Hits & Misses
LG receives a boost from status-symbol cell phones, Nissan cashes in by getting in touch with its feminine side, Danone gets less than it bargained for in a Chinese joint venture, a Mexican bank takes the microfinance model to, well, the bank, and more.
(Business 2.0 Magazine) -- [HIT] Hello kitschy. How do you make a splash in Japan's booming minicar market selling yet another tiny box with an engine a third the size of a Honda Civic's? If you're Nissan, you dub your car Pino (after Pinocchio) and pitch it to young women who can't resist upholstery embossed with stars and sparkly hubcaps "inspired by snowflake crystals." And that's just the start of the cute-sell: A Nissan website also lets the ladies accessorize with stuffed animals and heart-shaped decals and then e-share the sugary visuals with friends. The payoff: Since the car's launch in January, Nissan has been beating sales forecasts by 15 percent while pricing the Pino's base model 23 percent higher than the Suzuki Alto, the plain-Jane mini on whose platform the Pino is built.
[HIT] We-be-soft. It's not just carmakers that are getting in touch with their feminine side. Paris-based videogame giant Ubisoft, publisher of gritty titles like Brothers in Arms: Hell's Highway, has started making more games appealing to girls and reaping the rewards. The company's "casual gaming" titles, including such female-oriented hits as Fashion Academy and Alexandra Ledermann, accounted for 10 percent of Ubisoft's $900 million in revenue last year; the Petz franchise (in which players score by caring for Catz, Dogz, Horsez, and Hamsterz) alone sold 3.5 million units worldwide. Now, with the popular Wii and DS consoles drawing more women into the market, Ubisoft has established a new division, Games for Everyone, to develop titles for those platforms. All told, the company expects to more than double sales of casual games to about $200 million this year.
[HIT] Looking good. Believe it or not, Apple isn't the only company succeeding with the cell-phone-as-status-symbol gambit. South Korea's LG Electronics, known to Americans as a maker of cheap, generic handsets, has transformed its image overseas, releasing a series of high-end models that's raising its profile and its profit margins. Last year LG unwrapped the Chocolate, a bar-shaped handset with glowing red buttons that's sold 11 million units to date. That was followed by the Shine, a brushed-steel job that doubles as a vanity mirror. Next is an $800 model co-designed with Prada that features a leather carrying case and Apple-esque touchscreen. Gushed Lehman Bros. in a recent report, "Taking together the positive effect on LGE's high-end image and strong margins, we believe selling 700K units of its Prada phone is better than selling 10 million units of its other phones."
[HIT] Tiny loans, big payday. Banco Compartamos didn't invent the microfinance model, which entails making small loans to impoverished entrepreneurs. Credit for that goes to Bangladesh's Grameen Bank, whose founder, Muhammad Yunus, won the 2006 Nobel Peace Prize for his efforts. By capitalist measures, however, the Mexican knockoff is outpacing the original: Compartamos is now both the world's most profitable microfinance bank, with a return on equity topping 50 percent, and the fastest-growing bank in Latin America. The big money is duly impressed: This spring Compartamos sold a 30 percent stake, mainly to institutional investors, on Mexico's stock exchange for $467 million; shares jumped 30 percent the first day, and analysts at Citigroup project another rise of 22 percent in the next year.
[MISS] Zong show. Many companies have found it easier to crack the Chinese market by partnering with the locals. And indeed, the approach seemed to work for Groupe Danone, which teamed with entrepreneur Zong Qinghou to build a soft drink brand called Wahaha that last year hit $1.3 billion in sales. But where there's reward, there's often risk -- not to mention recrimination. In June, Danone filed suit alleging that companies linked to Zong's family had been making and selling Wahaha-branded products on the side, depriving Danone of at least $100 million. Zong countered by resigning as chairman of the joint venture, causing workers to hold protests laced with anti-Danone invective. The bizarre battle has put the brakes on Danone's stock price despite first-quarter revenue growth of more than 10 percent.To send a letter to the editor about this story, click here.
From the August 1, 2007 issue