Hypothetical business question - Aussie Stock Forums

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  1. #1

    Question Hypothetical business question


    I have a hypothetical question. Let's assume you have the ability to sell a product such as a very practical keyring. Key rings aren't available in Australia. You have no distribution rights and will import from an overseas contact with a landed nett $0.25.
    You intend to sell for $0.60 with a view for an RRP of $1.00.
    You have no direct competition at this stage, though there is a large national key manufacturer who may well enter the market if your keyring product shows promise as it would compliment their existing line for little outlay.

    Would you
    1. enter the market in a subdued manner with a view to "sneak under the radar" of the large national manufacturer whist slowly building client base and sales.

    2. Saturate your well branded product into the market place with the aim to get the jump on the large national manufacturer.

    I did say hypothetical, though I would be interested in your thoughts..

    Last edited by Stan 101; 31st-January-2006 at 06:23 PM.

  2. #2

    Default Re: Hypothetical business question

    If it were me, hypothetically, I would go with option 2, but don't make your product too overpriced, so that when the National distributor does decided to get on board, they won't undercut your price, thereby stealing your business.

    You have the opportunity to establish yourself, with a client base, and by going in with a realistic price, your integrity should stay intact, otherwise you will give the impression that you have gone in to make a quick buck.

    That's only my thoughts, and by no means advice - your gut is the way you should go

    Good luck with the product


  3. #3
    Rotaredom wayneL's Avatar
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    Jul 2004

    Default Re: Hypothetical business question

    I reckon option 2 as well.

    1st rule of branding is to be 1st. In the minds of the market anyway. Hit 'em fast and hit 'em hard. IMO

    Otherwise your competitors will...and they will appear to be 1st.


  4. #4

    Default Re: Hypothetical business question

    Option 2 in my opinion. Think about it...

    In the 1980's the Walkman was what the Ipod is today. There were plenty of manufacturers of personal cassette players with headphones, but it was Sony with their Walkman, released in numerous models over the years at both ends of the price range, which was the desirable product. Anything other than a Sony Walkman just wasn't the real deal.

    There's plenty of operating systems and internet browsers for computers. But the vast majority reading this would be using Microsoft Windows as the operating system and Microsoft Internet Explorer as the internet browser. 20 years ago few had heard of Microsoft and if you asked someone to name a computer company they would have said Commodore, Amstrad etc, neither of which are significant today.

    Video games. There were lots of systems around in the 1980's especially but most people of a certain age would at some point asked or been asked "have you got an Atari". In due course it became a liability for anyone to produce a home computer or games system which didn't at least have the Atari standard for joystick sockets since that's what practically all third party joystick manufacturers (and joysticks were big business 20 years ago) were using. Indeed you can still buy retro consoles which play Atari games today but you won't find any of the others.

    Alcohol. There's plenty of breweries producing decent beer and plenty of distillers producing all manner of spirits. But a few well marketed products overwhelmingly dominate the market with many drinks simply being known, especially to the younger generation, by their brand name only.

    Cigarettes. An absolute exercise in marketing to get people to smoke in the first place. Go to any tobacconist and you'll readily see that there's heaps of brands available. But if you think about the people you know that smoke, the vast majority are likely to smoke one of about three variants (out of typically 6 - 8) of 5 or so brands. So maybe 15 products, themselves made by 3 manufacturers, dominate a market with well over 100 products available.

    Fast food. Kids love take away, no doubting that. But give them a choice between fish and chips or McDonalds and most will choose the latter in my experience. McDonalds has extensive advertising and branded products versus your (considerably cheaper) local fish and chip shop which sells it's products in plain paper bags or wrapped in a big sheet of white paper. Likewise KFC, Hungry Jack's etc.

    So in my opinion certainly I would go for option 2 otherwise some competitor will. You wouldn't try and start a hamburger chain today since someone else has beaten you to it. Likewise beer and spirits. Likewise tobacco. Likewise Apple's Ipod would be pretty hard to compete with unless you've got something massively better and can launch an advertising blitz. Once they're well established as the first mover it's very hard to compete. So be the first mover but this is only going to work if you've got enough capital to fund the initial expenses without needing to start small.

  5. #5

    Smile Re: Hypothetical business question

    Quote Originally Posted by wayneL
    I reckon option 2 as well.

    1st rule of branding is to be 1st. In the minds of the market anyway. Hit 'em fast and hit 'em hard. IMO

    Otherwise your competitors will...and they will appear to be 1st.

    Exactly right. Basic human behaviour. We're all programmed this way. If we accept a belief in a product or concept or whatever it is as a 'truth' it is more likely to be called to mind should the need or occasion for it arise. The other useful thing to know is most humans like to stay consistent with their beliefs even if they don't know it. However, the subconsciously knows it and will operate in this direction. Its a protective thing. Of course advertisers, psychologists and sales people know this very, very well.


  6. #6

    Default Re: Hypothetical business question

    Look at your target market and market positioning.

    Do you want your product to be generic, that others work off? If so go number 2.

    Number 1 would be a niche market - maybe more profitable if you do the research.
    Discussion only! Posts may be factually incorrect due to ignorance, taken out of context, misinterpreted, or just opinionated discussion.

  7. #7

    Default Re: Hypothetical business question

    If you have an endless moneytank for sure option 2

    If you dont have that, then it is to easy to go broke so option 1 is better

    Yes it is easy to compare with Mcdonalds and others in the same league, but they also started somewhere, and being the first, does not always mean you will do great, it is always better to be the best and build long term, than to do it fast and go broke.

    It is my humble opinion.

  8. #8

    Default Re: Hypothetical business question

    With respect to what smurf said I think there quite a big difference between walkmans/ipods, operating systems, video games and 'keyrings'. One group has a very high and capital intensive R&D process whereas any Joe could make a keyring (and I am assuming that your product is really that simple). If it is a similar product to those outlined by Smurf then his/her option 2 is a good way to go (if you can get the seed money).

    If it is a simple product and you can get your distribution channels set up for low cost then 1 is a pretty good option. Build up an efficient and smooth distribution channel and then two choices will present themselves - add additional related lines or sell to someone with a complementary business. If you can establish the business then it may become attractive as a complete package.


  9. #9

    Default Re: Hypothetical business question

    Option 3 - Go to the biggest operator and see if you can make a deal.
    Maybe smaller profit over a longer period.

    Option 4 - Go to the second biggest operator and sell idea of outdoing biggest operator.
    Again maybe smaller profit over a longer period.

    Share cost of marketing and benefit from ready made distribution network.

    Good luck whatever you decide.

  10. #10

    Default Re: Hypothetical business question

    Quote Originally Posted by grumpee boi
    With respect to what smurf said I think there quite a big difference between walkmans/ipods, operating systems, video games and 'keyrings'.
    Agreed there's a huge difference if we're talking about a simple keyring like any other. But since it said that there was "no competition at this stage" I was assuming that it is some truly unique product which can be turned into a must have fashion item with appropriate marketing. That's the strategy used to sell all kinds of things which aren't really necessary in the first place.

    I certainly wouldn't go for option 2 if it is just a simple keyring the same as any other. In that case it's going to be hard to become a major operator since it's going to be virtually impossible to convince consumers that your bit of metal is better than any other, even if they can work out which is yours in the first place. Presumably it's an electronic device of some sort or is made of some radical material and so is readily identifiable as a branded fashion item??? That's what I had in mind anyway. Build the brand so that consumers buy even if they wouldn't have bought an ordinary keyring in the first place simply because it becomes a fashion item.

    So how unique is this keyring anyway? My comments are totally irrelevant if it's just a purely functional device to keep keys together. I was assuming otherwise...

  11. #11

    Default Re: Hypothetical business question

    thanks for the replies, everyone.

    Yes it is just a basic boring old "keyring". Just so happens you can not buy one here in Australia. Think of it more as a paperclip than the latest mobile phone in the "must have" stakes.

    Distribution rights can not be organised at this stage. That is why the "sneak under the radar" theory was added. By keeping out of the bigger Australian manufacturer's way in the short term, the opportunity is there to build up the client base with good customer service.

    Option 2 is a great idea but the reason I am confused is that it is only a boring old "keyring"; efficent and well needed, though is never given a second thought after purchase.

    My initial thoughts were that of grumpee boi's second paragraph though Wayne's first rule keeps singing to me...

    Thanks again.

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