108 ShowMetheMoney
guishing their products in the consumer’s eye as having distinctive
traits that make them worth buying even at higher prices. Bang &
Olufsen did this successfully in upgrading its image to a maker of
stereos an dother soun dsystems at the “high en d” of au dio tech-
nology.
Procee dwith similar sorts of questions about the pro duct mar-
ket. What is the company’s target customer and/or client base? Is it
teens and preteens (say, electronic music) or retirees (medical de-
vices), male or female (sporting goods, clothing, cosmetics)?
Does the company depend on one or a few customers for a major
portion of its revenues, as might a manufacturer or wholesaler such
as Procter & Gamble (13% of sales go to Wal-Mart)? Does it have
millions of customers, or does it depend on a handful? (Coca-Cola
has over 14 million customers who sell in turn to the ultimate con-
sumer!)
How much does any dependency matter—how sturdy is a major
customer? Even businesses with well-known an dtime-teste dpro d-
ucts can suffer enormous economic damage from policy changes by
their major customers. Mattel (with its venerable Barbie line) and
Hasbro (with powerful branded products such as Star Wars and Po-
ke ́mon figures) both took major financial beatings when one of their
largest customers—Toys-“R”-Us—force dmajor inventory control
changes that shifte dmuch of the cost of carrying inventory from the
store to the manufacturers.
How does the company sell its products? Direct mail (say, Dell)
and storefronts (say, Starbucks) are quite distinct modes of distri-
bution, an deach differs again from sales over the Internet (say, Am-
azon.com) or sales by industrial manufacturers to their industrial
clients (say, Johnson Controls an dGeneral Electric).
What is the company’s geographic market? An economic down-
turn in Asia can severely impair profits at multinational companies
that do significant parts of their business there, as the crisis in 1998
showe dfor venerable companies such as Procter & Gamble an d
Coca-Cola. Yet both also ha dsuch global reach, they survive dwith
no long-term damage.
Has the company le dor at least a dapte dquickly to changing
economic an dbusiness con ditions? Companies able to maneuver
quickly to join their ol deconomy businesses with new economy
strategies—such as General Electric—deserve credit for that deft-
ness. Can you judge which ones can do this?
These commonsense questions can go on an don to inclu de
questions such as the following: What is the company’s supply sit-