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The Economics Of Business Class

12:00 pm in Daily Bulletin

We may never get to travel in it but at least we can read about it. Jad Mouawad looked at the battle for business class:

  • While business and first class seats only make up about 10% of a plane, they account for up to half the revenue of airlines.
  • Thus the airlines are locked in fierce competition over attracting business class customers. For an airline making and installing a business class seat can cost up to $80,000. A first-class seat up to $500,000.
  • A seat has to be a working desk, an entertainment hub, a dinner table, and a bed. And it must be comfortable in each of these positions.
  • Since airlines, by definition, cross countries and cultures, they must also fit the body shape and type of people from around the world.
  • Business class rose in popularity during the 90s when planes could increasingly fly nonstop to any place on earth and people needed to actually be able to sleep on the flights.
  • Middle Eastern and Asian carriers really upped the luxury levels for business class passengers with large bars and full-flat beds.
  • It’s a popular class because often the travelers don’t pay for it themselves. Instead they have corporate expense accounts that they can bill the flight too.
  • The business class experience and seat is one of the few things that airlines can control and use to differentiate themselves in the airline market.
  • Making seats as big as possible while fitting as many of them as possible into a cabin is the goal for every airline. Some innovations include having half the passengers sitting backwards and facing each other, or fitting the legs of the passenger under the armrest of the passenger in front of them.
  • What’s in store for the future of business class? Maybe seats with cup holders.

The full article talks about why features such as “massage chairs” are increasingly being dropped from airplanes, how business class affects economy class and much more. It’s well worth a read. Find it here.

Source: The New York Times

Via: The Economist

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Business Lessons From A Refugee Camp

9:00 am in Daily Bulletin

Richard Davies went to a Syrian refugee camp in Jordan and talked about the business acumen there:

  • One successful store customizes bicycles by spray painting them and adding stripes. The bicycles are donated and originally all looked the same, which made refugees feel like they were losing their individual identity.
  • The bicycle business is a good one since buyers become customers for life as they come to the same store for ongoing maintenance.
  • Other businesses – such as carpentry – are less successful. Refugees take careful care of their belongings, meaning that there is little repeat business.
  • Some respond to this by updating their product lines month after month to add features and make them look different – much like in the smartphone world today.
  • Location matters. The most successful stores are on a road the locals call the Champs-Elysées. Nearby aid workers and new refugees all take that road giving the stores a broad customer base.
  • Having established themselves selling basic products, some stores are now moving upmarket to sell luxuries like jeans.
  • But refugee businesses must deal with unique problems. As a bloody peace begins to flicker in parts of Syria, some refugees are returning home – a problem for businesses looking to expand.

Read more on 1843.

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The Makers Of Big Ben Are Going Out Of Business

9:00 am in Daily Bulletin

Nicola Harley wrote that the oldest manufacturing firm in Britain is shutting down shop:

  • The Whitechapel Bell Foundry, based in London, built the bell that tolls in Big Ben, and is behind other famous bells such as Philadelphia’s Liberty Bell.
  • The company was founded in 1570, during the reign of Queen Elizabeth I, and managed to survive almost 500 years.
  • Quality is paramount to the company. It takes about 11 years between an inquiry being made and the final product being delivered. In one instance an order took an entire century.
  • The foundry priced its big-scale bells in the £250,000 (US$320,000) range.
  • But a lot of its business had turned into making small table bells, popularized by Downton Abbey, where it is used to ring for tea.

Read more about the company on The Telegraph.

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What Amish Businesses Do Differently

9:00 am in Daily Bulletin

The Amish are a group of traditionalists that avoid modern technology, and end their formal education after the eighth grade. They’re also business geniuses, writes Tim Stuhldreher:

  • More than 65% of American businesses fail, but less than 10% of Amish ones do.
  • Contrary to their reputation as an insular community, these businesses cater to mainstream consumers and have wide appeal.
  • The lack of formal education seems to help. The brightest students don’t go on to study to be lawyers, doctors, or accountants. Instead they can really only either farm or start a small business – and many opt for the latter.
  • Given that the Amish are disdainful of technology like air conditioning or decadent offices, their companies have low operating costs.
  • In fact avoiding technology in general forces the community to be inventive and creative in everyday living.
  • It is also easier to build a shared vision. Businesses know that their employees will share values and cultures, allowing for lower friction work environments.

Read some of the other factors that lead to their success over here.

Source: Lancaster Online

Via: Marginal Revolution

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Divorce Is A Lucrative Business

9:00 am in Daily Bulletin

The Economist wrote about an industry that hopes you stumble in your quest for true love:

  • Financiers offer loans to individuals seeking a divorce to cover legal costs.
  • In exchange the financiers get a cut of the assets that a party wins from the divorce.
  • The loans themselves typically have interest rates of 18% and are usually worth about a third of the expected payout.
  • In New York one firm’s average loan is for $306,000.
  • The biggest problem is when a couple aborts divorce proceedings and decides that they were right the first time, and stay together. No divorce means no sold assets, and no return on investment.
  • The firms point out that parties in a divorce would probably have to settle for much less if they couldn’t afford the high end lawyers that the loans allow.

Read more here.

Source: The Economist

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In China Uber Has Turned Into An Opportunity To Socialize Or Do Business

9:00 am in Daily Bulletin

Zheping Huang wrote about the peculiar role that Uber has gone onto play in China:

  • Due to the one-child policy, few middle-aged middle-class people have individuals like cousins or siblings their own age to spend time with.
  • In China one is also less likely to see random conversations being struck up at places like bars.
  • Some have taken to driving for Uber. It gives them short bursts of conversation with varied strangers.
  • Often these people make far more from their standard day jobs, than they do driving for Uber.
  • If they’re interested in finding someone to play tennis with, they may try to pick up passengers around tennis courts and form weekend plans with them.
  • At times Uber itself becomes the subject of socialization – some Uber drivers looking for social contact have come together to form communities.
  • For others Uber is about business opportunities. One driver who sells electronics parks in front of the aerospace academy and picks up passengers from there in an effort to keep up with industry trends.
  • And yet others just like the thrill of exploring massive cities like Beijing through people’s lives.

Read more about why Uber, rather than some of its more successful Chinese competitors, is the app of choice for those looking for socialization, and interviews with Chinese Uber drivers here.

Source: Quartz

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Some Chinese Business Leaders Are So Nervous About The Economy They’re Losing Lawsuits On Purpose

9:00 am in Daily Bulletin

People always find a way wrote Chuin-Wei Yap:

  • Due to concerns about China’s economy the rich are increasingly looking for ways to move their cash to safe havens abroad.
  • To prevent sudden capital flight the government has limited transfers of cash out of the country to $50,000 a year.
  • One company tried to hire a law firm to exploit a loophole by sueing itself for breach of contract. The plan was that the company would lose the lawsuit, and thus pay $3.5 million to its foreign subsidiary abroad.
  • It was hoped that going through the entire legal process would keep the government blind to what was really going on.

Read more here.

Source: The Wall Street Journal

Via: Marginal Revolution

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Iowa Businesses Are Cashing In On The Attention

9:00 am in Daily Bulletin

Iowa Caucus

All eyes are on the Iowa caucuses today. Businesses have found ways to take advantage writes Jeremy Quittner:

  • Some places such as Pizza Ranch have become election year institutions with candidates always planning events.
  • They are usually divided between the Democrats and the Republicans. Pizza Ranch, for example, usually only hosts Republican candidates.
  • One diner launched a coffee bean caucus. Patrons were invited to drop a coffee bean into a jar to indicate which candidate they supported.
  • The jars have been a surprisingly good predictor of caucus results leading to a lot of media attention that boosts business.
  • Another business sells caucus theme merchandise known for being edgy – think of all the plays on the word ‘caucus’.
  • According to one company, the Iowa caucus leads to an additional $100,000 in revenue.

Read more over here.

Source: Slate

Tags: American Elections, American Elections 2016
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The Business Of Selling Names

9:00 am in Daily Bulletin

The Economist wrote about an atypical business:

  • Many in Sri Lanka believe that names can shape destinies.
  • Therefore, when a baby is born, or a business launched, an increasing number of Sri Lankans are going to “naming consultants” that provide guidance on the names to choose.
  • At one such consultancy clients have to take a number and wait until they are called up. The service costs 500 rupees – about $3.56.
  • The practice is so popular that in 1992 the President was told the country needed to change its name to “Shri Lanka” for good fortune. He went onto be assassinated and the country quietly changed its name back.
  • The previous Sri Lankan President named an airline after himself so that his name would fly high in the skies. He was subsequently booted out of office in a surprise election defeat.
  • The airline bearing his name continues to fly high though so the naming consultant was not wrong per se.

Read more about the industry here.

Source: The Economist

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How To Build A Business That Lasts 1,000 Years

9:00 am in Daily Bulletin

Japan has a few companies that have existed for over a thousand years. Joe Pinsker took a look at the secrets to their success:

  • The oldest businesses are in industries that don’t go out of style: making food, shipping goods, and constructing buildings.
  • The country is flexible about passing businesses down a generation. If a family felt that their own child wasn’t worthy enough to run the family business, they would “adopt” a more suitable heir.
  • This explains why while in most of the world those adopted are usually children, in Japan 98% of adoptees are 25-30 year old men.
  • For a long time Japanese banks were expected to help out all struggling companies. As a result, according to one estimate, between 1955 and 1990 less than a hundred companies went out of business.
  • Things are changing though. In 2007 a 1,429 temple construction business ran out of money. Soon after a 533 year old company, and a 465 year old company went out of business.
  • This is in part because a change in the law meant that it was difficult for struggling businesses to get help from banks.
  • Younger Japanese consumers also care less about a company’s history.

Read about some of the older companies still operating in Japan, the 10 foot 17th century scroll that traced a company’s owners, some fascinating statistics, and much more over here.

Source: The Atlantic

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