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Book of Value - The Fine Art of Investing Wisely 2016(Anurag Sharma)
https://bbs.pinggu.org/forum.php?mod=viewthread&tid=6303889&from^^uid=109341(Page 205-224)
阅读到的有价值的内容段落摘录
Watch the Game
A Good business produces strong financial performance over time, but such performance takes considerable work to accomplish. To that end, a well-defined business model, competently executed, is essential for consistently strong operating performance and cash flows, both of which are essential for creating economic worth. As part of due diligence, therefore, investors must assess the quality of the company’s business model and the ability of managers to monetize it. To be effective, value propositions must have two essential features embedded in the products or services being offered: desirability and distinctiveness. That is, the company’s core products must offer clear use or functionality that is desired by specific groups of customers. Absent such desire, the company faces apathetic customers and an uphill battle generating sales. Even if there is general desire, however, it does little good unless the company’s products are distinctive enough from those offered by others. Distinctiveness turns general desire into demand and sales for the company’s products over those of others. In practical terms, value propositions are operationalized by correct positioning of products such that their desirability and distinctiveness are obvious to customers in the target markets. Delivering value propositions requires a proper structuring of necessary assets and activities that enable the competent execution of operating models. Without execution, value propositions remain unrealized and the company unable to generate economic returns. Yet, without a clear sense of desire for and distinctiveness of its products in the minds of target customers, a company’s operating model remains rudderless and, ultimately, economically ineffective. Hence, successful business models result from tight integration of well-honed operating models with clear value propositions.
A fundamental challenge for Best Buy was that retail businesses have low gross margins and big-box stores have high fixed costs because their operations require large recurring expenses for such necessities as rent, utilities, insurance, and staffing. To be profitable, the high fixed costs of big-box stores and the low gross margins of electronics retail made Best Buy highly dependent on volume of sales. Falling sales could create havoc on the economics of the company. If store traffic dropped because of an economic downturn or changes in consumption patterns, inventory would quickly become stale, and the stores would suffer heavy losses from trying to lure customers with aggressive promotion and markdowns. Since its business model had been a spectacular success for more than a decade, and perhaps because of this, Best Buy was slow to respond to an emerging threat that would greatly undermine the logic of big-box stores. The emergence of Amazon and other online retailers offered customers a viable, and in some ways superior, alternative for shopping for electronic goods. Selection and low prices, while still desirable, were no longer a source of distinctiveness for Best Buy. Since it sold the same branded goods that were widely available on the Internet, customers could simply turn to better deals from the comfort of their laptops and, increasingly, from their smartphones.
Internet retailers, moreover, had no need for expensive real estate or floor inventory in multiple locations; they could operate with the much more competitive cost structure of large distribution centers from which they shipped products directly to customers. Ironically, therefore, what were once the strengths of the big-box model—floor space and wide selection—became a liability because of the high relative costs associated with them. To add insult to injury, instead of shopping at the Best Buy stores, customers began to use them as showrooms, using service staff on the floor to educate themselves and make purchase decisions and then going to the Internet for the best deals. The stores continued attracting traffic, but it was traffic without sales.
A new breed of competitor was challenging the company with its quickly evolving Internet-enabled business model. Even though Best Buy looked good in terms of historical growth rates and performance record, alert investors paid heed to emerging headwinds and the seeming
lack of strong response to defend or quickly evolve the big-box store format. It became increasingly clear that its original value proposition was no longer distinctive, as customers now could easily search the Internet to locate products and then compare prices across websites.
The weakened value proposition would eventually lead to a slowdown in sales, which, in turn, would undermine the operating model, the efficiency of which depended crucially on the volume-driven economics of big-box stores. All this made Best Buy questionable as an investment.
阅读到的有价值信息的自我思考点评感想
What made Best Buy successful between 1990 and 2005 is very different from how Dell changed the personal computing industry in the 1980s and 1990s. Why Home Depot succeeded differed a great deal from why Monster Beverage achieved stunning success as a leading energy drink company. Panera Bread had a different model than Starbucks or McDonald’s. Priceline.com and Expedia, although in the same general business, go about attaining success in very different ways. Similarly, Nike and Under Armour do things very differently even though they both compete in footwear and athletic apparel. Business models come in many different stripes, in other words, both within and across industries. More so these days, new models are emerging frequently as entrepreneurs leverage emerging technologies and changing consumption patterns to exploit new opportunities.
The selection of successful investment depends on the ability of investors to grasp the details of a particular business model depends at least to a degree on prior knowledge and experiences. Given the particulars of skills and knowledge investors bring to an evaluation, it may be possible to clearly understand certain business models and pick up on nuances about how particular companies function. Other business models may be opaque to some investors because of their lack of familiarity with the industry or its inherent complexities. In some cases, particular investors may understand a business model clearly but also see enough instability and risk to keep them away from the company in question. In other cases, value propositions may be clearly articulated by management, but there is no clear evidence that the company can successfully and profitably execute to deliver on those propositions. So we must keep ourselves updated with the development of the world and continuous update ourselves with business models in particular relate this with the contemporary business environment.
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