How well does our system work? You can use the numerical index to check our blogs from the last big recession.
Much of the world suffered a severe recession from 2008 to 2011. During that time, we wrote more than 250 blogs using publicly available information and our Strategystreet system to project what would happen in various companies and industries who were living in those hostile environments. In 2022, we began to update each of these blogs to see what later took place and to check the quality of our conclusions. To date, we have completed the first 175 of our original blogs. You can use these updated blogs to see how well the Strategystreet system works.
Some analysts have estimated that the domestic airline industry needs to reduce its capacity by 20% in order to become profitable. This estimate sounds very high to me, as I’m sure it would to most of the flying public. If you miss a flight today, or if one should happen to be canceled on you, you are not necessarily going to get to your destination today. Airlines are flying with a high percentage of their seats filled. But the airline industry seems to be taking this advice to heart. All of the legacy airlines have…
Read MoreHow and where you raise prices is an important question. The legacy airlines are doing it badly. The legacy airlines are nickel and diming customers by charging fees for checked bags, and so forth. The reaction of passengers is to view these changes as petty nuisances. Many will try to avoid them by simply bringing even more chattel on board. This additional demand for overhead space makes travel even more uncomfortable for the Heart of the Market business traveler. (See the Perspective “Cutting the Right Cost” in StrategyStreet.com/Tools/Perspectives) These valuable customers will have to put…
Read MoreI am surprised and confused by the airline industry today. All the legacy airlines have announced substantial capacity reductions, in some cases by more than 20% of capacity. For example, United Airlines plans to ground 100 of its 460 planes in the foreseeable future. Some smaller cities will lose airline service completely. The legacies’ hub and spoke system is about to have fewer spokes. Here is what confuses me. These capacity reductions come before the airlines try a last ditch effort to simply raise the basic fares. The airlines are grounding planes that can not…
Read MoreThe RV market is in hostility. A hostile market sees low returns on investment, even for the industry leaders. One of the largest players in the market, Fleetwood Enterprises, has seen five straight years of losses. Another leader, Winnebago Industries, while still profitable, has seen four consecutive years of falling sales. This hostility has been caused by a rapid and deep fall-off in demand. Once an industry enters hostility, it will usually witness a “flight to quality” where customers migrate away from weaker competitors toward those offering a better value proposition. (See the Perspective “Success…
Read MoreThis entry is the last in our series of four entries on the HP/ED deal. The Setting Hewlett Packard has proposed a take-over of EDS, in order to improve its services, revenues and profits. EDS is #2 to IBM in the computer services industry. Hewlett Packard is #5. The combined company, at $38 billion in revenues, would have only a 5% share of the market. IBM has $54 billion in services revenues and 7% market share. The reaction in the stock market has been mixed. Hewlett Packard stockholders don’t like it. Its share price fell.…
Read MoreLow-end competitors don’t think like industry Standard Leaders. As a result, they often blow big holes in the leader’s plans. For twenty-five years, from the early 70s until the late 90s, the color television manufacturing market was one of the worst places on Earth to compete. Those companies who did survive, and there weren’t many, became hard-bitten competitors with no illusions about the inevitability of success of even the largest companies. The two largest U.S. competitors, RCA and Zenith, are now nearly-forgotten names. GE was another titan victim of the inexorable pressure of intense price-based…
Read MoreThe automobile insurance market has seen price declines since 2006. During this declining-price period, Allstate has done well, gaining market share by offering innovative pricing. The company instituted a program called “Your Choice Auto”. It launched this program in 2005, just before industry prices started to fall. This Your Choice program offers drivers a specific benefit in return for a slight premium in the cost of their insurance policies. One option in Your Choice offers a 5% rebate on premiums paid by drivers who remain accident-free during the term of the insurance. A second option…
Read MoreAfter thirty years of unmitigated success in the airline industry, the smaller discount airlines are starting to fall by the wayside. Aloha, ATA and Skybus recently shut down. Others are likely to follow. Even Southwest is feeling the pressure. None of these discounters is able to fully recover the burgeoning cost of fuel. What does this really mean? It means that the legacy carriers have finally reached the point where their cost structure is low enough that the prices they charge are very difficult for the discounters to get a substantial discount against. Typically, a…
Read MoreRemember the grade school experience when you learned of a party to which you did not receive an invitation? For most of us, that was a hurtful experience. But the failure to receive an invitation can cost real money in the business world, both now and in the future. In our research, we have found that there are two sources of failure when a new piece of business becomes available. The first is an invitation failure. A company did not get invited to bid. The second is evaluation failure. A company is invited to bid…
Read MoreThere were two items of interest in recent press reports. Both suggest something about our fundamental beliefs in our economic system. The first instance occurred in California. The State Insurance Commissioner asked Allstate to reduce its automobile rates in the state by nearly 16%. Allstate insures about 10% of California automobiles. The owners of these automobiles will save about $124 per car. The reductions came because the state concluded that the companies were charging too much for their services. In a separate event, the State of Arkansas ordered sixty companies who offer payday-lending services to…
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