Retailers ‘Stuck in the Middle’ May Soon Face Extinction

Much of what we do as investors involves studying businesses and critically evaluating the returns that are likely based on management’s competitive strategy. The elusive search for true “moats” is often frustrated by quick technological change which can make yesterday’s incumbent firm today’s dinosaur. Investors who pay a rich valuation for a business with a moat must be confident that the advantages leading to high returns today are not destroyed by new types of competition in the near term. Smart phones may soon threaten to drive retailers without a coherent competitive strategy to extinction.

Avoid Relegating Investment Errors to the “Memory Hole”

No one enjoys dwelling on past errors whether we are talking about investments, career choices, or poor decisions in personal relationships. It is far more pleasant to think about what has worked well in the past and to relegate unpleasant memories to what George Orwell referred to in 1984 as the “memory hole”. Read this article for a case study in faulty investment decision making.

Wal-Mart’s Upscale Strategy for Growth in China

Companies that attempt to expand from their home base into foreign countries must adapt their operations to suit the preferences and peculiarities of each local market. In the “Tea with the Economist” interview shown below, Wal-Mart’s head of China operations provides some insight into how Wal-Mart has adapted the familiar model we are used to in the United States to suit local preferences in China. Read this article for more details and a video.

Will Consumer Brands Survive the “Great Recession”?

Very few Americans have experienced an economic downturn as severe as the current recession. Although it is very possible that GDP will show a positive reading for the third quarter, hardly anyone expects the employment situation to improve significantly until 2011. It is very possible that unemployment will soon exceed the worst levels of the 1981-82 recession. In most economic downturns, consumers attempt to substitutecheaper private label “store brands” for brand name goods . The key question is whether the current “great recession” will produce more lasting effects in consumer behavior. Read this article for more details.

Will the “Great Recession” Change Long Term Consumer Behavior?

The Great Depression of the 1930s changed consumer behavior for decades among those who experienced the downturn firsthand. Although the vast majority of consumers today have no direct recollection of the Great Depression, most everyone remembers relatives who were frugal into their old age even decades after their economic fortunes improved. Read this article for more commentary and a video interview of Andy Bond, CEO of British supermarket firm ASDA.


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