We saw in Money Part 2, how we can quantify creation of money? What ever I was talking in that post about the creation concept, you must have identified it as Profit. Yes, Profits are the created money and are the lifeblood of modern world. Why do you think the capitalist economies like US have grown so much over these years and countries like Russia and India are gasping far behind? It’s because in their pursuit of profit was the hidden pursuit to create money. And why creation of money is important is clearly given in the ‘Stock Market 1’ post? Magic Poker, remember.
Now we will see what brand is. Brand is just another money creation concept but seen at the selling side rather being at the production. By cutting the cost of production and keeping the selling price same we can increase profits or create more money. On the same hand by keeping the cost same and increasing the selling price can also increase the profits. Now do you understand why companies go for brand building image? No? Because brands allow these companies to increase the selling price. Of course, who wouldn’t like to wear shoes with the sign of Alan Iverson even if it comes at double the price of ordinary shoes? Do you really think Nike charge you for an excellent product? Most of the shoes are made in sweat shops in low income countries like Thailand Malaysia. Most of my Nike shoes don’t last for more than 1 year. This is brand for you and that’s why companies are crazy after it. It is just more subjective and harder to conceive. How do you know how much Tiger woods can increase the price of your product? Well, that questions answer is worth what Nike is worth of. That is why Branded companies can become a very good friend in a treacherous territory of stock market. Why I am explaining this is because when you will come across a company with a solid brand then take notice of it. Brand images are hard to break. Brand can be anywhere. Reliance in Reliance Industries is a brand itself. Brand gives flexibility to these companies to raise prices or decrease it when they want to. This flexibility is one of the main tenets in the dictionary of Warren buffet’s stock picking commandments. So in a nut shell Brand is important. Apart from the brand value you can increase your selling price by providing very good service (think of Airtel, I will think twice even to change to Vodaphone) and all kinds of other things that compel you to shell out that extra buck to buy a product that does a same job as the inferior one. Take quality for example and you will realize why Sony products are higher priced than others. So Brands are really important and takes different set of expertise to develop. More of marketing is needed in it. Mba’s excel in this area and researchers excel in the production side. That’s why the MBA and a engineer degree is such a killer combination. You know how to create money on both the front, production front and selling front.
Now we will see what brand is. Brand is just another money creation concept but seen at the selling side rather being at the production. By cutting the cost of production and keeping the selling price same we can increase profits or create more money. On the same hand by keeping the cost same and increasing the selling price can also increase the profits. Now do you understand why companies go for brand building image? No? Because brands allow these companies to increase the selling price. Of course, who wouldn’t like to wear shoes with the sign of Alan Iverson even if it comes at double the price of ordinary shoes? Do you really think Nike charge you for an excellent product? Most of the shoes are made in sweat shops in low income countries like Thailand Malaysia. Most of my Nike shoes don’t last for more than 1 year. This is brand for you and that’s why companies are crazy after it. It is just more subjective and harder to conceive. How do you know how much Tiger woods can increase the price of your product? Well, that questions answer is worth what Nike is worth of. That is why Branded companies can become a very good friend in a treacherous territory of stock market. Why I am explaining this is because when you will come across a company with a solid brand then take notice of it. Brand images are hard to break. Brand can be anywhere. Reliance in Reliance Industries is a brand itself. Brand gives flexibility to these companies to raise prices or decrease it when they want to. This flexibility is one of the main tenets in the dictionary of Warren buffet’s stock picking commandments. So in a nut shell Brand is important. Apart from the brand value you can increase your selling price by providing very good service (think of Airtel, I will think twice even to change to Vodaphone) and all kinds of other things that compel you to shell out that extra buck to buy a product that does a same job as the inferior one. Take quality for example and you will realize why Sony products are higher priced than others. So Brands are really important and takes different set of expertise to develop. More of marketing is needed in it. Mba’s excel in this area and researchers excel in the production side. That’s why the MBA and a engineer degree is such a killer combination. You know how to create money on both the front, production front and selling front.
No comments:
Post a Comment