Sunday, June 26, 2005

Pricing and Competitive Advantage

I ran 10 miles today in 1:27 – took a lot out of me. This is the pace I need to maintain to qualify for the Boston marathon. This makes up for yesterday when I did not run at all.

I took my parents some fresh strawberries and radishes from the garden. We have no grass – just mulch and gardens. Poor on the time management – grass is faster (although the mulch helps). I do learn ever time I weed though that I could learn from some of the weeds’ persistence.

I like to read 4 or 5 books at a time. A chapter or one, a few from another etc. My good friend – Rick Jamieson, President of ABS Friction (they make brake pads) is a great reader and always passes on the best books. Well – usually. One of the books he recently loaned me is called “The Strategy and Tactics of Pricing” by Nagle and Holden. It is a highly technical read – a bit like a text book.

Pricing is a challenge in computer distribution. Our margin is so thin. Much of the book is about companies with more differentiated products and hence higher margins. Our industry is one of almost perfect competition. My challenge is to try to offer customers great value while at the same time making a fair profit. A 0.1% change in price in our industry can make the difference between profit and loss.

I am a big believer in competitive advantage. Being the lowest price without the lowest cost is a recipe for failure. One thing that attracted me to do the SYNNEX deal in the first place was SYNNEX’s low cost base. I know now this cost base is not without its price. What we now need to seek is to accentuate our advantages (not only our low cost base) for this is the only true way to prosper. For us this usually happens when we have the dominant market share like we do with Apple, Logitech, Acer, Autodesk, software licensing (and most software lines), Maritime market share, Calgary warehouse etc.

Our earnings get released this week. I am planning a few sessions with the staff to run through the earnings and also what our impact is on the big picture. I also plan to share some of my personal visions for the next 5 years.

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