Tag Archives: Management

More Dangerous Than Nuclear Bomb & Compound Interest… Perception!

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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

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

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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…

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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.

Suzuki Indonesia… A Not So Champion Of Rational Thinkers

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Okay, so I wrote back then about how Suzuki is the champion of rational thinkers. Now people might expect that I’m changing my mind about the matter because I don’t… However, I have this irk to settle about Suzuki Indonesia and why they kill a perfect little car called the Swift.

Suzuki products are widely known for its class leading equipments. For example here in Indonesia, the Swift WAS a product of choice for cars under US$16K with airbag+ABS+EBD+onboard computer+audio controller on steering wheel. Other cars barely reach Suzuki Swift’s equipments even as an option. The trend continues with SX-4 here in Indonesia, at just roughly US$17K, you get all of the above but with a bigger chassis and everything. But recently, Suzuki chopped off the options on Swift to the bare minimum. The car now has nothing but priced at mind boggling US$14K, down around US$3K with the negation of the options.

Now it is understandable to make the Swift as bare as it is to reduce price. But Suzuki Indonesia does not offer Swift with the extra options anymore, just the bare minimum… Now what the hell with that? From what I heard and read at many automotive forums and mailing list, Suzuki does this to push sales because the car is not selling well compared to Honda Jazz and Toyota Yaris. D’oh! Off course it is, Swift is a small car compared to those two. It is not a family car per se, it is more of a coupe with extra doors at the back. Rather than just pushing for bigger sales, Suzuki can use the Swift as a stepping stones for people who wants to buy bigger Suzuki cars in the future. After all, what sellers wants from their customer is their retainership and loyalty.

Instead, Suzuki Indonesia degrade the class of Swift into that of a cheap entry level car and those who wants to buy the full optioned Suzuki cars must buy Grand Vitara or SX-4. Now where’s the logic on that? The exclusion of models with full factory options are caused by Suzuki decision to localized the production of Swift, because before the Swift was exclusively imported from Japan. Now with the localization of the Swift, Suzuki deletes the option altogether. Suzuki can still import Swift with full options, even for just a handfull because there will always be a market for high end products. Is Suzuki worried that Swift will overlap SX-4 sales? I don’t think so, because the SX-4 is already a bigger car, even though it is derived from Swift chassis.

One thing I can notice about Suzuki Indonesia decision is just because they want to save as much money as possible. By making all Swift as one standard model, they can achieve economy of scale far easier and they don’t have to incur inventory cost by keeping a separate line of cars. The thing is importing a car are full of hassle, first there’s the administration fiasco between Suzuki Indonesia and Suzuki Japan, that’s for sure. Then there’s the hazard of importing a car from far away land physically (well, you won’t know what happened to the car on its way here), not to mention the time and cost it took to ship cars from overseas.

I wholeheartedly understand why Suzuki want to “degrade” the caste of Swift. After all by doing this Suzuki now has a complete line of products ranging from the affordable entry level Karimun Estillo, to the not so expensive neutered Swift, to the rightly priced all terrain SX-4, the coming soon SX-4 sedan, and to the top of the line Grand Vitara. All products ranging from US$10K to US$25K.

Now my decision of buying a Swift has been decimated to the lot… I do feel sad because the car was the best choice for a full optioned car under the price of US$15K. It seems the curse of Honda rears its head again, probably I will buy the all new Honda Fit/Jazz, a not so bad model. I wanted to buy SX-4 though but kind of afraid Suzuki Indonesia is going to pull the same trick with neutering the SX-4 as it did with the Swift. If I bought the fully optioned Swift back then, probably I will feel alienated by Suzuki Indonesia decision to neuter all existing Swift. Because after all, how can I brag and persuade people to use the Swift if the existing Swift is not exactly the same product I used? Don’t start about the exclusion of Airbag and ABS doesn’t bring about different driving experience, it does, wait until you gotten into a situation when those things safe your life… I had.