Apr 21, 2005

Cheese Tycoons Meet the Chinese Counterfeiters

A while back I picked up one of those business tycoon type computer games. You know the type Im sure. You start with a modest amount of capital and open a pizza shop and try to build a better pizza while you play against computer opponents who are doing the same thing.

The game claims to be realistic. You develop you own pizza recipes, design and open your own shops, hire your own employees, pay for advertising and such all in the hopes of building a better pizza than your competitors. And thus, building your own virtual pizza empire.

Not only inspiring, but the thought of it all is downright noble once you think about it. I mean, who wouldn't aspire to create or develop a better product or service and become a successful businessman or entrepreneur.

Sadly and yet inevitably about thirty minutes into the game, once discovering the virtual stock market feature you find out that there is no nobility in actually employing your serfs to make a better pizza, no such thing as healthy competition and and surely nothing but a waste of time in dealing with those pesky customers.

And so here I am thirty minutes into the game and I no longer need to make pizzas anymore. If some fool company comes in and decides to make a better pizza you simply use your financial muscle to buy them out or buy enough shares in them to made them do your bidding. With all the millions I make I dump it into advertising and brainwash the little sims into loving my now substandard pizzas. Ah the life of a business tycoon. Too bad the game didn't have corporate jets, caviar and champagne.

And so, is it a realistic simulation? Well, if it was anymore realistic you might find that you can pretty much outsource most of your business. Customer service, distribution, sales. Damn near everything can be outsourced. It makes no difference if customers complain or your product or service suffers or becomes substandard because of your indifference. You are the only game in town.

Today as I waited in vain for a returned call from Kraft Singapore in the hopes of getting my Velveeta cheese, While I was waiting, I decided to call Kraft Foods Malaysia once again. I managed to speak to a Mr. Lai who did his best to console me and help me to understand the harsh realities of big business and how things at Kraft Foods around the globe operate.

The end result was that Mr. Lai couldn't help much. The best he could do would be to put me in touch with another company that actually did the import, distribution and sales of their products, but that wouldn't help either because Velveeta was not listed on the local portfolio of items they sold here. It was not listed on the portfolio because Kraft had decided long ago that there is no market here for Velveeta.

This is where I got a bit confused.

I explained to Mr. Lai that I have been purchasing Velveeta for the last several years with no problems at all except that I found it a bit expensive. Mr. Lai replied and told me that this was what they called "parallel imports". The reason it is expensive is because the rogue importers and retailers of the product sell Velveeta as a niche market item. The price, well it's never stable. Kraft Foods has absolutely no control over the ultimate price. It fluctuates based on supply and demand. The price eventually settles on whatever the consumer is willing to pay. In fact, at the end of the day Kraft Foods can't even tell you how many importers bring it in or how much is sold. Sad is it not?

To make matters worse, eventually the consumer demand and price instablity leads to counterfeiting. It's not just Nike shoes or Louis Vuitton handbags anymore. Any item can be pirated from Marlboro cigarettes and Pringles potato chips to Jack Daniels whiskey. Both Marlboro cigarettes and Pringles potato chips are two hot items for piracy right now. To the point where the consumer never knows whether he is purchasing the original item or not.

Who suffers? Naturally the consumer does. The lawyers seem to win though.

The company will always claim they lost sales, but the truth is that they didn't. It was because they didn't make sales that someone else had to come in and do it for them - the pirates. It's actually kind of ridiculous to claim that you lost sales when you weren't in the market in the first place.

And who's to blame? Well it is really hard to say. In many respects, it is the indifference to their own business and lack of attention on the part of the manufacturer that leads to the situation. So shouldn't the manufacturer accept part of the blame? I mean if you leave your wallet on the car seat and your car unlocked and someone comes by and steals both, you have only yourself to blame. Right?

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