How Toy Crazes Are Born - This article I found very interesting, it is about how toy crazes come about and how collectible toys are created. Some important points gleaned from the article:
1) Collectible toys are engineered to make children crave them in massive numbers
2) If aimed at girls, girls love highly-detailed objects
3) To stoke demand, purposely produce some toys in small numbers and also limit distribution to only certain retailers (Beanie Babies were limited solely to small toy stores); also, parents may have a bone to pick with these methods
4) The urge to collect, sort, and categorize things is actually part of a child's natural cognitive development...at about age six, children will start hoarding categories of things...from the ages of three to six, children like to classify and collect objects by size, color, and shape; from the ages to five to seven, boys and girls alike tend to aim for quantity, competing to see who has more
5) Collectibles are designed to be cute, numerous (lots of characters), affordable, and just rare enough
Friday, December 31, 2010
Monday, December 27, 2010
Two Quick Things On Fragmented Industries
1) Not all fragmented industries can be consolidated. With some industries, forming a large company in fact could actually be a detriment to keeping costs down (as opposed to being able to create efficiencies and economies of scale with a large company). Some examples could be the furniture industry or the concrete block manufacturing industry (concrete blocks are expensive to transport and easy to make locally, so a large organization probably wouldn't provide much advantage).
2) The term "fragmented" can be a bit misleading, depending on the size of the industry. An industry can be so large, that it is really made up of a bunch of smaller sub-industries which themselves are in fact very concentrated. For example, the plastics and rubber industry. As a whole, the $200 billion rubber and plastic product manufacturing industry is fragmented into hundreds of niches, but individually, each of those niches can be pretty concentrated. For example, tire manufacturing, a $15 billion industry, is very concentrated.
One could also look at the locks industry. Globally, the locks industry is fragmented, and in Asia, it is still fragemented, however in most of the developed countries, within each country, the industry is fairly concentrated.
2) The term "fragmented" can be a bit misleading, depending on the size of the industry. An industry can be so large, that it is really made up of a bunch of smaller sub-industries which themselves are in fact very concentrated. For example, the plastics and rubber industry. As a whole, the $200 billion rubber and plastic product manufacturing industry is fragmented into hundreds of niches, but individually, each of those niches can be pretty concentrated. For example, tire manufacturing, a $15 billion industry, is very concentrated.
One could also look at the locks industry. Globally, the locks industry is fragmented, and in Asia, it is still fragemented, however in most of the developed countries, within each country, the industry is fairly concentrated.
Two Business Tips
So I was doing some random Googling and stumbled across two good points for when building a conglomerate that consists of multiple companies operating under a single holding company:
1) Create an employee stock-ownership program so that the individual member companies operating under the holding company have a financial stake in the performance of the holding company; this will incentivize the management to adopt an entrepreneurial approach to running their companies.
2) Decentralization as opposed to centralized management. Basically let the member companies operate as independent subsidiaries (this is also what I had theorized about earlier, as obviously a conglomerate where everything is run with a top-down management style would probably be sluggish and bureaucratic).
1) Create an employee stock-ownership program so that the individual member companies operating under the holding company have a financial stake in the performance of the holding company; this will incentivize the management to adopt an entrepreneurial approach to running their companies.
2) Decentralization as opposed to centralized management. Basically let the member companies operate as independent subsidiaries (this is also what I had theorized about earlier, as obviously a conglomerate where everything is run with a top-down management style would probably be sluggish and bureaucratic).
Fragmented Industries
So I've decided to make a list of the fragmented industries I know of off of the top of my head. These are industries with potential for entrepreneurs to build companies in:
1) Automotive parts retailing
2) Tire dealer retailing
3) Plumbing products distribution
4) Food service equipment manufacture
5) Food service distribution (this industry I'm not quite sure of; sources say it is "concentrated," but I've also read that it's fragmented as well; it's also very large ($125 billion)
6) Sporting goods retail
7) Used auto parts
8) Commercial printing
9) Packaging
10) Interconnect technologies industry
11) Specialized contracting services (Quanta Services is an example)
12) Engineering services
13) Industrial cleaning products
14) Trucking
15) Non-food pet products
16) Specialty automotive aftermarket equipment
17) Jewelry retail
18) Business services
19) Real-estate
20) Hotel and lodging
21) Pool supply distribution industry
22) Niche consumer products (look to Jarden Corporation and Spectrum Brands)
23) Fluid control equipment (which consists of pumps, valves, and seals, each of which is a fragmented industry unto itself)
24) Sensors
25) Embedded computing/industrial computers
26) Printed circuit boards
27) Pool products (as in the hardware, such as pumps, filters, etc...for swimming pools)
28) Filters
29) Thermal management technologies
30) Life sciences tools and equipment
31) Beer distribution
32) Steel service center distribution
33) HVAC/R (Heating-Ventilation-Air Conditioning/Refrigeration) distribution
34) Clinical diagnostics testing industry
35) Used auto parts
1) Automotive parts retailing
2) Tire dealer retailing
3) Plumbing products distribution
4) Food service equipment manufacture
5) Food service distribution (this industry I'm not quite sure of; sources say it is "concentrated," but I've also read that it's fragmented as well; it's also very large ($125 billion)
6) Sporting goods retail
7) Used auto parts
8) Commercial printing
9) Packaging
10) Interconnect technologies industry
11) Specialized contracting services (Quanta Services is an example)
12) Engineering services
13) Industrial cleaning products
14) Trucking
15) Non-food pet products
16) Specialty automotive aftermarket equipment
17) Jewelry retail
18) Business services
19) Real-estate
20) Hotel and lodging
21) Pool supply distribution industry
22) Niche consumer products (look to Jarden Corporation and Spectrum Brands)
23) Fluid control equipment (which consists of pumps, valves, and seals, each of which is a fragmented industry unto itself)
24) Sensors
25) Embedded computing/industrial computers
26) Printed circuit boards
27) Pool products (as in the hardware, such as pumps, filters, etc...for swimming pools)
28) Filters
29) Thermal management technologies
30) Life sciences tools and equipment
31) Beer distribution
32) Steel service center distribution
33) HVAC/R (Heating-Ventilation-Air Conditioning/Refrigeration) distribution
34) Clinical diagnostics testing industry
35) Used auto parts
Wednesday, December 22, 2010
Create Multiple Small Businesses to Start...?
One big problem for entrepreneurs who dream of building a large business can be exactly how to acquire the capital needed to start the business in the first place. One possible solution I have read is to start off by building multiple small businesses first. Basically, you start or acquire a small business, build it up some, systemize it, and hire a good manager to run it, then you start or acquire another small business and repeat the process.
By doing this, you could theoretically get a passive income of around $300K or higher from your small businesses. This in itself is very decent money for most people, but the important part is that it then gives you money to blow on getting your bigger projects off the ground. If you continue to live on say $50K a year with an income of $300K or higher, you will be able to live comfortably while at the same time have a lot of excess money to spend on getting your business that you are intending to grow to a large size going.
By doing this, you could theoretically get a passive income of around $300K or higher from your small businesses. This in itself is very decent money for most people, but the important part is that it then gives you money to blow on getting your bigger projects off the ground. If you continue to live on say $50K a year with an income of $300K or higher, you will be able to live comfortably while at the same time have a lot of excess money to spend on getting your business that you are intending to grow to a large size going.
Cut Costs and Marketing Or Increase Product Quality and Marketing?
So one of the things I have read some businesspeople say is that, in tough times, in order to attract and retain customers, one should not cut costs, which cuts product quality, nor cut marketing, which is one of the first things to get cut oftentimes. They say that if you focus solely on Revenue! Revenue! Revenue!, you'll hurt the company. Instead, you must ask yourself, "What can we do to make people willing to pay for the product?" They say marketing should not be cut, but instead perhaps even increased because it is vitally important for consumers to remain aware of your products/services, especially if other companies are cutting back on marketing. One point made is that this can endear consumers to your company for years, as they become aware of your company's products/services because of the increased marketing, and also very aware of the very good quality, especially in a time when quality from other companies was dropping.
An example of the cutting on costs could be could be how a submarine sandwich chain might cut back on the amount of meat in the standwiches in order to save money. However, this then also makes the product quality decline. The alternative idea is to increase (or at least maintain) marketing and increase the product quality, or maintain the product quality, while offering some really premium products, and marketing them well to consumers. This may hit profits in the short-term, but longer-term, could increase them. So for example, increase the meat in the sandwiches, or maintain the level of meat in the regular offerings, and offer some really meaty premium offerings. People will pay a premium, but get really superior quality.
This happened with Burger King in their experiment with offering expensive pork ribs in the middle of the recession. People bought them up so fast that Burger King began running out. What this showed is that, despite the recession, people are willing to pay a premium if the product has very good quality. How universal this is, I do not know however. A quick Google search for "increase marketing recession" yields a lot of results on this subject. I Googled "increase product quality recession" and "increase quality recession" but there does not seem to be as much on these.
In addition to increasing marketing, one could also instead focus on finding ways to increase marketing effectiveness, as opposed to just blanket increasing the marketing budget. This can give the best of both worlds if done correctly I'd imagine (more effective marketing for the same price!).
An example of the cutting on costs could be could be how a submarine sandwich chain might cut back on the amount of meat in the standwiches in order to save money. However, this then also makes the product quality decline. The alternative idea is to increase (or at least maintain) marketing and increase the product quality, or maintain the product quality, while offering some really premium products, and marketing them well to consumers. This may hit profits in the short-term, but longer-term, could increase them. So for example, increase the meat in the sandwiches, or maintain the level of meat in the regular offerings, and offer some really meaty premium offerings. People will pay a premium, but get really superior quality.
This happened with Burger King in their experiment with offering expensive pork ribs in the middle of the recession. People bought them up so fast that Burger King began running out. What this showed is that, despite the recession, people are willing to pay a premium if the product has very good quality. How universal this is, I do not know however. A quick Google search for "increase marketing recession" yields a lot of results on this subject. I Googled "increase product quality recession" and "increase quality recession" but there does not seem to be as much on these.
In addition to increasing marketing, one could also instead focus on finding ways to increase marketing effectiveness, as opposed to just blanket increasing the marketing budget. This can give the best of both worlds if done correctly I'd imagine (more effective marketing for the same price!).
Two Ways to Do Mergers and Acquisitions?
So I've been thinking, aside from graduating from a good MBA school and going to work as an investment banker or for a private equity firm, I figure there are two ways to do mergers and acquisitions. Actually, it's more one way, but two different methods of doing it. Basically, by building companies in relatively fragmented industries. You start with a central company, build it up some, then begin to make mergers and acquisitions of other companies in the industry. As you make the acquisitions, you then work to make the whole operation more efficient (say all the acquired companies have their own accounting, financial, etc..departments, so you centralize these types of functions so all companies use the same financial, accounting, etc...departments, which streamlines operations for the firm).
Now as I see it, there are two different ways to go about building companies via mergers and acquisitions. One is via taking the core company public in order to acess the capital markets, and then using the stock in order to begin making strategic acquisitions in order to grow the company. The second is via starting your own private equity firm and using the money investors have entrusted with you in order to build the portfolio companies you have acquired.
Not being a person who likes to be bossed around, the first one I am very unsure of, because once you become CEO of a publicly-traded company, you are now responsible for a huge amount of the public's money, and thus must constantly answer to stock analysts, shareholders, a board of directors, and so forth. And you likely will also have to focus on increasing the quarterly profits, which means focusing on the short-term, instead of the long-term. None of this sounds attractive to me. Instead of remaining an entrepreneur, you become a corporate bureaucrat (or you can become one).
The alternative model is the private equity fund. In this model, you do have to answer to investors, but it is a lot more private than with a publicly-traded corporation. You do not have to answer to shareholders, worry about stock analysts, and so forth. You can focus on taking a long-term view for the business you are growing. In fact, this is one of the primary benefits and purposes of private equity firms: to take publicly-traded companies that can be in dire straits, bring them under what is a form of private ownership, and then allow the management to focus on creating long-term value and growth for the company so that it can recover, then the private equity firm can either sell the company, or they can take it public via an IPO, or they can hold onto it as well.
One of the things private equity funds/firms have been doing as of late is consolidating fragmented industries, basically buying a company and then making a bunch of acquisitions (or even buying a group of companies and "rolling them up" into a single firm). So private equity is definitely an alternative way to pursue building companies via mergers and acquisitions. An entrepreneur can do it via the publicly-traded model, or via the private equity model if they are able to start their own private equity firm through which they can then do this.
The private equity model is by no means a guarantee such investments will work however (or the publicly-traded model), as there have been some private equity disasters as well.
Now as I see it, there are two different ways to go about building companies via mergers and acquisitions. One is via taking the core company public in order to acess the capital markets, and then using the stock in order to begin making strategic acquisitions in order to grow the company. The second is via starting your own private equity firm and using the money investors have entrusted with you in order to build the portfolio companies you have acquired.
Not being a person who likes to be bossed around, the first one I am very unsure of, because once you become CEO of a publicly-traded company, you are now responsible for a huge amount of the public's money, and thus must constantly answer to stock analysts, shareholders, a board of directors, and so forth. And you likely will also have to focus on increasing the quarterly profits, which means focusing on the short-term, instead of the long-term. None of this sounds attractive to me. Instead of remaining an entrepreneur, you become a corporate bureaucrat (or you can become one).
The alternative model is the private equity fund. In this model, you do have to answer to investors, but it is a lot more private than with a publicly-traded corporation. You do not have to answer to shareholders, worry about stock analysts, and so forth. You can focus on taking a long-term view for the business you are growing. In fact, this is one of the primary benefits and purposes of private equity firms: to take publicly-traded companies that can be in dire straits, bring them under what is a form of private ownership, and then allow the management to focus on creating long-term value and growth for the company so that it can recover, then the private equity firm can either sell the company, or they can take it public via an IPO, or they can hold onto it as well.
One of the things private equity funds/firms have been doing as of late is consolidating fragmented industries, basically buying a company and then making a bunch of acquisitions (or even buying a group of companies and "rolling them up" into a single firm). So private equity is definitely an alternative way to pursue building companies via mergers and acquisitions. An entrepreneur can do it via the publicly-traded model, or via the private equity model if they are able to start their own private equity firm through which they can then do this.
The private equity model is by no means a guarantee such investments will work however (or the publicly-traded model), as there have been some private equity disasters as well.
Tuesday, December 21, 2010
Create a Toy Company
So one particular type of company I would like to create, for the fun of it, is a toy and model hobbies company. The toy industry is very consolidated and very tough, however, but the toys I would like my company to make are the following:
1) A fashion-doll brand
2) Little-kid toys (for example, a competitor to Little Tikes, Step2, Fisher-Price, and so forth)
3) Die-cast toys
4) Radio-control toys
5) Japanese-themed brand
Fashion Dolls
The fashion doll industry went through a real re-awakening when MGA came out with the Bratz doll brand in 2001. Prior to that, Barbie had been THE undisputed champion of the fashion doll world, and no one could touch her. Anytime any company tried coming out with a doll brand to take on Barbie, they were met with an even more upscale, updated, and cooler Barbie and thus crushed.
MGA took a completely different path with the creation of the Bratz. Unlike Barbie, which is a fashion doll brand based around a central lead character (Barbie), Bratz are a fashion-doll brand that is not based on any particular character. Instead, the brand, "Bratz," was based on a group of characters, a very hip, urban, edgy, and multiethnic group of characters at that.
Thus Barbie found itself up against a completely new type of doll opponent. This was not a doll brand based on one central character competing with Barbie, it was Barbie, one character, competing against a brand of dolls that created up to forty different characters.
Worse, at the time, Mattel had let the Barbie brand slack off a bit. Barbie toys utilized more cheap materials, for example the handbag of a Barbie doll was a solid piece of plastic, whereas with a Bratz doll, you got a handbag made with real cloth and fabric. Being that the Barbie brand is something like one-third of Mattel's revenue, one can imagine what this led to.
Well, first, Mattel panicked. They watched helplessly as Barbie sales plunged, and Bratz sales surged. The toy industry watched with very keen interest as this upstart company, MGA Entertainment, knocked Barbie off her perch and sent Mattel into a scramble. Mattel responded by trying to copy the Bratz brand. This resulted initially was a failure, with the dolls called "Flava." Mattel now has a version of Barbie out called "My Scene," which is a more hip version of Barbie. They also sued MGA, claiming that the guy who designed the Bratz brand, Carter Bryant, had been working at Mattel when he came up with the idea, and then went to work for MGA, who then developed the Bratz brand.
Mattel was not successful in stopping the Bratz brand thus far, but they came very close, and really damaged the brand for MGA. MGA, upon thinking it might lose Bratz, responded by coming out with a new doll, called Moxie Girlz. One thing I have always wondered personally is whether Isaac Larian, upon seeing the Bratz idea, ever bothered to ask Mr. Bryant whether or not he had created the idea while working at Mattel. I mean that seriously. If I was owner of a toy company, and had hired on a guy who had previously worked at another company, in particular a company like Mattel, one of the first things I would have asked, just to be on the safe side, was, "You didn't design this doll while working at Mattel right?" And if he'd said, "Well yes, technically..." I'd have said, "I can't use it. If it is successful enough, Mattel could sue and try to claim it is their brand. I don't want to run that risk, or headache."
I have no idea whether Larian bothered to ask Bryant if he had come up with the Bratz concept while working at Mattel or not though. In an interview done some years ago, when asked about the Mattel lawsuit, Larian said (paraphrasing), "They can't win. It would be like if I were to say I could get into my car and drive to Mars. They can't win." The thing is, they almost DID win, which would tell me Larian must have really though Bryant did not design the doll while at Mattel. So who knows what the full details were.
Irregardless of all this, MGA did reform the fashion doll industry. The Bratz dolls, controversial as they were, personally I think had some AMAZING fashions. They really made Barbie look ridiculous. In addition, they changed the whole dynamic for how to create a fashion doll brand. No longer must a fashion doll brand be based around one single doll, but instead can be a brand based around a whole group of different doll characters. What's amazing to think about is that initially, Isaac Larian was told the idea would never work. No one would buy a multi-ethnic fashion doll brand based around multiple characters (HA!), and he was told that the success of the brand would not last when Bratz began becoming extremely successful. In this, they were inadverdently right, but only because of Mattel's lawsuit. It would be very interesting to see the position of Bratz right now had the lawsuit never occured.
Some people may point out that Barbie had multiethnic dolls as well, but with these, it was usually Barbie, the white girl, with her multiethnic sidekicks, whereas with Bratz, there was no central character. There also were no specific ethnicities. Bratz did not have a "white doll," a "black doll," a "Hispanic doll," etc...the dolls were different colors and girls could identify with whatever doll they thought best fit them.
Several lessons one could probably learn with regards to creation of a multiethnic fashion doll brand are thus, no specific ethnicities, just different colored dolls, and no central lead character.
Getting back to the point of how Bratz changed the dynamic of the fashion doll industry, as a result, there is now a slew of mutli-character fashion doll brands being created: there are Bratz dolls still, Moxie Girlz, Spinmaster's Liv dolls, Mattel's new Monster High brand, and probably a few others I do not know about.
My goal for my company is to create another brand of fashion dolls. I would like to revive the hip fashions and concepts that had initially made the Bratz so popular, which seem to have been given up as of late by brands such as Liv and Moxie Girls, and the new Bratz, due to complaints by parents and I suppose also the recession.
However, I am a firm believer that one could create fantastic eye-catching fashions without creating sexually-provocative dolls. It would be tricky, but I think it is doable. I would like the dolls to be focused on empowering girls as well. They (the characters) can love shopping and fashion, but also be into learning and education as well.
Kiddie Toys
This would be a brand meant to compete with Little Tikes, Step2, and so forth. I think creating such a company is very doable. It can make dolls, electronics, radio-control, and other such products.
Die-Cast Toys and Radio Control
One of the most innovative die-cast companies I have seen is Jada Toys. They, like Bratz, came on the toy seen and rocked their industry with really hip, quality, die-cast vehicles. Their die-cast cars focused on the collector's market and the custom vehicle industry. They got a licensing agreement with the DUB brand, which turned out to be a huge hit. One can also imagine how the Fast and the Furious movie series helped popularize the custom car market for their products as well. I would like to create very quality die-cast vehicles based off of the custom vehicle industry as well.
In terms of radio-control, radio-control toy companies are Mattel's Tyco brand, the Nikko brand, and a few others I am not thinking of. I intend to create a quality, very cool and innovative radio-control toy brand.
Model Hobbies
This group will likely consist of multiple brands, and will make model trains, hobby-grade radio-controlled aircraft (airplanes and helicopters), die-cast models, plastic model kits, and hobby-grade radio-controlled vehicles, both kits and RTR (Ready-to-Run). The really hip company in the hobby-grade RC vehicle industry I think is Traxxas. They pioneered the concept of RTR, and they are currently the leader in the RC vehicle industry. Their branding and marketing, in addition to the quality of their products, I think is absolutely top-notch (take a look at their website here: http://www.traxxas.com/).
Japanese-Themed Brand
Well with the success of Pokemon, Digimon, and now Spinmaster's Bakugan brand and the Beyblade brand, why not? Also anime is cool! I would like my company to thus create a cool Japanese-themed toy brand as well. Bakugan I believe was developed in conjunction with SEGA. Jakks-Pacific is currently seeking to create a new Japanese-themed brand as well. Theirs will be called Monsuno. Upon Googling it, it actually looks pretty cool.
Jakks-Pacific for years has been a producer of children's consumer products and of toys for brands created by other entities. However, now they are getting into creating their own content. And IMO, more power to them.
CNBTNOEHTOY
That stands for "Cool New Brand That No One Else Has Thought Of Yet" :D I don't know what it will be, but I'll definitely be trying to think one up.
1) A fashion-doll brand
2) Little-kid toys (for example, a competitor to Little Tikes, Step2, Fisher-Price, and so forth)
3) Die-cast toys
4) Radio-control toys
5) Japanese-themed brand
Fashion Dolls
The fashion doll industry went through a real re-awakening when MGA came out with the Bratz doll brand in 2001. Prior to that, Barbie had been THE undisputed champion of the fashion doll world, and no one could touch her. Anytime any company tried coming out with a doll brand to take on Barbie, they were met with an even more upscale, updated, and cooler Barbie and thus crushed.
MGA took a completely different path with the creation of the Bratz. Unlike Barbie, which is a fashion doll brand based around a central lead character (Barbie), Bratz are a fashion-doll brand that is not based on any particular character. Instead, the brand, "Bratz," was based on a group of characters, a very hip, urban, edgy, and multiethnic group of characters at that.
Thus Barbie found itself up against a completely new type of doll opponent. This was not a doll brand based on one central character competing with Barbie, it was Barbie, one character, competing against a brand of dolls that created up to forty different characters.
Worse, at the time, Mattel had let the Barbie brand slack off a bit. Barbie toys utilized more cheap materials, for example the handbag of a Barbie doll was a solid piece of plastic, whereas with a Bratz doll, you got a handbag made with real cloth and fabric. Being that the Barbie brand is something like one-third of Mattel's revenue, one can imagine what this led to.
Well, first, Mattel panicked. They watched helplessly as Barbie sales plunged, and Bratz sales surged. The toy industry watched with very keen interest as this upstart company, MGA Entertainment, knocked Barbie off her perch and sent Mattel into a scramble. Mattel responded by trying to copy the Bratz brand. This resulted initially was a failure, with the dolls called "Flava." Mattel now has a version of Barbie out called "My Scene," which is a more hip version of Barbie. They also sued MGA, claiming that the guy who designed the Bratz brand, Carter Bryant, had been working at Mattel when he came up with the idea, and then went to work for MGA, who then developed the Bratz brand.
Mattel was not successful in stopping the Bratz brand thus far, but they came very close, and really damaged the brand for MGA. MGA, upon thinking it might lose Bratz, responded by coming out with a new doll, called Moxie Girlz. One thing I have always wondered personally is whether Isaac Larian, upon seeing the Bratz idea, ever bothered to ask Mr. Bryant whether or not he had created the idea while working at Mattel. I mean that seriously. If I was owner of a toy company, and had hired on a guy who had previously worked at another company, in particular a company like Mattel, one of the first things I would have asked, just to be on the safe side, was, "You didn't design this doll while working at Mattel right?" And if he'd said, "Well yes, technically..." I'd have said, "I can't use it. If it is successful enough, Mattel could sue and try to claim it is their brand. I don't want to run that risk, or headache."
I have no idea whether Larian bothered to ask Bryant if he had come up with the Bratz concept while working at Mattel or not though. In an interview done some years ago, when asked about the Mattel lawsuit, Larian said (paraphrasing), "They can't win. It would be like if I were to say I could get into my car and drive to Mars. They can't win." The thing is, they almost DID win, which would tell me Larian must have really though Bryant did not design the doll while at Mattel. So who knows what the full details were.
Irregardless of all this, MGA did reform the fashion doll industry. The Bratz dolls, controversial as they were, personally I think had some AMAZING fashions. They really made Barbie look ridiculous. In addition, they changed the whole dynamic for how to create a fashion doll brand. No longer must a fashion doll brand be based around one single doll, but instead can be a brand based around a whole group of different doll characters. What's amazing to think about is that initially, Isaac Larian was told the idea would never work. No one would buy a multi-ethnic fashion doll brand based around multiple characters (HA!), and he was told that the success of the brand would not last when Bratz began becoming extremely successful. In this, they were inadverdently right, but only because of Mattel's lawsuit. It would be very interesting to see the position of Bratz right now had the lawsuit never occured.
Some people may point out that Barbie had multiethnic dolls as well, but with these, it was usually Barbie, the white girl, with her multiethnic sidekicks, whereas with Bratz, there was no central character. There also were no specific ethnicities. Bratz did not have a "white doll," a "black doll," a "Hispanic doll," etc...the dolls were different colors and girls could identify with whatever doll they thought best fit them.
Several lessons one could probably learn with regards to creation of a multiethnic fashion doll brand are thus, no specific ethnicities, just different colored dolls, and no central lead character.
Getting back to the point of how Bratz changed the dynamic of the fashion doll industry, as a result, there is now a slew of mutli-character fashion doll brands being created: there are Bratz dolls still, Moxie Girlz, Spinmaster's Liv dolls, Mattel's new Monster High brand, and probably a few others I do not know about.
My goal for my company is to create another brand of fashion dolls. I would like to revive the hip fashions and concepts that had initially made the Bratz so popular, which seem to have been given up as of late by brands such as Liv and Moxie Girls, and the new Bratz, due to complaints by parents and I suppose also the recession.
However, I am a firm believer that one could create fantastic eye-catching fashions without creating sexually-provocative dolls. It would be tricky, but I think it is doable. I would like the dolls to be focused on empowering girls as well. They (the characters) can love shopping and fashion, but also be into learning and education as well.
Kiddie Toys
This would be a brand meant to compete with Little Tikes, Step2, and so forth. I think creating such a company is very doable. It can make dolls, electronics, radio-control, and other such products.
Die-Cast Toys and Radio Control
One of the most innovative die-cast companies I have seen is Jada Toys. They, like Bratz, came on the toy seen and rocked their industry with really hip, quality, die-cast vehicles. Their die-cast cars focused on the collector's market and the custom vehicle industry. They got a licensing agreement with the DUB brand, which turned out to be a huge hit. One can also imagine how the Fast and the Furious movie series helped popularize the custom car market for their products as well. I would like to create very quality die-cast vehicles based off of the custom vehicle industry as well.
In terms of radio-control, radio-control toy companies are Mattel's Tyco brand, the Nikko brand, and a few others I am not thinking of. I intend to create a quality, very cool and innovative radio-control toy brand.
Model Hobbies
This group will likely consist of multiple brands, and will make model trains, hobby-grade radio-controlled aircraft (airplanes and helicopters), die-cast models, plastic model kits, and hobby-grade radio-controlled vehicles, both kits and RTR (Ready-to-Run). The really hip company in the hobby-grade RC vehicle industry I think is Traxxas. They pioneered the concept of RTR, and they are currently the leader in the RC vehicle industry. Their branding and marketing, in addition to the quality of their products, I think is absolutely top-notch (take a look at their website here: http://www.traxxas.com/).
Japanese-Themed Brand
Well with the success of Pokemon, Digimon, and now Spinmaster's Bakugan brand and the Beyblade brand, why not? Also anime is cool! I would like my company to thus create a cool Japanese-themed toy brand as well. Bakugan I believe was developed in conjunction with SEGA. Jakks-Pacific is currently seeking to create a new Japanese-themed brand as well. Theirs will be called Monsuno. Upon Googling it, it actually looks pretty cool.
Jakks-Pacific for years has been a producer of children's consumer products and of toys for brands created by other entities. However, now they are getting into creating their own content. And IMO, more power to them.
CNBTNOEHTOY
That stands for "Cool New Brand That No One Else Has Thought Of Yet" :D I don't know what it will be, but I'll definitely be trying to think one up.
Why the American Economy Boomed After World War II
One of the arguments often put forward by the proponents of massive government stimulus spending as a solution to our economic malaise right now, is that when World War II occurred, the massive level of spending the government engaged in is what created the necessary stimulus to pull the U.S. economy out of the depression it was in (the U.S. economy ran something like a deficit that was 40% of GDP during the war). After the war, the American economy experienced a phenomenal level of economic growth. Their argument thus is that if we engage in deficit spending on a similar scale, that we will see a similar turn around and level of economic growth again. I have a few problems with this argument.
Being a non-economist, my points for skepticism regarding this argument would be the following:
1) World War II itself, in terms of the amount of money spend on research and development regarding engineering and science, and in terms of the industrial base that was built up in America as a result of the war.
2) After World War II, most every other industrialized nation in the world was bombed out and rebuilding. The United States literally had no competition economically. In addition, some nations adopted socialist methods, which hamstrung their economies. Under the Labour Party, the United Kingdom for example nationalized the mines, the railroads, and so forth (which proved disastrous). Germany came close to adopting socialist central planning after WWII, but adopted market capitalism at the last second because the German people wanted nothing to do with socialism after the Nazis. This adopting socialist measures obviously hurt the economies of such nations.
3) Because of the New Deal, a lot of infrastructure had been created throughout various areas of America that had formerly, infrastructure-wise, been completely barren. Many areas had received electricity, plumbing, roads, bridges, ports, etc...and thus after the war, were able to develop into thriving economies. This development of totally rural areas of the nation into thriving economies probably had a lot to do with the big economic growth the nation experienced at the time. You had whole new areas of the country developing economically. It was things like this that endeared the Democratic party to the American people for roughly forty years as well.
An irony here is that if the Great Depression had never occurred (it is believed to have been the result of bad policies from the government and the Federal Reserve), then the New Deal infrastructure projects never would have occurred, and thus the economy may not have boomed after WWII the way it did.
4) During the Depression, the birthrate had declined. As a result, when the thriving economy of the 1950s rolled around, all of the men entering the workforce at the time found jobs ready and waiting for them.
5) The G.I. Bill, which allowed many returning soldiers to go to college or trade schools and learn skills and knowledge which they then used to build the economy.
6) After the war, the United States did not have the massive social welfare state that it has today. There was no Medicare or Medicaid and Social Security was a fragment of what it is today. As a result, the United States was able to quite easily pay down the massive level of deficit and debt it had built up during the war, in addition to helping to rebuild the economies of Europe and Japan.
7) The Interstate Highway System was started during the 1950s, which had a huge impact on the long-term economic growth of the nation.
8) The defense budget and the space program led to the funding of a lot of research at various universities and institutions. It was funding from DARPA that led to some of the key discoveries that allowed the creation of modern computers and electronics, along with the creation of the Internet and the GPS (Global Positioning System). In this sense, the defense budget I'd say served as a form of industrial policy for the United States during the 20th century (and still does to some degree).
Right now, the United States, if engaging in a similar level of deficit spending as what was seen during WWII, doesn't really have any ultra-rural areas that need infrastructure development where we would see thriving economic growth. We have a much larger social welfare state to contend with, we have a large population, and we have a lot of economic competition with other nations today. So I am not so sure the analogy holds in trying to justify massive stimulus today.
Being a non-economist, my points for skepticism regarding this argument would be the following:
1) World War II itself, in terms of the amount of money spend on research and development regarding engineering and science, and in terms of the industrial base that was built up in America as a result of the war.
2) After World War II, most every other industrialized nation in the world was bombed out and rebuilding. The United States literally had no competition economically. In addition, some nations adopted socialist methods, which hamstrung their economies. Under the Labour Party, the United Kingdom for example nationalized the mines, the railroads, and so forth (which proved disastrous). Germany came close to adopting socialist central planning after WWII, but adopted market capitalism at the last second because the German people wanted nothing to do with socialism after the Nazis. This adopting socialist measures obviously hurt the economies of such nations.
3) Because of the New Deal, a lot of infrastructure had been created throughout various areas of America that had formerly, infrastructure-wise, been completely barren. Many areas had received electricity, plumbing, roads, bridges, ports, etc...and thus after the war, were able to develop into thriving economies. This development of totally rural areas of the nation into thriving economies probably had a lot to do with the big economic growth the nation experienced at the time. You had whole new areas of the country developing economically. It was things like this that endeared the Democratic party to the American people for roughly forty years as well.
An irony here is that if the Great Depression had never occurred (it is believed to have been the result of bad policies from the government and the Federal Reserve), then the New Deal infrastructure projects never would have occurred, and thus the economy may not have boomed after WWII the way it did.
4) During the Depression, the birthrate had declined. As a result, when the thriving economy of the 1950s rolled around, all of the men entering the workforce at the time found jobs ready and waiting for them.
5) The G.I. Bill, which allowed many returning soldiers to go to college or trade schools and learn skills and knowledge which they then used to build the economy.
6) After the war, the United States did not have the massive social welfare state that it has today. There was no Medicare or Medicaid and Social Security was a fragment of what it is today. As a result, the United States was able to quite easily pay down the massive level of deficit and debt it had built up during the war, in addition to helping to rebuild the economies of Europe and Japan.
7) The Interstate Highway System was started during the 1950s, which had a huge impact on the long-term economic growth of the nation.
8) The defense budget and the space program led to the funding of a lot of research at various universities and institutions. It was funding from DARPA that led to some of the key discoveries that allowed the creation of modern computers and electronics, along with the creation of the Internet and the GPS (Global Positioning System). In this sense, the defense budget I'd say served as a form of industrial policy for the United States during the 20th century (and still does to some degree).
Right now, the United States, if engaging in a similar level of deficit spending as what was seen during WWII, doesn't really have any ultra-rural areas that need infrastructure development where we would see thriving economic growth. We have a much larger social welfare state to contend with, we have a large population, and we have a lot of economic competition with other nations today. So I am not so sure the analogy holds in trying to justify massive stimulus today.
Wednesday, December 1, 2010
Interesting Article, Another Conglomerate and New Idea
So I discovered another conglomerate, EBSCO Industries, a $2.5 billion a year privately-owned company. I found it reading this article: The New Conglomerate - I find the article very interesting, and it gives hope, as it shows that conglomerates can work. However, it seems in order to form a conglomerate, one would need to keep the company privately-owned, because if a public company, shareholders, at least nowadays, would likely demand the conglomerate be broken up, to focus on "core" businesses.
My new business idea is another industry to consolidate (I get these ideas a lot), or at least enter into and make acquisitions in over time. However, I think this very industry could also serve as a way to acquire or build a company, take it public, and make acquisitions without having the shareholders complain about "core businesses." Basically, the packaging industry. This is a very fragmented industry from my understanding with many players. One interesting area of it seems to be the pharmaceutical packaging industry. One company in this industry, a German company named Gerresheimer AG, started originally as a much smaller company, but then it was purchased by private equity (first Invescorp and Chase Manhattan Bank, then Blackstone), which moved it into pharmaceutical packaging. They had it make a series of acquisitions, then took it public in Frankfurt in 2007.
Two other packaging companies are Clondalkin Group and Mauser Group. I am not sure about Mauser Group, but Clondalkin Group is a large packaging conglomerate that was also built by a company making acquisitions of other various packaging companies.
Well obviously a pharmaceuticals packaging company that is a made up of various different pharmaceuticals packaging businesses, will itself be a conglomerate technically, BUT, it is not a conglomerate consisting of various disprate businesses. Instead, it is a conglomerate with one core business that it focuses on, it just does so via ownership of various companies within that core business/industry.
I do not think shareholders would complain about this type of conglomerate as such. My idea was perhaps to build a pharmaceuticals packaging empire, then via further acquisitions and mergers, combine it with a few other packaging companies to build an overall packaging empire (pharmaceuticals packaging is one aspect of overall packaging). I don't know if that would be a good idea or not though, it might just be good to leave it at pharmaceutical packaging (Gerreshemier actually is in life-sciences packaging as well), however, one could also make the argument that packaging itself is a core business, just with different areas, so building an overall packaging conglomerate (as opposed to just a pharmaceuticals packaging conglomerate) is still keeping within a core business (packaging).
If I did attempt this, well all I need to do I suppose is acquire a small packaging company, grow it larger, take it public, and then begin making acquisitions, then cash out within a decade (easier said then done of course). I would imagine I could be entrusted to remain CEO of the company as I would have grown it well as a private company over some years first (so the investors would know the CEO is not some totally inexperienced person).
My new business idea is another industry to consolidate (I get these ideas a lot), or at least enter into and make acquisitions in over time. However, I think this very industry could also serve as a way to acquire or build a company, take it public, and make acquisitions without having the shareholders complain about "core businesses." Basically, the packaging industry. This is a very fragmented industry from my understanding with many players. One interesting area of it seems to be the pharmaceutical packaging industry. One company in this industry, a German company named Gerresheimer AG, started originally as a much smaller company, but then it was purchased by private equity (first Invescorp and Chase Manhattan Bank, then Blackstone), which moved it into pharmaceutical packaging. They had it make a series of acquisitions, then took it public in Frankfurt in 2007.
Two other packaging companies are Clondalkin Group and Mauser Group. I am not sure about Mauser Group, but Clondalkin Group is a large packaging conglomerate that was also built by a company making acquisitions of other various packaging companies.
Well obviously a pharmaceuticals packaging company that is a made up of various different pharmaceuticals packaging businesses, will itself be a conglomerate technically, BUT, it is not a conglomerate consisting of various disprate businesses. Instead, it is a conglomerate with one core business that it focuses on, it just does so via ownership of various companies within that core business/industry.
I do not think shareholders would complain about this type of conglomerate as such. My idea was perhaps to build a pharmaceuticals packaging empire, then via further acquisitions and mergers, combine it with a few other packaging companies to build an overall packaging empire (pharmaceuticals packaging is one aspect of overall packaging). I don't know if that would be a good idea or not though, it might just be good to leave it at pharmaceutical packaging (Gerreshemier actually is in life-sciences packaging as well), however, one could also make the argument that packaging itself is a core business, just with different areas, so building an overall packaging conglomerate (as opposed to just a pharmaceuticals packaging conglomerate) is still keeping within a core business (packaging).
If I did attempt this, well all I need to do I suppose is acquire a small packaging company, grow it larger, take it public, and then begin making acquisitions, then cash out within a decade (easier said then done of course). I would imagine I could be entrusted to remain CEO of the company as I would have grown it well as a private company over some years first (so the investors would know the CEO is not some totally inexperienced person).
Real Estate
This is another area of business that I would like to build a large company in. I would like to create office buildings, hotel chains, and shopping malls. I would like to try real-estate because I love architecture and building construction. I see it as another way to build and create things.
I have lots of ideas for fortune-building, from real-estate, to private-equity, to entrepreneurship by building a large private company (hopefully holding company), to being a professional entrepreneur who builds companies by consolidating fragmented industries. I would go about doing this by taking the companies public, then using the capital to make acquisitions over a period of years, then cashing out, as Wayne Huizenga did with Waste Management, Blockbuster, and Autonation (he is now doing it again, in the cleaning products business apparently):
Huizenga to Take Cleaning Business Public in Coolbrands Merger
I have lots of ideas for fortune-building, from real-estate, to private-equity, to entrepreneurship by building a large private company (hopefully holding company), to being a professional entrepreneur who builds companies by consolidating fragmented industries. I would go about doing this by taking the companies public, then using the capital to make acquisitions over a period of years, then cashing out, as Wayne Huizenga did with Waste Management, Blockbuster, and Autonation (he is now doing it again, in the cleaning products business apparently):
Huizenga to Take Cleaning Business Public in Coolbrands Merger
Private Equity
So in addition to building a conglomerate, I also have dreams of building a private equity firm, or of having my holding company start its own private equity firm. This may sound maniacal to some, but I think it is very doable because Goldman-Sachs started its own private-equity operation, which is right now the largest private-equity operation on Wall Street.
Private equity fits with my desire to build companies and control lots of them. The thing that I am not sure of per se is how to found the firm (provided I do not wait to have a conglomerate first). My initial goal is to become a successful entrepreneur first, then perhaps start the firm. I figure this way I can start it with my own money like Lynn Tilton started Patriach Partners. What I also wonder is what degree of education do I need to start a private equity firm? Is knowledge of how to build a company enough? Or do I need extensive knowledge in terms of finance as well...? For example, Ron Burkle dropped out of college and started Yucaipa Companies, a holding company engaged in private equity investments (is that the same thing as a private equity fund...? or is it separate in that it is a company owned by one individual with no outside investors that engages in private equity...? THIS STUFF IS CONFUSING! if I can have my holding company engage in its own private equity investments, I might do that).
On the other hand, one could also say that while knowledge of how to build a company is important, as a private equity manager, one would probably need to know a lot of formal finance knowledge in order to handle how to structure the debt and so forth of various companies and investments the firm becomes involved in.
Obviously no one in their right mind will just give some random guy with no experience or knowledge a bunch of money to manage a private equity fund (or at least not now anyway; at the height of the boom, some actually were! It was like the venture capitalists throwing money at businesses with no solid fundamentals). But what about a successful entrepreneur who doesn't have much in the way of formal education (although does have self-education), as opposed to the guy who has spent say a decade working in for example mergers and acquisitions who now wants to start his own firm. I intend to be the former, as I cannot become the latter.
Irregardless though, I do intend to self-educate myself to a great degree in finance, and I would imagine that if I have a high enough net worth, that also could provide some comfort to investors at the time as well. All of this of course is if I decided to start a wholly-separate private equity firm managed by me.
Private equity fits with my desire to build companies and control lots of them. The thing that I am not sure of per se is how to found the firm (provided I do not wait to have a conglomerate first). My initial goal is to become a successful entrepreneur first, then perhaps start the firm. I figure this way I can start it with my own money like Lynn Tilton started Patriach Partners. What I also wonder is what degree of education do I need to start a private equity firm? Is knowledge of how to build a company enough? Or do I need extensive knowledge in terms of finance as well...? For example, Ron Burkle dropped out of college and started Yucaipa Companies, a holding company engaged in private equity investments (is that the same thing as a private equity fund...? or is it separate in that it is a company owned by one individual with no outside investors that engages in private equity...? THIS STUFF IS CONFUSING! if I can have my holding company engage in its own private equity investments, I might do that).
On the other hand, one could also say that while knowledge of how to build a company is important, as a private equity manager, one would probably need to know a lot of formal finance knowledge in order to handle how to structure the debt and so forth of various companies and investments the firm becomes involved in.
Obviously no one in their right mind will just give some random guy with no experience or knowledge a bunch of money to manage a private equity fund (or at least not now anyway; at the height of the boom, some actually were! It was like the venture capitalists throwing money at businesses with no solid fundamentals). But what about a successful entrepreneur who doesn't have much in the way of formal education (although does have self-education), as opposed to the guy who has spent say a decade working in for example mergers and acquisitions who now wants to start his own firm. I intend to be the former, as I cannot become the latter.
Irregardless though, I do intend to self-educate myself to a great degree in finance, and I would imagine that if I have a high enough net worth, that also could provide some comfort to investors at the time as well. All of this of course is if I decided to start a wholly-separate private equity firm managed by me.
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