prices are rising but how do we know?

A price index measures how prices change. Most commonly prices are compared over time but they can also be used to compare prices between geographical regions. The most commonly referred to index is the consumer price index (CPI) which in New Zealand measures a basket of goods which make up typical household spending such as food, alcohol, clothing, household utilities, health, transport, communication, recreation and education among other things. For more detail see the Statistics New Zealand site.

An index is often 'normalized' which means the user does not need to concern themselves with the units that define the data within the index because it is always in percentage terms. An index is calculated from the base year, which is in effect time zero, meaning the index will show the change between now and that base year. If you would like to know how to calculate an index view this wikipedia example.

The scope of an index can be as narrow as the user defines, e.g you could have an index that measures the price of Central Otago apricots using the spot prices of the stone fruit over a number of years. You could define a productivity index within your business to measure how productivity is changing. You can use an index to measure the change in almost anything.

Are You Prepared to Change Your Brand?

After 60 years of hard work the New Zealand wine company Nobilo Wine Group is re-branding itself. After all that time and effort this could not have been an easy decision, but perhaps made easier by the fact that the Nobilo family sold out seven years ago.

Nobilo Wine Group, now Constellation New Zealand, owns a number of leading export wines including Kim Crawford, Nobilo, Monkey Bay, Selaks and Drylands. Chief executive Joe Stanton explained that the company was changing its strategy from a volume and sales orientation to one focused more on quality and premium positioning. This is understandable given current industry trends of increasing competition and increasing educated global wine consumers.

Stanton uses the term "free up" when referring to the effect the name change will have as it neutralises the impact that 'Nobilo' has on the wines in its product portfolio. Thus, their strategy will allow each wine to speak for itself.

Personally I think that this is a great move as even though it appears that all their hard work building the brand is worthless, it is not. Nobilo will still remain a standalone brand, as it currently is, and because each of the above mentioned brands are so strong Constellation New Zealand may take on the persona of a parent company with each brand as a strategic business child.

For the New Zealand wine industry to be successful it needs to build strong brands positioned in premium markets, Nobilo recognised this and acted. This idea of brand building is not foreign to the industry sustained, consistent, targeted effort is required.

Overall Nobilo has more to gain than it will loose therefore decision made.

You can expect many more posts on wine related issues as it forms the basis for my Master of Entrepreneurship thesis at Otago School of Business

Think Smarter, Not Harder

A couple of weeks ago I read an NBR article "Truckers see more costs ahead" [18/04/08] which outlines the cost disparity of road transport between New Zealand and Australia. Road transport is 103% more expensive in New Zealand than Australia! If that was not enough the government is looking to introduce new policies including an emissions trading scheme, the introduction of biofuels, and a shift to low-sulphur diesel. All these environmentally focused policies will increase costs even further.

Road Transport Forum chief executive Tony Friedlander said a proposal to increase the maximum payload from 44 to 50 tonnes to increase efficiency has been before the government for eight years. This increase could go some way to reduce the difference in price with Australia but more importantly decrease carbon emissions. A study has shown that this increase would be four times friendlier on the environment than a switch of New Zealand's fleet to biofuels. No alterations need to be made to the trucks as it is only the payload that is increased, and there will be no need to purchase more expensive biofuels.

So it seems there is a sensible, almost immediate solution to decreasing the carbon emissions of New Zealand's transport fleet yet the government is fixated on the 'silver bullet' that it thinks biofuels will provide. Why not increase the payload now and then introduce biofeuls when technology has made them more efficient. I thought that to save our planet we needed to act now? The current government thinks otherwise.

Clearer at the Coal Face

Information overload is an everyday occurrence which lead me to ask; Why do certain pieces of information stick better than others? There are many scientific variables at play here but these are far beyond the scope of this post. I think, although no great epiphany, seeing, hearing or experiencing something that you have learned or are interested in makes everything seem that bit more clearly.

On a flight to Auckland this week I read an NBR article "Be wary of the digital pundits' Web 2.0 vapourware" which discusses the dangers of focusing a marketing strategy on the next new web craze. For example, advertising on Facebook is not a silver bullet to get young people to buy your product. The authors suggest it is more likely to be successful as part of a wider web or digital strategy.

On the return flight I was sitting next to an individual with 20 years of experience in the broadcasting industry. She talked about the changes that she had experienced over her career and remembering the above article I asked her if they were communicating digitally. Indeed they were through utilising podcasts, banners, partner’s web sites and social networking sites such as Facebook and Bebo. This conversation was the closest I have been to the broadcasting coal face but hearing firsthand about their digital strategy after reading about it gave me clarity.

Over the summer I travelled with my girlfriend throughout Southeast Asia. We did not know very much about the countries that we were going to explore but we brought a few guide books and read them as we travelled. Everything became much clearer as we visited the palaces of Bangkok, ate bowls of Pho on the streets of Vietnam and visited the Killing Fields in the outskirts of Phenom Phen. The experience clarifies the written word.

Overall experiencing things helps make them memorable leaving an impression far deeper than any book, lesson or documentary. I will be finished my studies in the coming months and relish the chance to get to the coal face to clarify and strengthen my understanding of business.

Outsourcing Non-Core Competencies?

Last week I was involved in a conversation which encouraged me to think about the outsourcing of non-core competencies. This particular conversation revolved around advertising, more specifically the design of posters, newsletters, brochures and other time sensitive marketing materials. The firm that formed the basis of the conversation has a diverse portfolio of businesses but no in-house designer. As a result most of the abovementioned materials are designed and produced by local graphic designers. On face value this seems like the sensible approach, given the increasing emphasis of ‘do what you do best’ strategies proposed throughout business press. However, like most things, one needs to dig a little deeper and place this pearl of wisdom within the context of the firm.

Graphic designers serve their purpose creating and publishing materials far and above the quality and creativity of a desktop publishing software system, I should know I am a web designer. This is why I was surprised that their firm was going to send this non-graphic designer to a short course focusing on graphic design. I questioned the motives of the firm and it was her reply that I found interesting. She explained that they often reuse materials for a couple of years or seasons and all they need to change are the dates, prices and other text information.

I know that even the smallest changes in a web site or piece of graphic design work are expensive. The designer must access the source files, re-orientate themselves with the previous work, make the changes, submit to the client for approval, and then complete the appropriate administration. For a small change the cost and commotion is enormous.

The diversified firm wanted to reduce these costs and time delays by bringing this service in-house. They did not want to hire a full time graphic design and their equipment but wanted to find a happy medium and not be at the mercy of their graphic designers when changes were required.

This conversation showed me that you need not apply business strategies blindly but rather explore the firm specific processes, constraints and requirements to see if the strategy is applicable. In this case it was not a black and white decision regarding the outsourcing of advertising but rather the degree to which it would provide the most value to the firm.

New Player in NZ Online Accommodation

Jason Travel Media have announced the deployment of a commission-free online accommodation booking application. The new system will benefit small operators as it streamlines allocating rooms to individual outlets or resellers. Last year Jason began online bookings through the acquisition of Holiday Guide and have been working on this current online application ever since.

If you familiar with Wotif.com, New Zealand's largest online booking system you will be asking yourself "How is Jasons offering different?"

Jasons, primarily a travel guide publisher, earns the majority of its revenue through advertising throughout its publication portfolio. Wotif.com on the other hand revenue stream comes from commissions and booking fees.

In the absence of commissions customers can change systems easily as the switching costs of doing so are low. Jasons content is rich in travel information drawing many more would-be holiday markers seeking not only accommodation but information relating to activities and transport within their destination region. This differs greatly from wotif.com which is simply a mechanism for booking discounted online accommodation. I think there are two questions to ask. (1) Will this difference in target market be distinct enough for for the systems to co-exist? (2) Will Jason's advertising revenue model work in the online accommodation booking space?

The ASICS Run 100 Miles in a Month Challenge

Today I signed up the ASICS Run 100 Miles in a Month Challenge. A few days ago I signed up to a free MapMyRun web application and after looking through a multitude of bells and whistles found the "Goals" section.

Goals are important both in personal life and in business, and with this in mind I decided to set myself one. I am not too sure if I have bitten off more than I can chew but I thought I would give it a go - I have nothing to loose! Maybe ASICS might even see this product placement and send me a free pair of shoes?

Major Government Intervention in Economy

The biggest government intervention in the New Zealand equity markets took place today blocking the Canadian Pension Plan's $1.7 billion bid for 40% of Auckland International Airport. Such a major government intervention begs the question "What economic system drives New Zealand?" Is it still a market economy, or are we moving towards a mixed economy? We are far from a mixed economy and I doubt that we will ever be one ... but its worth a thought. The Asian Tigers have showed that governments can pick winners and they have had a positive effect on their economies (pre 1997).

Government intervention is often justified if the market fails. This is why the government provides health care, justice, defence, education, roading and other social services and infrastructure. If left to the market these services are unlikely to be provided because of free riders, the difficulty in charging individuals, and the often uneconomic provision of merit goods. So what is the market failure that prompted the government to quash the CPP bid?

Activly Environmental

Today marked a turning point in my recycling / eco-friendly lifestyle. Up until now I have been recycling, composting, installing energy saving light bulbs and keeping the right amount of air in my tyres. But today I brought toilet paper made from recycled paper and eco-friendly dish washing liquid. There was not a great deal of price difference between these and their everyday equivalents so even on a student budget it was affordable.

As a student in Dunedin I can remember the uproar when 'user pays' rubbish collection commenced. We now had to pay for all our rubbish collection. At the same time the DCC also introduced recycling bins. Although some may think that students waste excessive amounts of money on alcohol and other luxuries this is not the case when it comes to rubbish collection. For this reasons students whole heartedly embraced recycling to decrease the cost of rubbish collection. It is probably for the same reason that students also install eco-friendly light bulbs ... it saves money!

I describe this as the turning point because I class the above mentioned measures as passive as they do not cost money or in the case of the light bulbs are a one off expense. It is only when one begins to choose everyday eco-friendly products that one turns the corner towards active eco-friendly, sustainable practices.

How does this relate to business? I can think of two paths to walk; supply side or demand side. In today's post I am more interested in the supply side or production path even though I really enjoy the demand side branding of the Ecostore product that I purchased (maybe a future post?)

The press often portrays business and environmental practices as mutually exclusive but when it comes to energy conversation this is not true. If businesses can reduce their energy costs through decreased consumption then this is a win-win situation.

Businesses should embrace the initiatives publicised by the multitude of eco-worrier groups aimed at individuals to practise energy conservation. These savings transmit to the bottom line - what is there to loose ... nothing!

NZ / China - Free Trade Agreement

After 15 rounds over the past three years a Free Trade Agreement (FTA) was signed between New Zealand and China on 7th April 2008. As a proponent of Free Trade I welcome the agreement.

Over the coming weeks I will delve a little deeper into international trade, FTA, and what this means for New Zealand consumers and business. Read below for a little of the ideology.

A Free Trade Agreement (FTA) involves the elimination or reduction of tariffs agreed upon by the member countries.

Trade Creation and Trade Diversion

The most obvious advantage of an FTA is that the economies exports can enter its FTA partner’s economy without tariffs having to be paid. Whether or not a nation experiences an increase or decrease in welfare due to the elimination of its own tariffs largely depends on the extent of trade creation and trade diversion.
Trade creation relates to the increased quantity of imports due to the elimination of tariffs on imports from member nations. As well as consumers receiving cheaper imported goods, the increase in imports also leads to a reallocation of resources away from the production of goods that the nation is relatively less efficient in producing favoring output in which they have a comparative advantage. Thus trade creation increases the efficiency of resource allocation.

Trade diversion arises when the formation of an FTA causes imports to be sourced from a member country that is not the worlds lowest cost producer. This reduces efficiency.

Free trade relationships that do not involve New Zealand can still impact on New Zealand’s economy. New Zealand may be at a price disadvantage if competing in markets where the competition has a FTA.

Both Winners and Losers

Although benefits from trade are received by a country they are not distributed evenly amongst it. Those who work or own the industries that we are relatively inefficient in comparison to China, such as textiles and manufacturing and textiles, will suffer the most while those in the efficient industries of agriculture will benefit the most. It is here that we should pause and think about the effect that this has on New Zealand's largest exporter, Fonterra. The Dairy industry has averaged NZ$363 million of export over the few years, of which Fonterra accounts for 95%. Knowing that they have a lot to gain from these tariff phase outs. However, China still has some mechanisms to delay reductions if exports exceed a certain quantity but this is still better than the current situation.

If you are an export then try the Tariff Finder to see how you will be affected.

Public officials must weigh up the gains and losses. One way would be to help displaced workers by offering retaining subsidies and relocation grants. Will the government help these displaced workers ... I guess only time will tell.

Selling Ice to Eskimos - The Business of Water

Last week I found myself in a second hand shop in Milton and discovered a soda siphon. Frosted onto the glass was its maker, Lanes Ltd, and its description, Gold Metal Aerated Water. Given the proliferation of packaged watered it lead me to ask - What is the story behind bottled water?

After a little internet surfing I found that sparkling mineral water or “fizzy water” was first machine made during the seventeenth century when an English reverend Rev Joseph Priestly applied carbonic acid to pressured water. The benefits of natural mineral water had long been associated with good health and finally the production of such an elixir was one step closer to reality.

Three years later in 1771 a Swedish chemist, Tobern Bergman, fabricated a machine to facilitate the commercialization of this process but was unsuccessful. It was not until 1790 that a feasible production process was conceived by German Jacob Schweppe, a name synonymous with carbonation.

Amazingly enough I discovered that the oldest bottled water company in the world is a New Zealand one, Waiwera Infinity established in 1875. They are still at the top of their game being named best water by Decanter in the UK and also best bottle design at a design competition in Italy in 2006. Unfortunately I was unable to find much information on Lanes Ltd (except for another soda siphon on Trademe) so there ends a brief history of water.

How did drinking water become so trendy? Perhaps the need to drink eight glasses a day, a fact ingrained in my generation, is what water marketers are tapping into?

New Zealanders drink (still looking for the statistic ... help?) of bottled water a year.

What is the difference between bottled water and tap water? Apparently not much, at least in the US. Both Coke and Pepsi main stream water brands are nothing more than packaged municipal water. It’s hard to believe isn’t it? Is this the case in New Zealand also? Where does PUMP water come from?

However, most New Zealand tap water does not taste the same as its bottled equivalent. Added chlorine and little bubbles that produce a murky appearance mean that there is a difference. Is this difference worth the premium we are paying?

An emergence of premium waters is taking place, especially in restaurants. New Zealand brands Antipodes and Mt Pisa and are fetching up to $10 for 750ml at our trendiest spots. Perhaps it is an attempt to compete with the world wide water tycoons Evian and San Pellegrino which have featured for years on wine lists. It is has never been more trendy or acceptable to drink water, especially premium priced New Zealand water. Claridges Hotel, London, sell 42 Below Volcanic water for 21 pounds for 420 ml!

Ten dollars may sound extravagant but cult waters are surfacing. Bling H20, a Hollywood accessory, sells its water online for around $20 - $40 depending on design and how many Swarovski crystals are stuck to the bottle. Triple this and this is what you can expect to pay at an A list venue.

One can not deny to marketability of water as given that Aquaplus specializes in branding water for your organization.

What impact is all this having on our environment and landfills? Opinions vary. Gary Hemphill, a New York marketing executive, splits the water market into ‘water replacement’ and ‘refreshment’ segments. Obviously tap water replacement business means more plastic in landfills. On the other hand, refreshment consumer at the drinks cabinet, are making a health choice not an environmental one as most refreshment products are packaged in plastic bottles. Ceteris paribus, buying water is not creating more rubbish but different rubbish. But all things are never the same and are the health benefits increasing refreshment purchases?

One blog I read suggested that tap water is going to come back into favour as the world rethinks the environmental impact of what we consume. Lately I have found myself buying more sparkling than still water as a refreshment purchase. I am proud to say that it is New Zealand water that I drink.

The marketers of water are doing a great job and the adage of selling ice to Eskimos holds true in this industry as we are sold something that we already have in abundance.

Brian Richards - Branding

As I think about the direction for my Master of Entrepreneurship thesis the more I am drawn to branding. I looked through what I had learned in the past and found some notes that I had written after hearing Brian Richards speak. Here they are.

“These unshaped islands on the sawyer’s bench, waiting for the chisel of the mind” - James K Baxter

In the past as economic times get tough New Zealand has taken the easy road. Although it made sense in the time we simply expanded production in the area that we were good at, namely agriculture. We built bigger freezing works and farmed more sheep. This is unsustainable – it is time to add value to the things that we do good, to make the things we do great!

In the past we have been a low cost producer but this cannot last as developing countries begin to undercut our prices. We need to focus on the New Zealand brand and tell a story to entice consumers with the attributes our country possesses. We are unaffected, honest, open, young, active and fresh.

We must first understand who we are and what it is to be a New Zealander. Why are our most successful domestic winemakers named Montana, a dry state in America, and Villa Maria, a name derived from Spanish, Cloudy Bay is evocative of New Zealand but Verve Clicquot, a French company owns it.

Branding attempts to bridge the gap between what one needs and what one wants. A Jaguar is technically inferior to many other automobiles but commands a price premium over other cars. People are in love with the story of Jaguar and the way it makes you feel as you sit in the cockpit. We assume that the wheels will turn and the breaks will work, our needs, so it is our senses and our heart that make the decision for us.

Marketers will tell you that you need four ingredients for a successful product: differentiation, relevance, esteem and knowledge. This is true. It is the focus on these elements that is often misguided. By knowledge we mean that everyone knows about the product. That’s well and fine but at the crunch when the advertising dollars have dried up it is esteem and the affection that consumers place on a product that will sell it, not knowledge that the product exists.

We need to be storytellers. The advent of mathematics has advanced society greatly without which we would have no building, no computers and very little consumables. The downside of this is that it has restricted our creativity and way of thinking. Now, greater than ever, products are becoming similar and we need to touch the hearts and emotions of people. We need them to want our product and the feeling consumption of it brings.

Otago University - 28/07/06

Branding To New Heights - Virgle

Virgle ... the merging of two brands that attempt to personify generation X & Y are launching a quest to inhabit other planets in our solar system, starting with Mars. All you need to do is submit your 30 second video (to the Google owned) YouTube on why you should become a Virgle Pioneer.

Perhaps Sir Richard Branson is trying to highlight issues of global warming or maybe Virgin and Google are trying to establish some sort of 'NASA Youth' program to relight humans desire to explore? More likely it is another media stunt so these brands remain on our minds and positioned as more exciting than there respective competitors.

Ethics and Knowledge

Although not strictly a business related post ethics are becoming increasingly important today because society expects companies and organisations to act 'ethically.'

How can you or your society decide ethically which knowledge should or should not be pursued.

How can you or your society decide ethically which knowledge should or should not be pursued is a question to be resolved through ethical decision making. I prefer to apply the utilitarian theory in dealing with ethical questions. To understand this question though one must first understand what an ethical decision is, how the individual or society allows or disallows the pursuit of knowledge and examples of what and why certain decisions have been made in the pursuit of knowledge.

Moral Philosophy or ethics are all around us whenever we say something is right, wrong, good, or bad although not all decisions are based on ethical principles we make many ethical decisions every day both consciously and unconsciously. It occurs every time we used the word right or wrong and even good and bad or whenever we make a judgement about the worth of something. There are four parts to making an ethical decision.

The Utilitarian theory of ethical decision making is concerned with the well being of everybody as opposed to a theory based on self-interest or universal laws, which focus on the well being of individuals. It is mainly for this reason that utilitarianism impresses me as a standard because it is concerned with the welfare of the group – in fact, it puts the welfare of the group ahead of the welfare of individuals thus it is of a greater benefit to society ...

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This essay was submitted as part of Theory of Knowledge for International Baccalaureate 2002

Qantas Accused of Price Fixing ... Who is next?

During my young life I have associated words such as 'cartel' and 'fixing' with oil and cricket. Earlier this week a news report suggested that the Australian Competition and Consumer Commission (ACCC) were taking their investigation into Qantas cargo and passenger price fixing to prosecution.

Perhaps this is not all too surprising to Qantas as they have set aside $A64 million to cover this potential liability. This is a prudent move as they have already been fined in the US for the same trans-Pacific trickery ACCC believes has occurred. However, this is not an isolated case in the air transportation industry as British Airways and Korean Air were also fined heavily in 2007 for similar practises. Will more airlines and alliances be exposed?

As a New Zealand air passenger this is a little alarming. Currently Air New Zealand and Qantas operate the majority of domestic air travel which begs the question, "Has Qantas tried to entice Air NZ in similar practises on the trans-Tasman route?" One would have to assume that this simply could not happen because of the governments 76% shareholding. However if price fixing has/is taking place the Labor Government could simply plead ignorance, just as it did in August 2007 when Air NZ ferried Australian forces into Kuwait contrary to government policy.

Maybe more cartels and fixing will be unearthed over the coming years as international institutions and the public call for more transparency throughout our globalised society.