Category Archives: Management

Well, it’s a BR-V after all

Posted on by
Reply

So that was… Strange… After all the smoke has cleared, the N7X becomes… BR-V. Why not just say it from the get got? Why the parade across the country, teasing the car to potential buyers? It feels there are few unnecessary steps in introducing the second generation BR-V.

Or is it?

Obviously the confusion about the BR-V got a code name for its second generation reveal is weird, but in hindsight I understand the idea. The first generation BR-V was never received favorably everywhere it’s introduced. The link between the BR-V and Mobilio even though only skin deep, a lot of people think that both are the same car. Both cars are structurally different, they have separate problems. For example, the BR-V is notorious for eating CV joint, while the Mobilio is not.

The problem lies in Honda experimenting in economies of scope on creating their car. the Mobilio and BR-V has different face and rear, but they both shares the same front glass, the same door and window panes, the same dashboard and the same seat structure. Even though the body is similar the BR-V has higher ceiling thus larger interior space, overall, the car looks the same. Is it wrong for Honda to do that? Obviously not, Honda needs to make money, as the alternative is market domination by Toyota group and thus monopoly when they have achieved it, and that is very bad.

The only logical thing that Honda Indonesia is doing all the charade for BR-V second generation is simply to relaunch the marque. Thinking back, registering a new name for an automotive product is difficult, and launching a campaign to familiarize the market for a new product is also difficult. The tease and code name is basically Honda Indonesia way of reintroducing BR-V to the market. In Europe and North America, renewing a marriage vow is common, it’s totally unnecessary, but it shows a commitment from both party. Some marriage vow renewal ceremony is even more festive than the original wedding party, and looks like Honda Indonesia is doing the same thing for BR-V. To let the market that Honda is serious and this time they will not repeat the same mistake.

Do remember though, Honda is not veering from the economy of scope, no no no no no no. They are still doing it, but it seems they are doing it right this time around. The N5X is coming, obviously a 2 row BR-V, which most likely be 2nd gen BR-V with its rear portion cut and different fascia (most likely cheaper headlight, different bumper) but retain everything from the overall shape, doors, and interior. Positioned exactly to fight Raize – Rocky duo.

Like in my previous post, Honda is doing it right this time around. The economy of scope experiment started with Brio, followed by Mobilio and finally BR-V. The similarity and timeline from those three cars created a correlation that all three cars are related, and although not wrong, it created story that BR-V comes from the Brio, a cheap car. This time, the N7X is the headliner, the causa prima, and every subsequent product is born from the line, a premium car.

I always teach my students about the importance of semantics and its relation to process. In our language, there’s two terms for ice tea, “teh es” (tea ice) and “es teh” (ice tea), we ask the drink with both term and it will be fine… But process wise saying the other will net different results. “teh es” is when you put tea first inside the glass and then you put the ice, making the tea thicker and less cold, especially if the tea is hot. “es teh” is when you fill the glass with ice then you put the tea, making a very cold drink but thinner tea. The same thing happened with second generation BR-V… Semantics.

The World Without Strangers… In Automotive at least

Posted on by
Reply

Driving a car in today’s modern world is no longer considered as luxury compared to the old times. We drive brands of car from east to west, from the small to big, from the thrifty to the so not thrifty. But do we really know our car from the inside out? When we see a brand of car, do we know if that car really is made from that particular brand? Because in today’s automotive world, an apparel tagline is more than just a tagline. More witty comments after the click. Continue reading →

Franchising Compendium… The Thing That Kick Starts Everything

Posted on by
Reply

The thing that kick starts everything… Man… I’m getting cornier by the hour for sure… Anyway…

Since moving here (new domain) equals to Google putting me somewhere on the last pages of its search engine, I think most visitors here never seen what I wrote back in the early days. These articles are what made me decides to host my own blog so I can get much more control and personalization. Why? Because they are the most searched subject back when I was starting this blog at wordpress.com. I meet new people (through the magic of internet), learn some more thing or two, and as such opened up my eyes to new horizons. These are not mere fruits of my knowledge and experience, these are what changed me.

Without further a due, here are my collection of franchising articles, its pros and cons and some examples along the way.

Franchise or not to Franchise… That is the question

Franchising: The Final Frontier – Part Uno

Franchising The Final Frontier: Part Dos! (Warning: Long Read)

Weekend Roulade: Franchising Fiasco

Enjoy the read, it’s about franchising, Krispy Kreme, J.Co, Es Teler 77, vodka drinking monkey and everything in between… Plus a bit of Honda.

Exit Strategy, and Why We All Got To Have It

Posted on by
2

Exit strategy is an integral part of a management function and nobody in their right management mind would ever omit such basic concept. Exit strategy is known by many as the penultimate or the very lastest (is that even a word?) thing that a manager would undertake in their corporate life. It’s not far from the truth though, as exit strategy will always means that, exit, the last step. However, every management book author, every educated manager, and every entrepreneur out there will always consider and managed exit strategy at the beginning of their career or at the start of the business. How is this so? Are they already considering defeat even at the earliest stage? Well this is a defining NO.

Exit Strategy For The Business

Linda Pinson, the author of “Anatomy of a Business Plan”, offers an excellent analogy why exit strategy has to be implemented right at the planning stage of the business itself. She wrote about a runner needs to know where he/she is going to finish the race. This is an excellent analogy for me because it exemplify what exit strategy really means. Well logically speaking using the analogy from the author, the runner capability obviously is limited, they have to know the range of the track first and adapt their running pace to win the race. If they didn’t know about the length of the track, the runner will exert their maximum force and got exhausted nowhere near the middle of the track. A good runner will spread their pace according to the length of the track, and keep a small amount of stamina for that last stride.

Business world is akin to runners on the track field, in that, each company has its own capability that can only be spread so much in its entire life span. Therefore one must apply exit strategy at planning phase of the business to accurately apply the overall strategy during the business life span. This is also what Linda Pinson wrote on her book, she even goes to length by defining that exit strategy defines a business financial plan, taxation plan, even its overall management decision. A very nice book indeed, I suggest every aspiring entrepreneur to read her book.

Exit Strategy doesn’t just apply to the overall business world, but also applies to the people who work there. One very good example of how exit strategy is used in the employee level of corporate life is the succession planning. How often in your corporate life that a good manager left from the company you are working for and there are no suitable people to replace him/her? My guess is… A lot, especially in a developing country such as mine.

Succession planning in a way is an exit strategy for the company who employs that person. Without proper succession planning, most often than not a company will lose its asset and will distort its daily balanced function.

Like some old guy (me) said, “a great manager is hard to groom, but a great manager is harder to find”. Basically, what I meant is that, it is easier to educate a good manager to great from within the company than to find a great manager from outside of the company. Pardon my lack of source, but on my MBA class, grooming manager from inside of the company for western companies are more preferable than just to find it from outside of the company. As this has several advantages being:

  1. That person already knows the culture of the company.
  2. He is already known by the people who will work for him.
  3. Company-client-media relationship will be intact because there are no need to have another introducing sequence between all three.

But somehow, some company still thinks that people who work for them are just people who work for them. They are not an asset by any long shot, nor they are an integral aspect of the company. Therefore, when somebody quits, the company will just say “ow, it’s the natural cause of things” or “that’s good, employee regeneration/fresh blood is always needed in the company”. To me, this is stupid and the wrongest concept of seeing employee as a tool rather than an asset. This actually happened on my current workplace, I’ll tattle about it on the example section along with the example of exit strategy for the business world.

Exit Strategy For Us

That’s what exit strategy means if its seen from the context of the business, but one can see exit strategy in our own life, out of the hustle and bustle of the corporate life. When we work for somebody, then our fate of working there is left to chance because simply we are just drones. Out of that 3rd “heat” or the inevitable such as economic downturn, natural disasters and so forth, we couldn’t be 100% sure of our future in that company. Out of the reasons stated above, we can get fired as soon it happens.

This is actually something that I wanted to share, it’s not based on any books or any classes that I have been into. Therefore accuracy is questionable but personally I think it’s something that is nice to know, so here goes.

We have in our life, multiple planning, no? Well, you ought to have it. In my lifetime, I’ve failed 4 of my biggest plan in my life. Luckily, I always have an exit strategy handy when all of those plans didn’t work out. For me, hatching a plan A, plan B, through plan Z will be never enough in our lifetime. Life will always change for the best or for the worse. To establish many plans for our life will be tiresome, not counting you have to keep in track and appropriately launch each and every plan for any given situation. For that reason, we only need to devise several solid plans that we can oversee with ease and then we devise an exit strategy.

The exit strategy in this context is not relevant to the mentioned business world application of the above, but rather, exit strategy in our life refers to hatching up another set of plan when the first set of plan didn’t work. For example, when you work on some company, you will have some plans devised to get promoted, yes? Of course… Then you planned to get the boss’s heart by buying him gifts, but he can’t be “bought”, so you buy his/her right hand man gifts to win favor so they will talk sweet things about you to the boss. That’s plan A and B right there. But what if your boss and his/her right hand person can’t be bought, and there’s a termination meeting, and… it’s so happen to be, your name is on that termination list? Well, this is the time when you got to have an exit strategy handy.

Exit strategy in this context means that you got to have another means of what to do after the inevitable happens. Exit strategy is not necessarily hard to hatch, because mostly it involves finding a new path your life and you creates the plans after you step into that path first. In the case of said example above, finding a new job or create your own business is the exit strategy. While it’s quite difficult setting up for a business, the subsequent plans can be made after the business has been established.

Again, this is a personal view of exit strategy. However, having some sort of getting out plan from your existing condition warrants a careful thought of exit strategy.

The Witty Examples

I’ve written about how exit strategy should be considered at the beginning of the planning stage of a business, and now let’s take a look at some examples.

A practical advice from Businesslink stated some exit strategy outcomes from different perspective of businesses. The article also further strengthen Linda Pinson’s book that exit strategy determines the overall long term strategy of the business. Basically, if you plan your business right, at the end of it you have to sell it for profit, groom or pick a successor for it, or just abandon it. Exit strategy determines those three outcomes from the declining phase of a business or your life cycle.

My step mom owns a quite profitable small bakery shop. However, she doesn’t want to expand the business by opening up branches or even introduce new bread or cakes. Why is this so? Because her exit strategy is to sell the shop when she is no longer able to run it anymore. An excerpt from Entrepreneur.com probably describes what my step mom is doing with her bakery, “a money in the wallet is no longer a money in the business”. This is because my step mom is taking any profits from the bakery straight to her wallet, not intending to reinvest them back to the business. On Entrepreneur.com article, this company is called a lifestyle company, because well… Its sole existence is to support the lifestyle of the owner.

Another good example of exit strategy or the lack of said thing is in the place where I worked for. So I work in a… Well, that would be telling isn’t it? Anyway, I once worked for one of the largest publishing company in my country as a journalist/reporter/editor/talk show host/desktop artist/superman. My boss has just been recently promoted to vice general manager for the division, but one peculiar thing is that, even after his promotion, there are nobody who inherently succeeds him. He is now a vice general manager for the division but still, every managerial aspects must go through him first. Essentially, the higher ups failed to implement exit strategy/succession planning for my boss, because he now essentially works in two place at once although his focus is still being vice general manager of the division. Because of it, work condition is chaotic at best, red tapes are getting longer and work paces become awfully slow.

Now, succession planning is also an integral part of exit strategy, because if not, then what happens in my workplace will be common in any workplace. Succession planning as an exit strategy on my step mom’s bakery could work if she wanted the shop to go 2nd generation. However, as my step brother is enjoying his stock broker related high lifestyle, and my father needs more assurance of my capability, the bakery would most likely in 95% confidence interval be sold to somebody.

There you go, exit strategy and why we all got to have it.

Sources and recommended readings:

Anatomy of a Business Plan by Linda Pinson

Ivan Hoffman’s exit strategy

Business link practical advice for business

Entrepreneur.com: Exit strategies for your business

More Dangerous Than Nuclear Bomb & Compound Interest… Perception!

Posted on by
4

Nuclear bombs decimate two of Japan’s city with casualties exceeding thousands of lifes, and compound interest… Well, let’s just say that because of it, lots of people lost their everything. The Romans once even ban compound interest in their law (although we know compound interest is very lively nowadays). But there is something more than those two combined, well, what else is there except for perception.

Now first, let’s talk about what is perception means literally. Because I don’t have my trusty library next to me, I will define perception with the help from the almighty internet itself. The meaning of perception varies a lot from sources to sources, I was even kind of shocked by how many meanings it contain. However… I noticed some similarity between them, therefore this is what I interpret about perception from the various sources (link at the end of the article). Perception is our disposition towards something related through our past experience… Now that’s a new definition of perception.

Now from the definition which I have filtered from various sources means that our judgment or perception will differs wildly because a person’s personal experience is up to God’s will and cannot be constructed as we hoped. This fact is actually quite new to me. I thought that perception is a response from a person directly when that situation arise. Then, about a week ago, I talk to my father about perception, he also added something new for me. In his book, he wrote about perception is a cumulative experience of a person PLUS our instinct… Instinct? What the hell… Then he describes that almost everybody are afraid of the dark although the intensity varies. Well, this is actually true because it is human nature to be afraid of the unknown, I think it goes back to our ancestors days.

So if I might summarize it all, perception is a person attitude towards a subject prior to their experience, knowledge and mood at the time they make a judgment. I put personal mood because sometimes, people makes decision based on feelings, just a bit personal experience there.

Now let’s get into the interesting part… The examples!

Now we have Suzuki and their SX4, Honda and their CR-V, Nissan and their Livina. In Indonesia, those respective cars delivery waiting period exceeds 3 months, and the question is what people perceives about the long delivery waiting period? To the majority of people, it means that all three cars are a hot item, but to the more wary people, it means that all three company fails to estimate the market absorption rate of their products. Me? I’m one of the wary people so I perceive Honda, Nissan and Suzuki has failed to estimate the market absorption rate of CR-V, Livina and SX-4. One would argue that the company could not do anything about it because their main headquarter established a fixed quota… Well, global warming is a natural cause anyway (sarcasm warning).

Then how about J.Co and Krispy Kreme strategy here in Indonesia? They play perception game quite well if I bold enough to speak. Well, this is my blog, I can write anything anyway… One peculiar thing I noticed about those spritely donut shops are how their cashier counter and queue line is set up. Most often than not, it revolves around one single line with two cashier waiting at the end of the line. This set up will always make a long queue line even when the customer load (people coming) is just medium to high. I consider this as a stupid management, but there are two advantage of doing this. One is there are more seating space because the queueing line is just a single file, and two, people will perceive that J.Co and Krispy Kreme products are so good even people willing to wait in long line just to purchase it. There you go… Perception…. Me? Again, as my personal experience are a bit bitter, I consider it as a hassle. I demand swift service, I want to go in and out as fast as possible, so I just consider J.Co and Krispy Kreme queue strategy as lacking management wise. However, us we are Asians who are typically does not want to be left out of the “loop” will consider this queueing line as something that is “hip” and we as people must follow that trend. Because we perceive that if people stand that long for just an over the top sugary treat or whatever it is must be extremely good… Me? I don’t like queue lines, when I buy donuts I bought Dunkin Donuts or Krispy Kreme, just because they have shorter queue line than J.Co.

So there you go, perception. I can go on and on about the examples of perception, but it is a little bit of a moot point because there are just too many examples out there already.

Until then, XOXO… (I’ve been watching too much Gossip Girl)

The Sources:

American Marketing Association definition of perception
International Federation of Library Associations and Institutions definition of perception
Canadian Food Inspection Agency definition of perception

Honda Head Honcho: Hybrid War Is Beginning, Civic Hybrid Was A Mistake

Posted on by
3

Well, finally the head honcho at Honda Japan has declared an all out hybrid war and stating that Civic Hybrid was a mistake. Starting 2009, Honda will release an all new dedicated hybrid car like Toyota Prius, no longer the hybrid car is based off an existing car.

This actually a long awaited news personally for me… For the longest time I feel that Honda is making a mistake with introducing Civic Hybrid. Toyota Prius as a dedicated hybrid car is instantaneously recognizable as a hybrid car, unlike the “hybrid in disguise” of Civic Hybrid. From marketing point of view, Prius drivers will get a direct recognition of being “environmentally conscious” because the car looks different, and thus people can directly associate it with hybrid. The Civic Hybrid on the other hand… Looks like a Civic, a car that is commonly associated as… Common.

Here are some screenshots of the an existing mule of the supposedly dedicated hybrid.

global hybrid face

global hybrid back

As you can see, Honda’s commitment to introduce a dedicated hybrid is in full steam. Above are pictures of a frankensteined Honda Fit front end on Honda Airwave chassis taken sometimes mid 2007, supposedly tested using the all new hybrid engine. Pictures are taken from… Motor Trend…

Honda also introduced CR-Z, a concept car at 40th Tokyo Motor Show. The car will be gas-electric hybrid, and aimed at performance oriented market… It has the looks, but the gas-electric engine will be something less desired from performance point of view.

Honda CR-Z
Honda supposedly dead serious about the hybrid war. In 2009 the car that is being tested with the frankensteined Fit/Airwave will be available worldwide according to Honda CEO year end speech of 2006, and the car will be cheaper than the current Civic Hybrid. The CR-Z however remains a mystery regarding of its mass production date although Takeo Fukui has mentioned that the car is on its way to production. Probably Honda will deliver a one-two punch by delivering two hybrids at the same time in 2009. The Prius fighter and the CR-Z.

The Prius Fighter, supposedly sized bigger than the Fit but smaller than the Civic will be priced accordingly… Someway between the Fit and the Civic. In America, Civic Hybrid is US$22.000ish, and the new hybrid car supposed to be less than that.

Sources:
Edited… Fixed some release schedule error, I was so sleepy when typing the entry.

Proton Vs Indonesia: Between Dreams and Reality

Posted on by
Reply

Proton as one of SE Asia own automotive marque is regarded as one of the most successful brand in the industry. As a SE Asia bigger company, it stretches its sales network to Europe, Middle East, Australia, New Zealand, Singapore, China, many other countries and recently Indonesia. Even though many late comers did not enjoy high growth or sales immediately, Proton sales in Indonesia is awfully lacking.

Indonesians are well known for their impulsive buying habit and have tendency to become super early adopter. Many China made bikes, cars, products which had bad quality being bought as soon as they come up, and the reason why because they are cheap. Sure in the end the quality problem rears its ugly head and people started ditching them. However, Proton did not enjoy that kind of “first step” as none even bought their products (well actually there are some). Until today since last year Proton opens up its business in Indonesia, I only saw 4 Protons on the road with one of them being towed… Probably had a problem, the driver seemed very unhappy. So why oh why…?

The reason Proton is very unsuccessful in Indonesia as far as I know is attributed to several obvious things. One being political, two being product portfolio, and three being the product styling.

Politically, Malaysia and Indonesia has a bit of tension regarding Indonesian labor being treated bad there. As deaths has been reported due to neglect and abuse in Malaysia. To make things worse, there are claims about Malaysia claiming Indonesia’s cultural products such as songs, indigenous dance and what not. I would not go into details because I think politics are stupids and most politician goes where a marketer and lawyers went when they are dead anyway.

On product portfolio front, Proton only made available cars which are sedans and supermini, which are cars most Indonesians dislike. Indonesian market dictates that a car must be:

  1. Cheap.
  2. Can sit minimum of 6 comfortably.
  3. Frugal
  4. Handsome… This one is subjective

So Proton current product portfolio only consists of two sedans, one hatch coupe, and one supermini hatch. They certainly could not seat 6, the price range is weird, their looks are… Somewhat unique, and frugality is unproven. Proton’s product price range is unique in a connotative way. Proton Savvy as a supermini is aggressively priced at Rp. 107 million, that is quite right, considering it is automatic model, the Gen-2 sedan hatch is also attractively priced at Rp. 146 million, so does the Waja sedan at Rp 168 million (all A/T models). However, the Satria Neo, which is a 2 door hatch coupe is priced at Rp. 190 million, quite expensive for a late comer considering at that price you can get the more popular Honda City VTEC A/T. So price is okay, one star product with three cash cow is not bad at all.

Then there is the look… Frankly speaking personally, aside from Proton Savvy, all of Proton’s offering is… Different… In a negative way. The Savvy is different in a unique way, it looks very European. The unique side profile, the center exhaust, and every line puts me head over heel. If I have excess money, then I will buy this car, but since I do not have any, then it will have to suffice I am writing good impression of the car 🙂 Do you know that the Savvy has engine and transmission lifted directly from Renault Clio? Yup, the D4F engine and Quickshift 4 (or is it 5?) can be found powering the Savvy. Some say the Savvy itself is based on the Clio, but I could not found definitive info on this. Suffice to say, the engine and transmission itself is worthy to be called awesome, as this means that Savvy is a true European car. There is a popular culture here in Indonesia that if you cannot afford Mini Cooper, than Suzuki Swift is the next best thing… WHOA! The Swift might have the look, but the Savvy is the truer representation of European technology (because it actually is). Interior wise it is also quite good, considering it is a Rp 107 million car.

Other Proton cars… Err… The Waja looks like small VW Passat, a bad impersonation that is. The Gen-2 rear end is good, I like it, but the overall roundness does not suit the front end of the car, which happens by the way has smallish headlights. Proton Satria Neo profile also look like it belongs to the 90s. Overall, aside from the Savvy, all Proton cars looks outdated to me.

So why Proton is unsuccessful in Indonesia? Aside from political problems, Proton did not do the number one mantra in the business world, they did not do enough marketing effort. Marketing effort to change the perception of Proton when it was just taxi fleet so many years ago. The problem is, Proton Indonesia needs to get rid of its taxi fleet image that has been perceived for so many years. Mind you, when Proton (Saga) was used as taxis, it is not a good taxi, the ride was rough, and the engine noise was awful. Sure time changes everything, but perception is one thing that time could not easily change.

So Proton needs to change or rather reinvent their marketing strategy. For sure the existing campaign is less than effective, and they can follow what Suzuki, Toyota and Honda had done in the past to introduce youth oriented marketing and approach. At least the Savvy is quite good, Proton could abuse the European connection because people are sucker for International exposure.

One more thing I like about the Savvy is that it looks very different than any other car out there. Perfect to be targeted to those who wanted to be different.

Accord 2008 Global Image Comparison

Posted on by
2

I might have been too harsh for my preview of the 2008 Honda Accord Asia version. The thing is that, Toyota as Honda main competitor tried very hard to differentiate products where different aesthetic taste is appreciated. Western stereotypes and Eastern stereotypes are very different like cats and dogs, especially when appreciating something visually. Simple and utilitarian are a perfect combination for Westerners while Easterners prefers “the blings”.

Toyota decided to change the face of Camry for American and Eastern market, creating an almost altogether different car (visually). You guys can check it out with the image below…

accord us front

Accord Asia front

Can you guess which Accord is for Asian and American market? (hint:you can’t, it’s the same)

Accord Asia Back

Accord America Back

Can you guess which Accord is for Asian and American market? (hint:you can, now it’s a bit different)

Now let’s take a look at US and Asian Toyota Camry…

Asian Camry

US Camry

Asian Camry (above) and US Camry (below)

As you guys can see, how starkingly different the US and Asian Camry are, while the Accord is just that… The same. As US market is utilitarian, they mostly didn’t care about the exclusion of projector headlight on the Accord, while the US Camry has them. This is once again, only a cosmetic as it is the bulb that is more important than the shape of the headlight. However, Asian market whores about silly cosmetics, and Accord doesn’t have it.

Management wise, Honda did the right thing. It’s cost saving measure to the highest degree, after all, what we need is basic transportation right? Wrong… Marketing wise it’s not the right thing to do. In marketing we have what we call customer focus, where one shaped a product based on what is the market demand. However, Honda has this penchant notion that Honda users are glad being shoved on what they need not what they want.

Truth be told, even though I’m rambling how the Accord looks, magazines and people love the new Accord. In America, the new Accord gains first place in many mid sedan comparisons (cars.com, edmunds.com, wheels.ca). Even though one publication rates the Accord third, at least three other publication rates the Accord at first.

So there you go, visually I loathe at the new Accord, but my friends told me… When you are sitting/driving in the new Accord you won’t see what’s on the outside, you drive the car, you enjoy the seating, you feel the raw power of the engine and bathe in the luxurious and cozy interior. They might be right… I am to cynical about how it looks, I forgot what makes a Honda a Honda… A sensible car. Because in the end, I guess it’s not how you look, but it’s what you have inside, that makes you as a person, that also applied to a car I guess.

(I’m watching 12 days of Christmas eve at Hallmark, and I guess it softens this bitter heart a bit)

Images are taken from Temple Of Vtec, Toyota Indonesia website, Honda Thailand website, and Edmunds.com, cropped to fit.

Accord finishes first at Edmunds comparison

Cars.com Accord comparison

Wheels Accord car of the year candidate

Franchising The Final Frontier: Part Dos! (Warning: Long Read)

Posted on by
3

Now, let’s continue my entry about franchising. Be warned though, this is a long read… Get some chips and dips, because I believe this will be interesting.

The last time I blabber about franchising, I talk about problematic brands that tried to extend its wing but seemingly didn’t have the strength to flap it out. Es Teler 77 probably a small example from a good pool out there, but it is good enough to illustrate. Let’s take a recap, this is weekend anyway where I usually wrap things up in weekend roulade.

Es Teler 77 is what I call a geographic resource centric business, meaning that it can’t operate at 100% efficiency outside the boundaries or places that it needs its resource to operate. Es Teler 77 needs ripe-fresh-and ready tropical fruits that can only be found… D’oh, in tropical countries. Opening a branch or selling a franchise on non tropical countries means that it has to deal with the hassle of exporting and importing fresh produces which in itself is a hassle. Creating Es Teler 77 signature product is not quite the easiest thing in the world. It’s like making Sushi, you have to select the best ingredient out there, ingredients which are best taken directly and used immediately from mother earth.

There’s also the problem of habit of eating when introducing Es Teler 77 signature product outside tropical countries. It’s not a dessert, it’s heavier, it’s not condiment, it’s something more, so what is it? Well for sure on four seasoned countries it can only be eaten on summer or at least best to, so there goes 9 months of potential revenue. What about culture? Here in Indonesia people love impulse buying, especially snacks. Almost anywhere in Indonesia you can find small stalls which sells snacks from simple fried cassava/banana/tofu/chicken, to traditional snacks. Mind you that these are not light snacks but can be considered as light meal. Now what countries have that kind of eating habit? Not much eh?

Speaking of habit of eating, let’s continue on to our second example, Krispy Kreme…

Donut’s as we know is an American thing, coffee and donuts, just like the cops on those movies always took in the morning or when they are in break. For years donuts are considered as snacks in Indonesia, made not so popular by Dunkin Donuts, the first Indonesian franchised store which sells donuts. Then suddenly, two years ago J.co, a locally owned donut retailers opened up its business and BOOM! Donuts are on its way to stardom baby! Donuts are now hip and a cool thing, far from so so image Dunkin Donuts has created for years. Indonesians love new things, they will always took that 1st chance to try anything new. In marketing term you can say that Indonesians are super early adopters. Sell anything that is new here and people will buy it, seriously! Nokia E90? We got it, there’s even engineering sample sold on a local mega store. Lexus? Seen it driven here and there, even though they are ridiculously overpriced (Lexus IS250 is more expensive than Mercedes E260, and Mercedes has better image and recognition here). Chinese cars? There’s few on the road, Chinese motorcycle, ditto.

Yes Indonesians are super early adopters, but they also put emphasize on satisfaction and expectation. When a product is bad, most often than not the product will be literally shunned by the community. After all we are talking about Easterners stereotype where word of mouth are more believable than advertising or promotion. Chinese motorcycle for example, about 4 years ago it’s super cheap and people (at first) flock on to it, anywhere it’s Chinese motorcycle for a while. However, just like flash flood, it’s over instantly (in this case less than half a year), as cheap also equals cheap quality and everywhere Chinese branded motorcycle dying on the roads, on the workshop, everywhere. 4 years later, only a handful of people bought Chinese branded motorcycle, and that even after extensive test driving and manually selecting the bike before purchasing.

Now let’s back to Krispy Kreme stuff. 1 year after J.co opens up its business, it seems that everything is fine and dandy, people still queue long lines to purchase even half a dozen of donuts. Now does this means J.co’s donuts are a success, you bet it is. However, hot on the tail of J.co is PT. Mitra Adi Perkasa, Indonesian Krispy Kreme franchiser who wants a piece of the donut so to speak (pardon the pun). There are rumors that J.co is using Krispy Kreme recipe therefore it is expected that with brand name and originality claim, it is expected that Krispy Kreme will do better than J.co.

However, this is my critics lie upon Mitra Adi Perkasa, do they actually did a research about the eating habit of Indonesians rather than just following in J.co’s successful steps? Do they did a research that Indonesians like to eat donuts? This actually a classic condition where one fails to oversee the immediate surrounding or the market condition. Ya Kun Kaya, a Singaporean owned breakfast stall was a hit in Singapore even until today. When you visit Singapore, be sure to eat breakfast at one, the combination of milked tea and kaya sandwich are top notch. However here in Indonesia Ya Kun Kaya is positioned as a lavish upscale snack place in shopping complexes which opens at noon… WTF?? For years I saw mostly empty chairs and I’m just sad how a wonderful product was put out of its intended place. This is because Indonesians didn’t eat breakfast outside of their house, it’s just habit, custom, culture or whatever you might called it. Indonesians are communal individuals, they eat breakfast with the family in the morning, and if possible eat dinner together with the family. How about the singles? Well, they eat alone, but still at the comfort of home. Indonesia’s capital is not the friendliest place to travel you know, with traffic jams 24/7, there is not enough time to go anywhere to eat.

Does Mitra Adi Perkasa knows about donuts are not indigenous to the locals? I don’t know. Now let’s continue to the horror story that haunted Indonesia’s Krispy Kreme franchiser until today.

If you wanted to know how Krispy Kreme fair, please check my previous post about Krispy Kreme. I suspect that Mitra Adi Perkasa relies solely on J.co’s success and that Krispy Kreme is an international brand that they expect the franchise will be successful. However that’s just wrong. In my days of observing Krispy Kreme is that they are successful enough in the first months, queue line as long as J.co’s but it only lasts for a brief time. Now Krispy Kreme is like Dunkin Donuts, barren, devoid of customers except for the occasional people lured by the buy a dozen get two dozen more promo. So how can J.co survived but Krispy Kreme couldn’t? The answer is deceptively, and eerily simple.

While Mitra Adi Perkasa seemingly rely on promotion and Krispy Kreme brand, J.co actively pursue recognition in the form of pure marketing campaign. I’ve talked about habit of eating, where as donuts are not staple food or even snacks for Indonesians, so what does J.co did? They did a roadshow, taking donuts and coffee to universities and literally educate students to integrate donuts and coffee into their life. Now who wouldn’t target young aspiring future users these days? This conforms to Adam Morgan’s book, Eating The Big Fish (1999). He wrote about how second liner brands could outperform the number one brand. In this case, J.co used the classic approach of education, educating how to properly eat donuts and the likes. Who knows that glazed donuts are overly sweet because it is meant to be dipped into the hot coffee to soften the sweetness thus making the coffee sweeter along the way… I do, but most Indonesian’s don’t.

For J.co and Krispy Kreme, everything is already written in stone, as J.co aggressive marketing strategy seemingly defeat Krispy Kreme costly promotion. The defeat of Krispy Kreme lies not on its unattractive promotion, it is attractive indeed, you get triple for the amount you paid, but for what? Those who got “touched” by J.co will surely know how to eat and when to eat it properly. But those who eat Krispy Kreme just ate it because they bought it. Now it’s not just about Krispy Kreme lack of creative marketing effort, but also on its lack of improvement of the product they sell.

I’ve also noted on the last post about how Krispy Kreme franchise characteristic is its own down fall against creative competitors. It cannot changed its recipe because it’s a franchise company. Robert M. Grant wrote on his book (Contemporary Strategy Analysis, 2006) about evolutionary theory and organizational change. He mentions about organizational willingness to change and adapt to their surroundings if they see it fit. The lack of creativity out of Krispy Kreme might not be the fault of their franchisers, but attributed also to Krispy Kreme headquarter to not let local franchisers to introduce new products in its lineup.

I see Krispy Kreme Indonesia is dying, unless Mitra Adi Perkasa could introduce the same marketing concept as J.co, they might succeed, but for this time being, I’ll be watching from a distance, the slow death of Krispy Kreme Indonesia.

Do You Want To Start Your Own Business? Read On…

Posted on by
2

Starting their own business is a dream for almost every person in this world. You work for yourself, you don’t have the nagging boss behind you, you set your own goal, and if you strike it good, you will get lots of money. Speaking of money, my father and I had a little conversation about setting up a business. We talk about how my friend wants to open up an upscale escort/transportation business with little start up capital.

Now here are some problems we encountered during the conversation. With a small start up capital, does the bulk of the resource goes to the core of the business? And if it isn’t does the core of the business is allowed to expand later in the stages of its life cycle?

Now we know about product life cycle, where a product is devised, introduced, then it matured and then it finally falters. With a small start up capital, will the product/service being introduced has its core business 100% developed? To put it simply, my friend’s idea about starting up the escort/transportation business requires a hefty sum of money. However, because he didn’t have enough start up capital (he does actually, but he didn’t want to put all his eggs in one basket) he wants to introduce the business concept incrementally. Personally I thought that this is a bad idea… And why is that?

Here is the thing, my family ran our own business, and what we learn through the years is that customers only remembers us for the smallest mistake or the slightest lack of feature from our product/service. Here in my country, we have a saying that goes like this (loosely translated to English): a drop of coffee on a glass of milk and you throw away the milk jug. It means that people will judge us for the smallest mistake we made, not how many good deed we had done.

Back to the business part, what that old saying means is that we have to establish the core of the business 100% instead of introducing an incremental increase for a period of time. My friend’s business proposal for example, the escort/transport will first use cheap vehicles that contains only the essence of the true core business, then down the line he will introduce the more expensive vehicle. Now the example seems a bit convoluted, let’s talk about automotive service workshop.

Inside a workshop, we usually finds oil changing service, tire changing/balancing/spooring, engine maintenance, engine repairing, and the likes. How about if we open up an automotive service workshop providing only engine maintenance and engine repairing, but we put up general service workshop sign in front of the shop. People off course will be upset because your core business which is general repair is not fulfilled. If you has only limited start up capital, do make sure that your core business is intact, up and running. Use less man power, provides no-frill waiting room, whatever you do, don’t do the other way around. The waiting room on a service workshop acts as a support for the core business, and that should be the least thought out aspect of opening up a business.

Now people sometimes confuse what is the core business and what is the supporting factor. This is actually basic marketing once again, one of the 4 Ps, product. According to value based management.net, a product must have functionality, quality, appearance, packaging, brand, service, support, and warranty. When I helped a lecturer wrote a book for his professorship he divides product into three separate category, the core, the secondary and tertiary. The core is what defines the product itself, its function. The secondary defines the name, the specific category it places and the tertiary defines the supporting factor of the product such as warranty, after sales service and the likes.

Well, enough for the product description, I will write a separate article for that one. Back on topic, if you open up a business, you need to make sure that the core business is intact and fully running. Do not sell a broom without the whisk that’s for sure, and thus when you open up your business, always starts with your core business intact from introduction phase up to maturity in its life cycle.