A Wicked business model

Driving mundane hirecars around the South-Western US over the past month, sharing the roads with behemoth Winnebagos, and staying in equally uninspired motels all reminded me of an enterprise and business model I’ve been meaning to write up on this Blog for a good six months at least.

Strategy is the search for competitive advantage – offering a product that attracts and retains customers in a cost-effective fashion. The folks at Wicked Campers appear to do a great job on all fronts.

For those unfamiliar with this product, just head anywhere touristy and remote in Australia/New Zealand (and increasingly beyond) and you will find them. This mob hire out (and also sell) very basic campervans to the backpacker crowd. The campervans are converted work vans that have been fitted with a very efficiently laid out set of beds, seating, cooker, sink etc. The most noticeable aspect of them is the spraypainted (graffiti-style) exterior and a (typically tasteless) individualised joke/catchphrase on the rear.

We drove one around far-north Queensland last year and it was great fun and extremely practical.

So let’s look at the business model:

Target market: young travellers who aren’t overly endowed with money, are looking to sleep cheaply and explore a country with few constraints. They also like something different to include in their happy snaps and some form of differentiation from the retirees and families they’re sharing the roads and campgrounds with.

Competitors: fairly staid caravan and car-hire forms on one side. Sole operators with no reputation or service/dropoff network on the other.

Substitutes: public transport (land, sea and air), tour groups, and unreliable and transaction-cost-heavy used-vehicle markets.

Value chain: a steady supply of used vans that can be converted at pretty low cost (it’s basically a bit of carpentry, plumbing and supplies from a $2 shop). Standardised repair and maintenance (their pretty much all the same sort of vans). Online booking. Sheds and carparks as distribution points (with most customers prepared to go to dodgy neighbourhoods for the bargain).

Marketing: cheeky as all hell (see this discussion for the mixed opinions of their ad campaigns), with the vans as billboards, and loads of word of mouth.

Synergies: I can’t help but think a big chunk of this was accidentally strategic. Why are the van’s spraypainted with individual designs? Because the old work vans had decals and details from previous uses and the artwork is cheaper (and more distinctive) than a more professional respray.

Market positioning: definitely low cost, and perhaps focussed low cost (they aren’t targetting the broadest possible market). But they’ve managed to build in sufficient differentiation to make sheer imitation a little more difficult (and also opening up new entrants to “copy cat” derision).

Blue ocean-ness: they have stretched the market such that new consumers (backpackers) are considering the previously slightly geriatric and daggy campervan option, and also pared back the bells and whistles that incumbents competed around (comfort/reliability/newness).

Expansion: what brought this back to my attention was firstly lamenting our lack of Wicked Van in the US, and then hours later, spotting one of them. The firm has expanded from its roots in Australia to tackle other backpacker havens. The ordering seems comparable to another Aussie backpacker-related internationaliser, Flight Centre, in that they started with the most similar countries (NZ, Canada, South Africa), and are then broader options (US and Europe (with Italy first I think). Excitingly, the firm could well be considered global now, with Bangkok and Chile about to open.

All in all, this is a viable and well-structured approach. It’ll be intriguing to see if the international expansion can work. Will the humour (if you can call it that) translate?

Might multinational managers be the problem?

My recent US trip was principally motivated the big annual conference of international business scholars – the AIB. I spent five sunny days in San Diego presented, discussing and pondering the nature of multinational activities, strategies and impact with 900 or so other academics. There were a range of fascinating sessions and papers.

An opening session featured some IB luminaries – Pankaj Ghemawat and Udo Zander – discussing the nature of the global business environment (notionally the rather non-controversial Flat versus Spikey debate). Both made strong arguments that none of the purported globalisation we’ve seen in recent decades is particularly unprecedented when we look at a time frame of a century or more, nor is international trade and production as integrated or connected as most people assume. They presented some conflicting implications of this however.

Ghemawat argued that firms run the risk of assuming the world is flat and thus adopting big, bland reductionist strategies that will satisfy no consumer’s needs and will stumble in the face of genuine country and regional differences.

Zander argued a more complex and controversial position. In his tale, only a small number of multinationals manage to build temporary innovation and knowledge advantages that they can leverage via global cloning (i.e. advantages that are sufficiently transferable and applicable across multiple markets). Other multinationals will struggle to adapt to to local needs and thus fail (or at least underperform).

So far, there’s not much new in this perspective. Even his explanation for the barriers to firm adaptation/learning aren’t surprising – the multinationals are burdened by the organisational history/institutional memory and current wisdom is sticky.

Where it gets intriguing is the examples he gave of subsidiary managers in markets steadfastly refusing to change their strategy in the face of years of failure and repeated suggestions to adapt and learn.

This begs the question, as does Ghemawat’s characterisation of strategies being too simple, are multinational managers the handbrake on multinational success?

Perhaps we have placed too much weight on the size of the challenges in international business, and too little on the failure of managers to tackle these challenges. Firms may be failing more because of the weaknesses of their managers rather than any insurmountable liabilities of foreignness or risks of doing international business.

As scholars we spend too little time looking at failures and too much time looking at the winners. Perhaps the winners are just those who stuffed it up the least. Might we learn more from the mistakes?

Why buy? Indian firms seeking partner who…

International business researchers have always been interested in the motivations for foreign direct investments. Pre-eminent IB scholar John Dunning argued that there were four core drivers:
- the quest for more customers (market-seeking)
- gaining access to inputs unavailable, or less palatable, at home (resource-seeking)
- looking to build a more efficient chain of value adding activities (efficiency-seeking)
– building up the knowledge-based resources of the firm and portfolio of brands (strategic-asset-seeking).

This recent Economist article gives a nice catalogue of recent international acquisitions by Indian firms, and offers decent examples of several fronts.

The acquisitions mentioned by Avantha (in engineering), Tata Steel and Tata Motors all can be lumped under the strategic-asset-seeking banner, as the firms sought to tap into technologies and brands unavailable in their home market and which are crucial to further international growth. This is comparable to Lenovo’s purchase of IBM’s PC business a few years back (and pretty typical for emerging market multinationals).

What is less clear in terms of motivation is what is driving Bharti Airtel’s pursuit of South African mobile giant MTN.

Are they chasing MTN’s (admittedly outstanding) competencies in rolling out networks in very poor countries (in terms of household incomes and also physical infrastructure)? These may well mesh in very well with Bharti’s own experiences in India, and set the firm up for a huge play in markets across the developing world (i.e. a strategic-asset-seeking approach).

Or they simply chasing the almost billion possible customers in Africa (to throw on top of a similar top of comparable target market in India)? This would clearly be market-seeking FDI…