Economist’s commentary behind the reasons of Chapter 11 filing.
The American Postal Service is facing bankruptcy with $9 billion dollar negative cash flow. One way to come up with a new business model is to see what happens in other parts of the world. It turns out that European postal services have already spent to past 20 years trying to reinvent themselves, as detailed in this article in the NY Times.
The proximate cause was the HP Stock price.
For more distant causes click on “more”.
The WSJ reports:
ROCHESTER, N.Y—After three decades of serial reorganizations, Eastman Kodak Co. is struggling to stay in the picture.
The 131-year-old company lost much of its film business to foreign competitors, then mishandled the transition to digital cameras. Now it is quickly burning through its cash as it remakes itself into a company that sells printers and ink.
On July 26, Kodak reported its fifth consecutive quarter of losses. The company’s junk-rated debt coming due in two years has moved below 80 cents on the dollar, signaling the market sees a risk of default. The company’s already battered stock has taken an especially tough pounding in recent days, falling 10% Wednesday to $1.77. Prior to this week, Kodak hadn’t closed below $2 since the 1950s, according to the Center for Research in Security Prices at the University of Chicago.
Feb 1, 2012: Wharton Professors comment on the demise of Kodak. What’s Wrong with This Picture: Kodak’s 30-year Slide into Bankruptcy
May 2, 2012: John Kotter traces to failure of Kodak to complacency that set in even before the digital revolution. Read Barriers to Change: The Real Reason Behind the Kodak Downfall
Nokia is in trouble. The CEO realized that to win time before new phones based on Microsoft Operating system are coming out, he needs to win back confidence of key stakeholders. It will be fascinating to watch whether Nokia will be able to stem the market share loss. Clearly, the CEO understands the urgency of the situation and his communication strategy seems to be on target. Read the full article about Nokia’s new N9 smartphone on NYTimes.com. Click on more to find stats on how Nokia is losing market share.
This fascinating excerpt from Bob Lutz’s book highlights a couple of key issues: one needs to have deep knowledge about an industry to make the right decisions, one needs to select the right leadership style for the organizational context, and finally if one wants to have a long last impact, one needs to institutionalize the change. The reason why Lutz failed to institutionalize is product develop process at Chrysler but believes that it will stick may have nothing to do with him: GM went through bankruptcy and the old ways may have been forced to retreat.
A few days later Lutz was interviewed about the book and the article by the WSJ. Click on
You can read the full story behind this graph on Economist.com/
From NY Times:
Microsoft has long salivated over the notion of controlling the living room and becoming a major entertainment force. Kinect may well stand as its best bet yet for turning that vision into a reality. “This is an incredibly amazing, wonderful first step toward making interactivity in the living room available to everybody,” says Mr. Ballmer, while cautioning that Microsoft still has “a lot of work to do.”
The first Kinect prototype cost Microsoft $30,000 to build, but 1,000 workers would eventually be involved in the project. And now, hundreds of millions of dollars later, the company has a product it can sell for $150 a pop and still turn a profit, Mr. Mattrick says. (People who don’t have an Xbox can pay $300 for a package that includes the console, Kinect and a game.)
For Mr. Ballmer, Kinect is far more than a business opportunity or a pleasant diversion for consumers. It offers a moment to prove to investors and company directors that Microsoft is capable of an Applesque, game-changing moment under his leadership.
Don’t front up at a neworking function expecting to make a sale. “Networking is an opportunity to meet people in a neutral environment, to form relationship and to built trust. People who are too anxious about making a dollar will only ostracise themselves from the rest of the group.” Other tips include: be open-minded, don’t be pushy, be a good listener and think to long-term. [...] “I have known someone [though networking] for 12 year and only last year did that relationship come up with business.”
From: BRW, September 2—8, 2010, p. 38
Peter Murmann: These tips can be applied not only to win business but also to advance one’s career.
This one of the most vivid examples of challenges to the existing business model of a firm. The Wall Street Journal reports:
After nearly 17 years of consistent growth, Barnes & Noble is stumbling. Revenue fell 3% to $5.12 billion for the fiscal year ended Jan. 31, 2009, while earnings dropped about 45% to $76 million.
When it launched the iPad last month, Apple championed a new approach to e-book pricing. Earlier this year, most large publishers agreed to establish a so-called agency model, where the publisher receives 70% of the digital price while e-book sellers act as agents and receive 30%. While some best sellers remain at $9.99, many major authors are priced at $12.99 or $14.99.
Jump to minute 1:47 of the Business Week video.
Rarely is a Hollywood movie such a great teaching instrument. Duplicity gives a wonderful picture of how far large companies go in figuring out what their competition is up to. What’s more, the principles of game theory are very well illustrated by Julia Roberts and Clive Owen, who make a wonderful pair. I recommend that every Strategic Management student watch this film.
The Economist reports how Rolls-Royse figured out a different way to make money in the jet engine business:
The big pay-off from getting engines under more wings comes from selling spares and servicing them. This is because selling aircraft engines is like selling razors. The razor and engine make little if any profit; that comes later, from blades or spare parts and servicing (see chart 3). Gross margins from rebuilding engines are thought to be about 35%; analysts at Credit Suisse, an investment bank, estimate that some makers of jet engines get about seven times as much revenue from servicing and selling spare parts as they do from selling engines. Many analysts suspect that Rolls-Royce (and others) sell engines at a loss. Judging this is hard, though, because of the way Rolls-Royce accounts for long-term contracts, often by booking a profit on the sale for income that will be received only over many years. Rolls-Royce says that, on average, engines are sold at a profit. The trouble with selling razors at a loss is that someone else may make the blades to fit them. And the juicy margins in engine maintenance have indeed attracted a swarm of independent servicing firms (and engine-makers after each other’s business).