Tiger Woods look like he’s really in deep trouble; James Surowiecki traces the reason how Tiger Woods’ image is going down with the scandals and gave a thorough analysis on how the image of these celebrity figures are tied to products and firms they endorse or act as the public face for.
He even did a follow-up on his New Yorker blog to highlight the trouble Woods got into with the different firms and brands linked to him. He decided that Woods’ image is quite wrecked for the professional sponsorships from non-golf related stuff would probably cut back quite substantially.
John Cassidy did another analysis of what went wrong for Tiger Woods in the entire episode and explains why Tiger Woods need to get back into Professional golfing fast – assuming he’s able to maintain his focus and discipline.
A while back, I was writing about LVMH because they were featured in a briefing on The Economist. One of the strategies that were highlighted in the article was Louis Vuitton’s effort in researching customer flows in malls:
In 2005, when Maurizio Borletti, owner of several prominent department stores in Italy and France, was preparing for the opening of a refurbished La Rinascente department store in Milan, he recalls, the Vuitton people built a scale model of the building in their offices to understand customer flows and get the best positioning. “In this they’re the most professional in the industry,” he says.
I didn’t think too highly of it then but recently I was forced to think about this issue when I wonder why a crowd in the mall refuse to go to the cafe I was at.
The design of Iluma is definitely pretty interesting; with all the glittery looking stuff on the building surface, some kind of balcony on the middle floors and fancy looking glass doors that looks as though they weigh a ton but opens automatically (at least some of them). The outside main entrance area, there are 2 escalators; one leading from and another leading to the second level of the building. The interior of the building is big, and the ground floor is capable of holding lots of people in the middle, perfect for events and normally used for cart-stalls giving it a bazaar feel.
There’s another pair of escalators there, leading to the fourth floor directly. Wait a minute, fourth floor? Yes, it leads you directly to the fourth floor, by-passing the second and the third, which totally explains why it’s hard to get crowds within the building to go to the shops on the second floor. The pair of escalators inside the building that leads to the second floor is absolutely hidden from the crowd standing in the middle of the interior of the building. Some pictures of the interior will help you see why. Even when it takes about 40 seconds or so to reach the end of that long escalator, it’s fun enough to attract people to hit that level where a bunch of other cafes awaits.
The Coffee Bean will largely have to rely on people entering from the escalators at the front main entrance for business (come on, who takes the lifts these days?). On 13 December when 8-Days Magazine was having their 1001 issue exhibition, people who are naturally drawn to the ground floor interior of the building will probably not take that escalator and so the crowd they anticipate at their cafe will probably not manifest. The only people who might patronize them are those who came over to Iluma via the newly built link bridge from Parcos Bugis Junction and unable to find the escalator that will lead them down to the center of activity at the ground floor…
The customer flows in malls are pretty important in this sense, the location of the escalators, the entrance/exits, the link bridges and the placements of your signboard. That will all be before your staff’s attitude. Studying these flows before you rent out a space in a mall is going to make a whole load of difference to the destiny of that shop/unit.
With the Subprime Financial Crisis, the global economy tumbled, trade flows scaled down rapidly as economies started contracting. Initially, during the boom, trade was growing faster than global income, implying that the global growth, mainly concentrated in the already developed parts of the world economy was gained from increasing specialization and division of labour through trade and exchange. And for a slight contraction in the global economy, a lot of these supply chain will face problems in-between and go bust, resulting in a huge contraction in trade since the businesses relied on each other heavily for business. Daniel Gross discusses the decline of trade, and the implied slowdown/reverse of globalization on Slate.com. The situation is probably not as serious as Gross makes it sound.
The crisis is leading to a re-organization of globalization, towards greater degrees of cooperation and perhaps with less imbalances. With economists finding a better means of carry trade, and more reasons for Asia to get together, the world won’t be drifting apart that soon. In the latter article from Banyan column, The Economist highlights the strengths of a more integrated Asian economy and the challenges facing Asia.
The world seem to have accepted the global multilateral trade isn’t exactly going to be possible with all that decline in trade and rise of calls for protectionism and so regional multilateral trade and economic integration is the second best thing. Forming trade blocs or even common markets would do a great deal to help further globalization and put it on a path with more supranational bodies’ control. The idea is that having authorities in the process of globalization might help make it a better force in this world.
In an entry with the same title on my blog, I detailed my experience at The Coffee Bean recently that didn’t quite start nicely but ended off pretty intellectually. I’m quoting the gist here:
I approached the counter with a maths worksheet in my hand (I was planning to work out some problems there while I sipped on the tea since I had some spare time on my hand and needed to exercise my mind) and made my order. The young man serving me immediately asked if I intended to sit around to study.
I commented that I’ll probably be around for half an hour and asked if it’ll be a problem. He replied that there’s an event downstairs and they anticipate a crowd so they discourage people from studying at the cafe. I kept quiet and took my receipt. I thought that the Large Chai Latte should at least buy me 30 minutes of time at the cafe.
This post is a discussion seeks to answer the question: “If a cafe wants to maximize their profits from a crowd and yet is limited by their available seats, how do they discourage people from studying there besides using attitude (which I assume is something I experienced)?” So before answering that question, we list out the factors that would encourage one to study at the cafe and see if there’s anything we can do to manipulate them:
Things that encourage one to study at a cafe
Good lighting; makes reading comfortable
Extremely hot or cold drink; takes you longer to drink and the taste of the drink don’t change that rapidly over time which means more excuse to stay at the cafe longer
Quality drinks; makes for nice beverage while you study and you probably won’t mind ordering one more and staying longer
Comfortable seats; allows you to study comfortably and sit at the cafe for longer time without feeling discomfort physically.
Technically speaking, removing any of these would help to reduce the time people stay around the cafe and also discourage studying. On the other hand, attitude (on part of the service staff) won’t help to reduce the determination of people studying at the cafe. In fact, it turns off people who genuinely just want to chill at the cafe for a while without discouraging the studying students. When one plans to stay at the cafe for a long time to study and sip on drinks, service at the counter makes up only a small part of the experience, whereas for customers who are interested to get a good drink and sit for a while, the service at the counter makes up half of the experience. In other words, giving people attitude is the worst possible solution compared to removing any of the above.
I strongly recommend the dimming of lighting, which doesn’t harm people out to relax but makes studying tedious and difficult. But this is not always possible since The Coffee Bean that I went to utilizes the in-building lighting that they probably have no control over. It’s not wise to compromise the quality of the drinks since it sends out the wrong messages and is disastrously difficult to control. That leaves us with modifying the seats.
I got this idea when I was at Saizeriya Restaurant at Liang Court; they feature a drinks bar where you pay about $6 bucks or so and get to drink lots of different drinks and it’s free flow – literally a drinks buffet. At first, I wondered why the seats there were so narrow and small; the cushion were thin and not exactly comfortable with prolonged sitting. Later I rationalized it as a means to get people out of the restaurant as soon as they’re done with the food. Of course it’s not going to put off people determined to try all the drinks, but at least they’ll finish with their affair and get out fast.
So here’s some prescription for cafes who hopes to attract people there for a drink and to sit around for a while (after all, if the cafe was empty you might think the drinks suck) but discourage students from spending their entire day studying there, the best move would be to adjust lighting according to your needs to adjust demand. Where this is not possible, modify the seats to make prolonged sitting uncomfortable.
Tyler Cowen mentioned something about product insurance at one part of his book, Discover Your Inner Economist. He says that one should not argue with his wife when she insist on buying product insurance even when you know that the results are economic analysis are at your favour. Presumably, there are some other cost-benefit analysis taking place, at the level where the cost of winning the argument greatly overwhelms the benefit (which of course is the cash saved on the product insurance). The Economist asked why people continue to buy them even when products are unlikely to fail, which means that these product insurances are immensely profitable for the electronics retail sector. The researchers who examined purchase data from a big electronics retailer for over 600 households from November 2003 to October 2004 concluded that the purchases were linked to the shopper’s mood. Of course, a less-than-rational wife might be the explanation, but even the wife has a sound explanation for that:
[…] the emotional tranquillity that comes with buying a new warranty is not in itself without value, even if “rationally, it doesn’t make sense”.
But I find an ingredient missing in this story; the researchers probably falsely assume that all the shoppers have got the same level of perceptiveness. And I believe perception have all to do with the purchase of product insurance. Think about it, when was the last time you had a product which failed and the warranty period was just over and you blame yourself for not buying additional coverage? But how about the last time when you did buy the product insurance and it didn’t fail at all within the span of its usage, not once? Just like the belief that we’re unlucky enough to always join the slowest queue in the supermarket; our erroneous perception of the frequency we get unlucky can make us more frustrated with a product insurance unextended than a product which didn’t fail after we bought the coverage despite the fact that they probably inflicts the same cost on you. Obviously it actually hurts you more when you think back and regret not extending coverage; you probably won’t even think back on how stupid you were to buy product insurance for a reliable product since you’re using it happily.
This creates a bias for purchasing product insurance. Our faulty perception supplements our faulty memory in suggesting that buying product insurance would be the wise choice, going by the seemingly sound argument of ‘if the product fails, I’m protected; and even if it doesn’t, I get a peace of mind plus the retailers deserve the reward if they recommended me the durable kind of good’. You could very well have realised that if the product was that durable the manufacturer would already have taken a cut for that on the retail price and that if the product ran a high chance of failure the retailer wouldn’t even offer you the product insurance in the first place. And if your wife has anything to say about that, it’ll probably be “Must you be that calculative?”
The Economist ran a story about counterfeit handsets in China lately. Counterfeiting and piracy is not exactly all imitation and no creativity but it does actually hurt the economy, or so claimed by original manufacturers because it affects their incentives to innovate. The difficulty lies with assessing whether the consumer would even consume the good in the first place if the imitation is not available. As a matter of fact, I think the best way for these problem to solve themselves is for consumers to realise which one of the products (real or fake) offers them the utility they need. In most cases, people may just be satisfied with imitations then so be it; the original manufacturers simply may not have profited from these group of consumers who would otherwise not be able to afford the real thing.
It is only when the utility functions of these products coincide and people switch from using original to fakes that matters (but the difference should be made up by the disparity in quality or the time lag in introduction of imitations) and becomes a huge problem. And it would be a bad thing if manufacturers ends up engaged in the competition of who is best able to prevent piracy – that’s senseless innovation that penalizes the society in general. Take Digital Rights Management (DRMs) for example. It sucks, everyone hates them and games like Red Alert 3 lost business because of it (though most part of its lack of popularity was attributed to its poor interface design and lame scenarios) and consumers hate big firms for them.
Perhaps intellectual property should be contained in ways that are stricter such that innovations built upon ideas that belongs to others are welcomed. In many sense, parodies are imitations, and so are fan fiction, built upon characterization or story frameworks that belongs to others. We should perhaps start treating the NPhone’s relation with iPhone like Shrek’s relation with Matrix. A joke.
Debt didn’t get dangerously out of scale because the system was broken. It got out of scale, in part, because the system worked.
Of course, he was speaking largely of corporate debts as well as mortgages but he did also raised the point that “In the U.S., people used to be able to write off the interest they paid on credit cards. That tax break was abolished in 1986…” Interestingly, Fortune Magazine ran a story about record debt in China. The diagnosis sounds grim but it does little to compare the context of the debts in China and US, making it difficult to assess if the ‘some economists’ quoted by them makes sense. Moreover, the statement about infrastructural investments is way too wobbly, China has much room to pull ahead when you compare them with the developed world; to be frank, the top cities in China barely compare with top cities of the world. In addition, The Economist have also tried to offer an alternative, more comprehensive explanation of China’s growth linked to productivity.
Some economists believe China’s infrastructure, already superior to that of many other developing economies, has now passed the point where more investment can contribute much to growth. China, in other words — despite the rosy, headline GDP numbers — might be stuck.
And yes, Japan is now fearful of the D-word, or rather the comeback of it; not depression, or debts. It’s kind of cool to have a central bank that combats ‘deflation’ rather than ‘inflation’ though.
No doubt the Japanese are really good with technology and particularly great with their niche areas of precision engineering. The Economistreveals how indispensable some medium-sized corporations in Japan have come to be so (despite their somewhat unknown-ness) in our global tech economy. Their culture of monozukuri (making things) and kaizen (continuous improvement) have probably helped Japan sustained these niches but I must say that the article revealed an important aspect of business in certain industry that have too often been overlooked.
The very fact that long-term working relations helps these Japanese firms gain trust from their client for reliability and a special understanding of their client’s needs presents a difficulty for other firms to compete with them. It is something rather different from brand-loyalty that consumers might exhibit like the case of food, as a recent Schumpeter article was suggesting. This loyalty is something functional and as long as these engineering firms continue to provide excellence in the fields they engage in, they’ll continue to thrive.
Of course, The Economist sounded some warning about the secrecy these Japanese firms place on their technology and how their belief in the strength of the firm being stored in the collective mind of their employees devour them of labour flexibility that may some day come to haunt them. Japanese firms have prevailed more or less and I believe they’ll adapt their culture to the changing time, all while insisting they didn’t quite change the traditions and beliefs.
This week’s package is a little more on the reading side. The Economist dug up the book review of a 1980s book. And read up about how sometimes, product pricing is all about business and little about economics especially when demand function starts entangling with supply. This is the sort of thing that always happens with super high-class sort of thing – or maybe it’s just high-class because of marketing.
Perhaps people are learning more about Professor Waldfogel’s theories since more retailers are rolling out gift certificates for this festive season. How about signaling your care or love for someone through the Internet or your mobile phone instead? Stefana Broadbent, a tech anthropologist speaks on how the Internet enables intimacy.
Finally, a little read on xanthan gum from moreIntelligentLife, a stabilizer – in your food but not something particularly good for your health I heard..
If the recent entries suddenly appear to be skewed towards recommending readings from The Economist, I’ve to admit that this is happening because I’ve got the chance to stick around the computer as much as the previous week and have come to make more use of the stuff I read on my hardcopy of The Economist.
And strangely, the magazine is pretty obsessed with the food industry this couple of days. It could well be a result of the recession, which has made the food industry a little less boring compared to the days when finance was hot and occupying too much coverage on papers (both the times when they were bubbling and when the crisis came). Perhaps more importantly, it was the trend that the food giants were transforming. And these transformations are catching the attention of regulators. The Economist discusses how the line between food and drugs are blurring as manufacturers are slapping health and nutritional claims on what they call ‘functional foods’. A briefing on Nestlé reveals how these food giants are now operating. In many ways these industries’ methods and Research and Development expenditures are fast resembling those of Pharmaceutical industries. For some, it is probably comforting to know that our food is going to do more than keep us full and alive; for me, I think it’s pretty scary to be munching with foods that promises too much (“to improve nature”) and yet claims to contain “no weird stuff”.
Beyond the boring regulatory stuff and operations of the food giant, the big players appears to be engaging in some rather interesting competition and some potential integrations. Hostile bids are somewhat frowned upon in these times of business especially when Cadbury is growing faster than Kraft (that’s if you read the article that is linked) and I’m pretty confident that Kraft will not be able to acquire the British chocolatier without revising their bid.
