First week in SF starts tomorrow

This is Pilot's Row. Our apartment is just behind it, and not as aesthetically pleasing (see previous post).

as you walk in, look left...

Dining room with a look at Peter, roomie, in the kitchen

And now...they just delivered the California King.

First week on the job

They flew me to New York

First lobster

But it wasn't all lobster and neon lights...

The office where we spent almost every day of the week...

And now I'm back in SF...

more pics in the next post.

Personal Finance Institute

I would like to start an institute involved with personal finance. The institute would initially be a knowledge base for personal finance related topics. I hope to compile a set of documents on the subject, citing other well-known sources (admitting that I am not the ultimate expert). The institute would allow other members, provided they follow a set of bylaws or perhaps contribute to the content. The trouble, of course, is coming up with the name. So if you know anyone inspirational to you in the finance world, I'm open to suggestions! More to come.

How much does it cost to buy a golf course?

Well, if you want to know how much it costs, all you need to do is type the question into a Google search bar. Then a litany of websites show up where you can see how much a business costs. For instance, I really checked how much a golf course business costs. They range anywhere from a few hundred thousand to a quite a few million. A vending machine business sells from anywhere from $15,000 to $90,000 and even higher. These sites also tell the forecasted cash flow, and it just tells me that there is a lot of money to be made in the world! I think that these websites are cool.

Note to Hendron

My last post was a project I did for school a while ago. You should not count the project as part of the length. And you shouldn't count this post as one of my entries...unless you want to. But you should count my last post, because the first part analyzes the current CSCO stock.

My Old Valuation Project

So, I first got interested in valuation when I was in BM 401 (Corporate Finance) with Professor Couch two semesters ago. Since then I've had two internships where I did valuation and I've graded hundreds of analyst reports created by BM 401 students.

I'm publishing the report I did back in April of 2008, and it's interesting to see that I wasn't too far off with the stock price, however, my call to hold the stock might not have been good. Actually, I still think it's a hold, but the value today is $6 lower than it was when I did my project. At least I didn't suggest a strong buy.

I'm publishing it because it's interesting to see that I wasn't too far off with my sales and net income estimates. Additionally, my recommendation (HOLD) is exactly what S&P analysts are recommending right now. SO here it is in all its glory...

TELCOMMUNICATION EQUIPMENT INDUSTRY ANALYSIS
Telecommunication Equipment Industry Overview
In the last ten years, the telecommunication equipment has become a prominent industry in the technology sector. Innovation has been essential to this industry as companies seek to gain a competitive edge to provide consumers with the latest in voice, data, and video communication. Along with this however, is the weight of building an efficient infrastructure in anticipation of future demand. Facing competition from online communication, telecommunication equipment has sought to develop their product by switching from analog to digital and wireless devices. The five major players in this industry currently are Nokia (with 127.1 bil. in market capital), Qualcomm (with 64.9 bil. in market capital), Corning Incorporated (with 35.9 bil. in market capital), LM Ericsson (with 31.5 bil. in market capital), and The Direct TV Group (with 28.4 bil. in market capital).
The following factors account for the historical trends and expected future projections. Like most of the industries in the technology sector, telecommunication equipment has a trend of high growth compared to the rest of the market. The average industry returns for the last ten years is 21.7%. This is significant since the S&P 500 only had 2.1% returns for the same time period. A major factor for this growth is an increased demand for mobile devices and services. The Pew Internet & American Life Project recently released a study that show that Americans would find it harder to live without their cell phones than the internet, television, or land line phones. Consumers are demanding more features for their mobile devices, and this has put pressure on telecommunication to design hardware capable to meet this demand. The Wall Street Journal reports that telecom equipment manufacturers are meeting this demand by rolling out new cell phones that will integrate global positioning and voice information with talk and text systems. With equity betas ranging from 1.9 to 2.2, the telecommunication equipment industry has volatility comparable to e-commerce and entertainment. This volatility can, in part, be explained by the newness of the technology and concepts being produced. Although volatile, the outlook for this industry is bright due to cultural shifts causing people to rely on telecommunications equipment.
Financial Analysis of the Telecommunication Equipment Industry
A unique aspect of the telecommunication equipment industry is its comparatively low long-term debt to equity ratio. Out of the 32 industries in the technology sector, telecommunication equipment is the fourth smallest with a ratio of .19. This means that this industry relies heavily on its equity holders to finance new projects and operations. Low debt ratios are a sign that companies are growing and want to have more financial slack to finance new projects rather than being weighed down by debt interest payments. Other industries in the technology sector with comparable debt to equity are the Networking & Communication Devices and Personal Computers industries. As far as the P/E ratio and ROE, telecommunication equipment holds average values compared to the rest of the other industries in its sector. However, in the tech sector, this industry holds the fifth largest market cap with $360 bil. in assets. This value could most likely increase in the future as companies within the industry are merging with and acquiring other companies especially from the wireless communication industry, which holds $916 bil. in market cap.
In the last couple of years, companies in the telecommunication equipment industry have sought to add more depth to their products by merging or developing partnership with other firms. Two examples of this occurred in 2006 with the merger of Alcatel-Lucent and a joint venture between Nokia and Siemens. The mergers are the result of a young industry with many players consolidating to form key players and vie for market share. For example, the Alcatel-Lucent merger put the company ahead of LM Ericsson’s annual sales and gave the group an 18% market share.
FINANCIAL ANALYSIS OF CISCO
Overview of Cisco
Cisco Systems, Inc is a telecommunications equipment company that was established in 1984 by a husband and wife on the faculty of Stanford, Leonard Bosack and Sandra Lerner. They improved upon a multiple router protocol enabling compatibility with computers previously unable to use that functionality in networking. Today, Internet Protocol (IP) is the standard, so Cisco has had to shift its focus from multiple router protocol, and now provides a wide array of products and services including Ethernet switches, IP Telephony products including phones, routers, carrier and ATM switches, Storage Area Networks (SAN), remote access and gateways.
Cisco currently trades on the NASDAQ under the ticker symbol “CSCO” and currently trades around $23.96. A brief history of the stock’s progress over the last 10 years shows that CSCO was a victim of the dotcom boom. In the beginning of 1999 the stock traded at around $22.00, then rode the dotcom wave to a price of $79.37 before plummeting in mid 2000 to hit a low of $13.92 in the first quarter of 2001. CSCO has risen in price steadily in the long-term but still showcases volatility familiar to its industry as seen by the high and low over the last year (High: $34.24, Low: $21.77). The volatility in the past year is blamed on economic woes in the credit market that are hitting almost every industry. February news from Citi analysts upgraded CSCO to “buy” because the company had toned down its growth expectations to around 12-17%, lower than the industry average, historically around 21%. As it turns out, more telecom equipment companies are adjusting down their growth rates. A bright spot for Cisco, however, is that its innovation, a key factor in maintaining the competitive advantage in the telecom equipment industry, is winning out. Sales of Cisco’s Fastest Router have surged in the past 9 months and Cisco is blazing a new trail with its marketing campaign, offering business solutions for enterprises during NCAA tournament games. Cisco is also making the smart move to go green with its routers and switches, designing more energy efficient, environmentally friendly equipment.
Cisco competes against companies such as Motorola, Cisco Systems, LM Ericsson Telephone, Alcatel-Lucent, and Nortel Network. Cisco’s direct competitors include Alcatel-Lucent, Juniper Networks, and Nortel Networks. Of the three direct competitors, Cisco is by far the largest company with 61,535 employees compared to the next best, Nortel with 32,550 employees. Reported revenue for these companies is as follows: Cisco $37.68 billion, Alcatel-Lucent $28.04 billion, Juniper $2.84 billion, and Nortel $10.95 billion.
Growth over the past year has been somewhat volatile for each of these companies, with Cisco managing a 22.6% increase in sales growth, Juniper 23.1%, Nortel -4.1%, Alcatel-Lucent 4.2%. Growth is based on the success of business projects and Cisco has experienced growth most recently as a result of its goal to move into more aspects of the telecom industry, including its big push to provide IP telephony systems. As project manager for BYU’s Office of IT, I have seen Cisco’s resurgence over the past two years as a formidable opponent in telecom. Cisco has successfully gained BYU contracts for routers, switches, IP Telephony, Gateways, and other campus systems that I deal with on a daily basis. BYU has a new campus initiative called pervasive wireless that will supply all of campus with wireless Ethernet and Cisco is the main provider of wireless systems for BYU. These smart decisions to move into all arenas of telecom equipment are directly helping Cisco to increase its sales year over year.
Valuation of Cisco
Discount rates for Cisco
In valuing Cisco, I first went to the SEC website and downloaded the past five years of financial statements. I used these statements to find growth rates, ratios, trends in growth or ratios, and then made assumptions which I used to forecast the financial statements for the company for the next five years into 2012. In computing the WACC I used the return on the 5-year T-bill as the risk-free rate (2.49%) and contrary to our group’s initial observation of the return of the market (12% when valuing QCOM) I took an average of the past 5 years’ return on the S&P 500 and used that as my market return, 8%. I used Google’s equity beta of 1.59, which implies that the stock is a little more volatile than the market, which holds true for this telecom stock. One interesting note is that CSCO has yet to pay a dividend.
Including the firm’s debt ratio of 21% I was able to calculate the WACC for CSCO at 9.63%. Note that the WACC is very sensitive to its inputs, specifically the terminal value and the expected return on the market. The next section will explain growth rates and the DCF with a final recommendation on whether or not to hold CSCO stock.
Growth Rates and Cisco’s Stock Price
Using the estimated 5-year growth rate from MorningStar.com (13.05%), I estimate that Cisco’s sales will increase from $39,479 million in 2008 to $64,484 million in year five with a terminal value of $72,899. Growth thereafter was adjusted down after I learned about CSCO’s own actual downward growth adjustments. The rate I used was 6%, which is on the low end for the telecom industry (We used 8% with QCOM, I’m just a little more conservative and CSCO isn’t currently growing as fast as QCOM.).
Recall that the telecom industry is relatively young in the financial world and firms are constantly trying to grow by increasing market share through taking on big projects. Issuing equity is preferred to issuing debt because debt is “more expensive” to growth firms according to the pecking order theory. As a result, Cisco does not have a lot of debt, but I experimented with an assumption that debt would begin to grow in accordance to sales, and that by 2012 Cisco would have around 66% debt financing (as opposed to 41% in 2007). As the company increases its debt, the WACC will lower because of tax shields (5-year average tax rate I calculated at 26.75%) and the stock price should be higher.
In conclusion, Cisco’s forecasted financial statements are impressive and my estimate of the stock price at $20.16 is just a little lower than the market price of $23.96. I toned down the increases in Goodwill for the next 5 years (Goodwill has more than tripled since 2004!) and I also levered-up the company as one of my key assumptions. Based solely on the numbers, a “Sell” recommendation would be given, but I believe that Cisco is doing something unique with recent ad campaigns and the sale of new and innovative routers, switches and wireless communications systems. My recommendation is “Hold” on CSCO stock. I believe the price will hover around the $20-$25 dollar range until next year when this year’s sales are actually realized and new growth forecasts can be made after CSCO sees the fruits of this year’s advertising and innovative products.

Business Plan Competition: Final Event

I attended the Business Plan Competition Final Event today in the JSB auditorium from 2pm-4pm as part of my 1 credit class. I was very impressed by the amount of work that has gone into these business plans. There is absolutely no way that I could compete on the same level as them. I have not got the network or the product that they do.

For instance, the first team to present was Terra Nova. Their business plan involves a sludge-eating microbe chain that is used for reclaiming contaminated soil. For one, I didn’t even know of this business problem. Secondly, I didn’t know that microbes do the work. And third, these guys have figured out how to introduce these microbes in the most effective order, in effect they’ve alphabetized them and made a biological game of Pac-Man. Now Pac-Man, I can play Pac-Man, but this business idea, no way.

The second team came up with the next big waterproofer, called Hydrapel. It’s better than Teflon or Goretex because the agent they use is applied in a space age vacuum chamber and the product covalently bonds with the fibers at the molecular level. I don’t even have to explain why I can’t do that, I barely understand it.

The third team did a business idea that I can probably work with. KT Tape sells kinesiology tape like Kerrie Walsh wore in the Olympics. In fact, Kerrie endorses their product. So I’m staying with them to this point, but then they start talking about how they are already on track to do sales of $3 million this year and have their product in 30,000 locations. That is incredible! Of course, this isn’t their first startup and they are just utilizing their existing network from their previous venture, so it’s all in a day’s work for them.

I think you get the point. This isn’t a business plan competition. This is a second and third round of funding opportunity for already successful and profitable businesses. I was blown away with what these people accomplished, but I rest assured knowing that I’m not where they are right now because when they were my age, they were right where I am now. Kudos to them! And maybe me in a few years!!!

Love Swing Hate

A marketing professor gave me his model for marketing. He called it the "Love Swing Hate" model. Picture if you will, a powerpoint slide with a horizontal line with arrows pointing away from it at each end. On one end is your Love Group. They love your product and won't ever consider buying anything else. On the other end is the Hate Group. They will never buy your product. This professor claims that the middle is the Swing Group. They are the ones you should focus on. They might still buy your product.

I'm not naming his name because I do not think this is a novel model. It's fairly common sense. But I bring it up because it is common sense and all businesses need to consider basic marketing strategy for their business. I'm surprised with the approach that a lot of businesses make, advertising in arenas that are not particular to their clientel, or not advertising at all.

If I were to start a business, I would work my butt off to make it work, and networking, marketing, and everything in between would have to be part of the strategy. I guess I'm just finally admitting that marketing is important and is an acceptable major. Shh..don't tell anyone.

Bundling Cable, Phone, and Internet Services

Is bundling cable, phone, and internet services a good strategy for cable companies? Not in a recession. My grandpa just got rid of his bundled packages and saved over $400 in the past three months. WOW! That's a lot of revenue that those companies are losing when a customer quits.

And only offering good deals to bundle package purchasers discriminates against other customers who will go elsewhere or do without if they fee they aren't getting the best deal.

I believe a better strategy would be to offer one service for a discount to everyone, say cable. Then provide cable customers (once you've got 'em) with special "members only" deals that will give them better deals on internet and phone than non-members. Then you're making incremental sales and it's easier to sell someone 1 $30 subscription at a time than to sell them 1 $90 bundle. The bundle price just flips a switch inside people's heads that is an automatic "no." Poison by degrees.

Car Wash on 8th update

Dear Strategy Journal...Chandler and I worked a pretty good amount in making a plan to attack the B2B market around The Car Wash on 8th. It turned out to be a flyer that has a picture of the place, the address, and most importantly a focus on a few key advertising issues. We are really trying to market the ExpressKey to business. The Black ExpressKey is a credit key that will roll over all your credits for the whole month and then your company will receive an invoice at the end of the month. By having this easy key, the businesses won't have to worry about each purchase, but it will become "a cost of doing business" instead. The flyer seems to be working after our initial test runs, although there was one ignorant person who didn't want to listen to us, even though we were giving him a free car wash for hearing us out for 20 seconds.

Nina's Pizza

Everybody loves J-Dawgs, right? They have the best hot dogs in Provo, and all of Utah for that matter--Hands Down! And if you don't know about J-Dawgs and you go to BYU, you must live under a rock. But what I wouldn't expect you to know about is a store that came and went in the retail space right next to J-Dawgs: Nina's New York Style Pizza. I'll tell you what I perceive was Nina's strategy and why it didn't work.

Nina has an authentic product. NY-Style Pizza. She is from NYC, and actually makes a pretty good pie. I'm sure when she moved to Utah it was just a matter of time before she came up with the idea and capitalized on her talent. Where to put the store? Location. Location. Location.

As an economics professor told me, anywhere there is queuing (lines), there is an opportunity to prey on opportunity cost (should I wait in line at J-Dawgs or should I go to Nina's). Nina chose well to pick J-Dawgs, for surely some of the people waiting for a dog would convert to pizza; after all, hot dogs are an inferior good when compared to hot dogs. Well, the lines at J-Dawgs are still long, and not very many people thought Nina's was worth leaving the line for.

So what was her problem? She wasn't competing with J-Dawgs in the first place. I'll explain that in a minute, but also... People who go to J-Dawgs only go to that area of campus to eat a hot dog, and it's a social event. Most people don't go alone. It's much harder to convince a group to switch to Nina's when they have made plans to actually go to J-Dawgs for a hot dog. Also, J-Dawgs is an experience. Nina's was just pizza.

But didn't I say earlier that Nina's was NY style pizza. Yes...but she is actually competing with Brick Oven!!!! Dun Dun Dun... that's the truth of it. Although Nina came to offer something new to Provo, she failed to realize that her audience has already been targeted. They don't want the artichoke hearts or the uber-thin slices in NY. They want a step up from homemade, and they only want pepperoni, cheese, hawaiian, or BBQ chicken. Young Mormon youth will choose Brick Oven--steeped in tradition and history subsequent to the BYU campus---every time! I chose Nina's once and thought, for a couple dollars more I could have Brick Oven. And Brick Oven is awesome. If you take a girl to Brick Oven she'll tell her friends. If you take a girl to Nina's, she might not tell anyone.

Bottom line, Nina didn't know the audience. Brick Oven claims all good pizza within a 2 mile radius at least! If you want a dining experience it's Brick Oven or nothing.

ChevBox

In a recent post I commented about Chevron advertising $1 movie rentals. It turns out, they do! They have what I would call a cross between a vending machine and a RedBox just inside the main door of the store. It looks like a company in Utah actually owns and operates the machine. And no, I didn't even have to open any doors (our Chevron has automatic doors). Better yet, this machine actually shows a preview of the movie you are choosing, which I think is a good STRATEGY, because it will induce more purchases by customers who would not otherwise be converted if their first choice of movie was already sold out.

I think this idea is an improvement to the original redbox. It proves that RedBox is not inimitable and it proves that being the second mover isn't bade either. With use of the transparent display of the machine all inventory can be seen without having to look over someone's shoulder or wait to scroll through the touch screen. Kudos to the "ChevBox." I don't know what the actual name is, though.

From Enron to Wall Street

I was astounded yesterday in class to learn Dr. Hendron's philosophy that former Enron-ites went to Wall Street after their crooked company crashed. Where did they land? Hedge funds and I-Banks. This is a really good explanation of why we are in the financial crisis. 'nuff said.

Drop Shipping: DOBA

One potential strategy for finding suppliers AND eliminating the need for warehousing is DOBA. DOBA is a drop shipping company. Their strategy is to integrate the e-biz world like the power grid, hooking up sellers with manufacturers. They have a relationship with over 300 wholesalers and millions of e-biz sellers. Most of these sellers are eBay stores, or sellers on Amazon. I think it's genius! They are located in Orem, UT of all places. A customer orders a product from an eBay store, the store owner sends the order to Doba, alerting the supplier and beginning the shipping process. So the COGS for the company essentially is whatever they have to pay to Doba, and further, the inventory turnover is maxed out!

garmentlot.com

I want to get into e-biz SOOOO BAD! I just don't know how to do it or what to sell. I came up with my most recent idea after putting on one of my many dress shirts that is too big in the waist. I wish all my shirts were fitted. However, if you want a fitted shirt you usually have to pay more for it. I want to make a website that sells fitted shirts. The strategy is for me to find the PERFECT SHIRT, just a few of them, and then publish it on a website and let people buy them. I'd start with just two kinds, white and blue, at first.

But the problem is that I do not have a supplier! And I haven't found a low cost fitted shirt! And I just found a website headquartered in NYC that does a similar thing, they sell just dress shirts, though. Not fitted. They're garmentlot.com.

Strategies

So I'm learning that there a lot of strategies that companies use. For instance, some try to be the "first mover" and others try to be the "highest quality." Well, for our strategy project we are working with a neighborhood car wash in Orem, UT. It turns out that their strategy is kind of interesting. They are seeking to be the "Friendly" car wash. At least that's the image that they project. Car washes are impulse purchases and by implementing this friendly customer service strategy, they will be able to maybe get some return customers. I'm interested in seeing how it works out for them.

StratSim: It's Tough

In our Strategy class, we competed against other teams in our class in an online simulation called StratSim. We simulated 10 years of an auto industry and had to make decisions every year in the areas of marketing, research and development, new product introduction, dealership ratings, and others. Ultimately the success of our firm was judged by our stock price.

Our stock price is around $8 dollars after starting at $25. The best firm in the industry had a price nearer $150. We attributed our lack of success to poor financing decisions and failure to develop exactly what customers wanted.

If I did this simulation again, from the get go we would develop cars that were exactly like what the customer demanded.

Move over Apple: The Adamo is here

So I just heard that Dell is offering the Adamo. The Adamo is a superlite computer with no CD drive, very thin, and made from a single piece of machined aluminum. It's as skinny as the fashion models holding it in the ads.

This is the perfect example of being a second mover. Dell took Apple's innovation and applied it to the Adamo, now competing with the MacBook Air. The target market would be those people who use the computer for net and word processing, nothing too task intensive because of the lack of drives. Specifically, Dell is trying to quell the trend of young computer buyers purchasing Macs. Now, with the Adamo, those purchasers can stay with the PC because a lot of the sleek stylishness of the Mac is found in the Adamo.

A lot of people I've talked to think it's a good idea, but they wouldn't buy it. They wouldn't buy the Air either, because the features are too minimal.

Does Chevron have a RedBox?

I live a block from the Chevron gas station. About a month ago they put a banner out on the corner that stated "Rent DVDs Here: New Releases"--Does that mean they have a RedBox of their own? I don't know. I looked around for a box, maybe a blue or green one, but I didn't see one. I think I actually have to go inside to get the movies, but what if when I go inside there actually isn't a box? What if it's just a rack of DVDs? What if they aren't $1. They way they advertised it made me think it was a RedBox. The sign was even red with white letters. Hmmm...

It's an interesting marketing attempt, but the strategy did not get me to go inside. I feel more comfortable knowing I can just pull up at a red box and push some buttons and get a DVD. Does anyone know about this or do I need to check it out on my own?

Go Big or Go Broke

I am currently working on creating a lounge for student in a college town where the only two places to "chill" are a pizza place and the bowling alley (pretty advanced town, I must say.). Conceptual design was a snap and finding a business savvy partner who has the blessing of the town was even easier. The problem I am running into, interestingly enough, is trying to scale back my ideas into a more affordable pay scale without losing the aspects of the business that were going to make it a hit. I need to tone down the technology and find a smaller space in order to pay for the idea, but now I feel that I am no different than every other little establishment in this town.

Who has a half a million dollars I can borrow?

Consulting for Lawn Mowing Business Owners

Did you ever start your own lawn mowing business????????

So, I'm thinking about a new strategy problem. Adolescent youth all over America are planning on starting their very own lawn mowing business this summer, just like they do every summer. Few succeed at making a profitable business. I know I attempted Hightower Lawn Care a few times and wasn't ever hugely successful from a profit standpoint. I made enough money to pay for my mower and gas, but that was about it. At one point, Hightower Lawn Care became Hightower & Co. Lawn care, or HCO Lawn Care for short, because I hired one of my best friends from High School to work with me. I thought we were true entrepreneurs because of our partnership and budding clientel base.

The tough part about a commodity service business like lawn mowing is getting intitial clients and differentiating yourself from other service providers. The next hard part is managing your clients. For a teenager, that's a pretty difficult job. I was often scared to call on my clients for jobs (I thought that they would think I was hitting them up for money when they just had their lawn mowed a week ago.). I hoped they would just call and remind me. Probably what really happened was I sat at home wondering if it was too early to call again and they sat at home and wondered why I never just came and mowed their lawn.

Perhaps customer management was a challenge peculiar to me, but assuming that it isn't, I want to develop a system where kids can manage their clients. It's all about MANAGING EXPECTATIONS. If I had come to my clients with some sort of semi-formal agreement on paper, such as a lawn mowing calendar or a written list of services I would provide and just how often I would provide them, my business would have been much more lucrative and legit.

So, I'm thinking about making a new website, kind of a non-profit help yourself consulting page where young 12-16 year-olds entrepreneurs can learn from my mistakes and get a leg up on the competition. If anyone has some suggestions for this site or advice for how I should set it up, or wants to tell me what their lawn mowing business was like, I'd appreciate your comments!

Blog Backgrounds Website Scrapped

So, I came up with a strategy to make a website that makes blog backgrounds. I was going to have Laura make the backgrounds and then I would make the website. Well, I had no idea how to make a website so that was a problem. I ended up talking to my friend Sam about how to make that type of website. He pointed me to a CMS (content management system). I downloaded an open-source CMS called Joomla. Joomla turns out to be a great program, and I figured out how to make my computer a local host, meaning I created the website on my computer. I was able to make functional backgrounds that I could download and install on my blog. If I had pushed the Joomla site I created onto the internet through a hosting service, visitors to this blog probably would have seen the ugly backgrounds that I created. Since the site was local, only I saw the backgrounds.

We ended up needing a better program to make backgrounds, so we got Adobe Photoshop. After purchasing Photoshop I found out that Laura didn't want it to make blog backgrounds, she wanted the program to make her pictures cooler so she could post them on our family blog. So, my star artist no longer has motivation, so I pretty much have to scrap the strategy of the blog backgrounds website.

The plan was to put the site online within the next couple of months. We would make some money through ad revenue and bring people to our site through SEO (search engine optimization). But the sustainability would have come from doing "consulting" or customized blog headers and Christmas cards, etc... that people would actually pay for.

Was this a lost effort? No! I learned how to make a website, and it's sweet! I wish I could show you what it looks like. So I'll have to come up with a better business idea or something or maybe just make a family website in the meantime. It's just back to the drawing board for business plan ideas.

Core Competencies

We've been learning about all the great companies of our era, Google, Apple, Southwest, etc... I'm getting tired of learning about those guys. But one thing I've been thinking is that they all have a list of core competencies--focii that point them in a strategic direction. Apple found its niche in the consumer market with innovative "gee whiz!" products. Google simplified something no one else could and is making bank off of figuring out how to advertise based on user information. Southwest dared to be the low cost provider and incorporate fun and love in their programs.

Thinking about that, I want to develop some core competencies of my own and see if I can't come up with a good idea. Look for that in future entries.

And the postal service Redbox idea would be helpful when the post office was closed, making the post office available for people who are at work between 9 and 5.

USPS Strategy

So, I've been analyzing the framework of the United States Postal Service. Laura went to mail a book she sold on Amazon.com, and I thought "How old school. Isn't there a better way to do that?"

So I came up with my own business idea. It's Redbox, but for shipping stuff that you sold on Amazon.com or eBay. I call it the Box Stop. I'll put Box Stop Machines outside the post office, business districts, etc... People then go there after they get their sale confirmation from the online auction or retailer. You can pick the packaging material you want, print shipping labels, pay postage, and weigh your item, all at this convenient location. Then you can leave the box there (in a secured location) and USPS will come pick it up.

Well, I wanted to see if anything would be a "barrier to entry" for this idea. Sure enough, USPS, UPS, DHL, and FedEx all have online shipping solutions. But I think there may still be some viability for this semi-online yet semi-brick and mortar idea. Thoughts???

A Muse: Hendron

My Strategy professor, Dr. Hendron, asked that his students keep a strategy journal. He inspired me when he noted that the journal could be kept online. Now I have a little bit of direction for the blog under construction. We'll talk about news and current events and lump it under the "Strategy" umbrella. So, here's to Dr. Hendron, looking forward to posting some strategic thoughts!