How KFC is now N°2 in the country of the Michelin’s Guide?

France is mainly known for its gastronomy. The best “Chefs” go abroad in the best restaurants from New York to Tokyo. In Paris, you have a huge concentration of 3 Michelin’s stars restaurants  where you can eat the best meals ever prepared.

Otherwise, you have more and more McDonalds! For few years now, you also find more and more KFC.  Why France could be a paradise for American Fast Foods? A Paradox? Some factors allow us to understand :

§                    - Fast-Food sales have increased of 4% in 2012 and 73% since 2005. 

           - A place where you can eat for less than 10 euros is enjoyable in a country in crisis.

                       -  Only 4 fast-foods companies: McDonald, KFC, Quick _ a Belgium firm and Subway in the big cities.

The main reason why Burger King or Quick are failing in developing themselves on the market is that McDonald was the first to enter the market (more than 20 years ago) and is now very strong and well implanted. Basically, they sell sandwiches made with beef.

One company tried to enter this market successfully. It’s KFC. They just opened their 150° restaurant and want to open 150 more for 2017. Their strategy is quite simple:

                          - Using the decrease of Quick to buy strategic emplacement_ quite rare and expansive in the biggest cities

                         - Not doing a low-cost strategy : France is where they do their best margins

            - Selling something different : chicken and not beef

            - Communicate on the “home-made” and fresh chicken

They wanted to be completely different from their main competitor. Results: 3 millions of revenues for Quick and 3,4 million for McDo.

Which company will be the next KFC in France?

Augmented Reality: Which Business Opportunities ?

Everybody have heard this term and knows that it is a new technology. But few people know what exactly it is or what is its potentiality. Too bad, because plenty of new businesses are possible with it. Actually, almost everything that we do today can be “improved” with the augmented reality (AR). But first, what is augmented reality? The basic definition, according to wikiepdia, is a “live view of physical, real-world environment whose elements are augmented by computer-generated sensory input such as sound, video or graphics”. Like on the picture, you see your real hand with a false toy on it.

People need to think out of the box to get all the potential of it. It’s the case of Oren Jacob who gave an interview to the Stanford University to present his new app on tablet_ ToyPlay. Basically, the app allows a kid to play in live with a character. More than playing, it’s a live conversation that is possible. Oren Jacob says that we need to use all the capabilities of the tablet device to think about new apps. The tablet gets the microphone and a camera and you can touch it. So, you can program a character to interact with you. Here is the video:

There are plenty of business opportunities for using augmented reality. Some sounds not really interesting or maybe dangerous such as the facial recognition in the street. But others seem promising:

1.       Shopping

In front of your computer, you can try all the clothes you want, change the color, etc. We know that the online shopping is still growing. This is definitely the new step in online shopping. You can also imagine how will fix a new furniture in your living room. You just select the product and put your tablet in your living room to see how it looks.

Check this cicso's advertisement : 

2.       Entertainment

It’s quite frustrating to check on our smartphone all the time to get information about something we are seeing . With AR, you just have to put your device in front of the thing you want to learn more about. For example, you can targeting a player on a soccer field and instantly see his performance during the season. In museums, audio guides will not be useful anymore. You can have on your tablet someone explaining to you all the paintings of the museum.

3.       Marketing

The AR can work by using cards that you put in front of a camera. You can imagine giving these cards in the street or a mall or even sending them by mail like catalogues and then people can check on a screen how the product looks like and moving it in all direction to see every angles. 

4.       Training

Airplane pilots already train in a simulator. But these machines are very expensive. With the AR, you can manipulate for example mechanical pieces in a motor again and again before doing it for real.

5.       Advertising

After the “classic” advertisement in the subway with posters, you can see now some videoscreen. The next generation is the AR. Imagine looking at a wall with the advertisement for traveling in the Pacific islands. With AR, you can see the trees moving and the dolphins jumping in the sea.

However, this technology needs a device between our eyes and the real world. The next step is to avoid this device or at least not feeling it anymore. This is the google glasses project. Your screen and your camera are fixed in the glasses. You can see all around you without touching anything. Check this video and after think about all the business opportunities it offers.

Some company should be focused to be successful?

Two professors from the INESAD school in Fontainbleau _ Karan Girotra and Serguei Netessine _ just released an article on the Harvard Business Review. They argue on the fact that the really successful companies are not the ones who try to growth by expansion but the one who focus on what thing that they can do almost perfectly.

We have seen some big companies trying to expand as much as possible following the Keiretsus’ model. Maybe one of the best example is Virgin which try to enter many different kind of markets. We can mention Virgin Atlantic (transatlantic airlines company), Virgin Megastore, Virgin Drinks, Virgin Galactic (space travelling), Virgin Oceanic (scientific ocean exploration), Virgin Books (publishing company) and we could go on. However, even if Virgin is a huge company, it also has to deal with major financial issues. What is characterizing Virgin except the fact that they do almost everything?

There are some companies who have chosen a totally different business model. As the two authors point it out, we can take the example of southern airlines which has only one type of class (economic) and only one type of aircraft (boeing 737). They know how to fix and maintain it. You also have Belron, a Belgium company who is specialized in vehicle glass repair _ now present in 30 countries and hiring more than 25,000 people_ or RedBull who is only making one enerydrink.

Thanks to this focus, these three companies control all their process and they avoid expensive underutilized equipment. However, the best examples still are the Mittelstand companies. It’s the name given to the small and medium-sized companies in Germany which are specialized in one field and which are export-oriented. They employ 70% of Germany’s workforce in private business and contribute 50% of Germany’s gross domestic product (GDP : $3.3 trillion).

Have a look at this  two minutes video that shows an example of Mittelstand company that is making print pincode:

Karan Girotra and Serguei Netessine give us 4 common features:

            1)      “Most Hidden Champions are extremely focused in what they do”.

            2)      “They do one thing but they do it extremely well by achieving tremendous efficiencies”. They can do really cost-competitive and avoid a real new competitor arrival on the market.

            3)      “Lean Management Hierarchy”. As their processes are simplified, their organization is too.

            4)      “International diversified”. Be specialized allow them to export everywhere in the world and to make great economies of scale.

The last point is maybe the most important because if you can produce the best product at the best price, you technically avoid the entrance of any other competitors on your market. We can take the example of Jungbunzlauer. You don’t know them but you already consume them. They are making the acid citric for Coca Cola Worldwide! They are alone and ultra-specialized.

The authors ask: “why don't we see more of these firms?”.  Maybe it’s cultural as they think but there is something in this kind of business model that is very dangerous: to be the best one without any risk of new technology revolution. Any inefficiency in your process let the opportunity to another competitor to enter as says the laws of economics.

So, be focused can be very successful but it also very hard and every company cannot think their business model in that way. However, that doesn’t mean not taking the risk.

Why doing Good-Better-Best Prices Instead of Finding the Perfect Price?

SeaWorld Orlando Dine with Shamu

I have just learned that what is considered as the best restaurant in the world _el Bulli_ was actually unprofitable. Why? Because the restaurant was only open from June to December for a total of 8000 clients a year. Each client used to pay the same price -$250- for a 25 dishes meal. It means that one dish cost approximately 10 euros! It’s less than a pizza in Madrid! But the restaurant was booked one year in advance (in fact it was booked the before its closure period).

Technically, it means that they didn’t find the equilibrium price. The demand was much more superior that the supply for this price. But the question is : Is finding this price the better solution for a company?

I do believe that Rafi Mohammed is right when he says that “even if you can determine your product's perfect price, you end up in what I call a "Pricing Catch-22": no matter what price you set, you'll inevitably create missed profit opportunities. Some people would have paid more, while others would have purchased if only the price had been lower”.

 

On a graph, it means that you try not to find the perfect price, but you try to do the integral of the demand curve. In that way, you can fix all the demand of your customers.

 

But what does that mean? We can take two examples to illustrate that. Usually, it works quite well for entertaining companies. We can take theme parks such as Sea World Orlando or Disneyland Paris in France. Both of them have an equilibrium price which is about $60 a day and per person. The idea is to find a new offer without changing the product. For Sea World for example, you can choose amongst an array of extra options (more than 17!) such as “animal interactions”, “exclusive tours”, “exclusive dining” and ”quick queue”. The normal admission is $80. With these options you can pay more than $500, just for one ticket!

 

Here is a graph I made showing what is happening. You target all your customers with different offers and different price. Ideally, the park can propose an offer per customer_ which is of course now impossible.

 

Another example is Disneyland Paris. The normal admission is 74 euros. At this price, you have people who buy them without problem (usually foreigners). But you also have the “francilien ticket” at 30 euros. At this price, you have to say which day you are coming at the park. You cannot change the date or the name on it. Doing this, both parks don’t really change their original offer _ they are still theme parks with attractions_ but they find a price for everyone interested by spending a day in the park.

 

With a good-better-best price strategy, you reach some people would have paid more that your original price, while others would have purchased if only the price had been lower. Moreover, customers are more comfortable with this pricing strategy. There is no more this kind of ultimatum: “you take it or you leave”. 

 

With a perfect price strategy, companies are missing significant profit opportunities. Customers are better served and profits are enhanced by serving new customers as well as reaping higher margins with a good-better-best price strategy.

You can read all the theory of Rafi Mohammed, pricing strategy consultant in his bookThe 1% Windfall : How Successful Companies Use Price to Profit and Grow256 pagesHarperBusiness; 1 edition (March 16, 2010)