The Isolated Entrepreneur

In this week’s Get to the Point newsletter, there is a great case study of why a person would drive approximately an hour to a Mac store rather than going to the local Apple store.

In the automotive industry, you see it quite often, competitors reacting to popular vehicle designs and features by copying them - after the fact.

If you didn’t look for the Chevrolet symbol, you might think someone driving a Chevrolet HHR is sitting in the better known Chrysler PT Cruiser.  Do you think investing the time and money was worth it for Chevrolet?  Did it increase GM’s market share or draw new customers to Chevrolet?  Not really - unless you count the GM and contractor employees who get GM discounts.

Is Copying a Competitor Ever Effective?

In some cases it makes sense to invest the time and cost in copying features your competitor created.

Take the minivan industry.  Most minivan customers expect a minivan these days to have a sliding door on both sides of the vehicle.  If the automotive manufacturers did not copy this feature, they would actually have lost market share.

This trend is repeating itself again.  Every year more minivan models have a feature where the third (and in some the second) row of seats can be folded down so that it makes a flat floor for cargo.  See Chrysler Town and Country Stow’nGo Seating.

Copying a competitor is only effective when prospective customers come to expect the new features.

It is Best to Stay Ahead of Your Competitors

Awaiting FCC approval, Apple is on the verge of releasing the Apple iPhone.  Many blogs and news sources rave about the iPhone being innovative and expect it to do as well as the iPod.

What do you think Palm (manufacturer of the Treo SmartPhones) is doing?  I can tell you they are not sitting still.  They just announced that they are getting a $325 million cash infusion from Elevation Partners and have added players such as Jon Rubinstein (former head of the iPod division at Apple) to their management team.

Apple’s iPhone is not the first competitor Palm has had to deal with.  Current Treo SmartPhone competitors include Motorola (Moto Q smartphone) and Canada’s Research In Motion (Blackberry).  Apple poses a new threat.  With the success of their iPod product, Apple has a large source of potential customers for the iPhone.

Palm’s new blood and money will hopefully drive the innovation needed to stay ahead of the industry.  The company is already working hard on rewriting their Palm operating system to compete.

Source: “Palm’s New Dough - and New Blood.” BusinessWeek, June 5, 2007.

What is Your Competitive Advantage

For small and micro businesses, your competitive advantage is to constantly keep up-to-date on the latest developments in your industry and to consistently review and update your business/market plan.  The best sources of information are trade shows and magazines and customer/employee feedback.  Where do you think the idea to have doors on both sides of the minivan came from?

Your competitive advantage is not to engage in price wars, but to focus on the factors that make your customers rave about you.

Resources:

• “Give Your Business A Competitive Edge“, NASE Successful Skills Workshop.
• “Spot the Next Hot Trend“, Mark Landsbaum, NASE Successful Skills Workshop.
• “Escape from Brand X: How to Build a Brand for Your Business“, Mary C. Weaver, NASE Successful Skills Workshop.
• “Starting Your Business - Conducting a Marketing Analysis“, SCORE Online Training Module.
• “Grow Your Business - Assess Your Current Status.” StartupNation.
• “Enhance Your Customer Experience.” Startupnation.com

It’s all over the papers.  Daimler is parting with 80.1% of Chrysler (automotive and financial arm) and it’s paying about $700 million for the splitoff to happen.

The new owners of Chrysler is an investment company called Cerberus Capital Management.  Cerberus owns Air Canada and a large part of GMAC (General Motors financial arm).

Chrysler, like other US auto firms, had an operating loss.  The hope is that the private equity firm - which will not have to answer to stockholders, will be able to make the drastic structural changes to make Chrysler profitable once more.

Source:

• NPR, “Q&A: Under the Hood of the Chrysler Deal“, Eric Werner, May 14, 2007.
• Business Week, “Daimler Gives Chrysler to Cerberus“, Gail Edmundson, May 14, 2007.
• Associated Press, “Cerberus-Chrysler, Labor Leaders to Meet“, May 15, 2007.
• NY Times, “In Deal, a Test for the U.A.W,” Micheline Maynard, May 15, 2007

Costcos is known for bringing you products at great prices, right? Did you know the other part of their strategy is to get you to buy products you don’t want once your in the door.

Just think of how products are placed in the store. The bulk items such as produce, meats, and bakery are placed at the back of the store. The pharmaceutical and dried goods are at the far-front.

You breeze by electronics, seasonal goods (furniture, toys, and summer items), clothing and books before you reach the items you came to the store for.

The result - you might walk out with a couple lilac bushes, a book and two t-shirts in addition to the bread, cereal, milk and meat you wanted to buy.