techreports,
re: business moats, Same for any industry. Throw enough money at it and you'll eventually win. No company is invincible (unless maybe you're a government regulated monpoly). It's possible Pepsi could unseat Coke.
the comparison was new money to unseat an incumbent. 5 billion VC money wouldn't begin to unseat Coke. just as a comparison, look at what a poor job Coke has done of trying to unseat Gatorade, despite KO's great distribution system. these are strong brands which are real moats and have very long product cycles. i think they are much more valuable businesses than any tech company except maybe MSFT. that doesn't mean KO is a great buy, just that it's a great business. on the other hand, a number of tech cos. seem to be bad businesses and expensive to boot.
That's if Pepsi wanted to spend 20 billion on advertising and another 10 billion on distribution.
see, there's no way they'd get a return on this investment. it wouldn't work, and the CEO would be fired before he left the boardroom.
Heck, the only reason people buy Coke is because of their brand really. Not really a barrier i'd consider very big
no, it's not a big barrier; it's HUGE. Coca-Cola is the most recognized brand in the world. i believe it is the second most recognized symbol in the world after the crucifix. you can go into the deepest amazon jungle or the forests of borneo, and they know Coke. there's no way you can afford to buy that ubiquity or symbol depth.
Not really a barrier i'd consider very big. People HAVE TO BUY WINDOWS.
LOL. some people have to buy windows once every product cycle (5 years now). lots more people have to drink Coke 3 times a day, every day, till they die. if you don't think this is true, why don't Coke drinkers buy the supermarket brand of cola. not quite as much of a lock as MO, but pretty darn good for sugar water.
BTW, i agree with you that MSFT has a great business. however, the industry fundamentals now suck, and i think MSFT is overpriced just like KO. notice that MSFT is desperately going after a totally unrelated market with the X-box--low margin, incredible competition, and no leverage from Windows. this is just like Coke going after gatorade with their crappy sports-ade.
i expect MSFT will get whacked by the japanese and X-box will go down as one of the great product boondoggles of all time. for one thing, the product has a very stupid business model. playstation 1 of yore was a great model because the box was cheap and the games were cheap (for kiddy with product-cycle budget of 500, 150 for low-margin box, 350 for software, so purchases 10+ high-margin games). hence lots of royalties on lots of games, and lots of market for lots of software vendors. that is the perfect razor/blades model. but X-box, and to a lesser degree playstation 2 has this bassackward: the box is super expensive, so the games have to be more expensive, meaning there are fewer games, fewer royalties, fewer happy software vendors. this is not a razor/blades model and will only work if they can expand well beyond the core youth group with their very limited budgets (300 or more for loss-loser box, only 200 left over for 50+-dollar games, so only 3-4 high-margin games). |
