Q1. The Cartel That Makes Sure Airplane Tickets Never Get Cheaper
SKY HIGH
It’s been a windfall year for the industry, but you won’t be getting any better accommodations or more affordable fares. What gives?
Updated Apr. 14, 2017 10:33AM ET / Published Jun. 22, 2015 5:21AM ET
Jim Young/Reuters
Screw the passengers.
That appears all too often to be the governing philosophy of the airline business.
Take the case of a United Airlines flight from Chicago to London last weekend. A technical problem forced the plane to abort its trans-Atlantic route and divert to Goose Bay in Canada. The 176 passengers were marooned there for more than 20 hours, sleeping in unheated military barracks at near-freezing temperatures.
“There was nobody from United Airlines to be seen anywhere,” one passenger told NBC News. “No United representative ever reached out to anybody, no phone calls, no human beings, no nothing. Nobody had any idea what was going on.”
It so happened that this came at the end of a week in which the world’s airline chiefs, junketing in Miami, celebrated their most lucrative year ever. They are projecting profits totaling $29.3 billion in 2015—almost double what they made in 2014.
And you must have noticed if you’re flying anywhere in the U.S. this summer that seat prices are not falling. Indeed, if the owners of those seats are suddenly feeling fat and happy, they are in no mood to pass on their swell feelings to you. It’s hard to imagine any other service industry being run like the airline business—but then there is no other business like the airline business.
So now we have a novel opportunity to see how airlines behave when, suddenly and much to their surprise, they find themselves with a business model that is working. If making a profit is a new experience for them, what effect will that have on their behavior?
First, let us consider why the numbers have been transformed.
There has been a steep change in the efficiency of jets. Beginning with the Boeing 787 Dreamliner, the combination of lighter but stronger composite materials in structures and a quantum leap in engine efficiency, using far less fuel, has slashed operating costs per airplane by as much as 30 percent.
In the last year, this windfall has been boosted by the large decline in oil prices.
However, these dual benefits are not being evenly spread either among airlines or continents. Airlines stuck with fleets of older airplanes are not getting these benefits. Fleet age has become far more decisive in deciding an airline’s profitability, particularly true in the U.S.
The three major U.S. legacy carriers—American, United, and Delta—failed to get in early to order the new generation of airplanes—the 787, the Airbus A350, revamped versions of the Boeing 777, the Airbus A320, and the Boeing 737—and allowed European, Middle Eastern, and Asian competitors to become first adopters and, thereby, reap the benefits of lower fuel costs.
The average age of the jets in the American fleet is 12.3 years; for United 13 years; and for Delta 17.2 years. It won’t be until at least 2020 that they can finally dump the oldest of their airplanes. (American has actually been delaying the delivery of some new jets that it ordered.)
Age doesn’t mean that an airplane is unsafe. Properly maintained 20-year-old jets are not in danger of falling apart. The frequency of flights determines retirement age more than years and the smaller single-aisle jets used on domestic routes age the fastest because they are making up to seven flights a day.
Age may not be dangerous but it sure registers with passengers when it contrasts with the comforts they encounter in the new generation of jets with their better cabin climate and quieter engines. So it’s not surprising that when airlines show up with all-new fleets as well as gracious cabin crews people start wondering, Why can’t it always be like this?
It’s also not surprising that the major American carriers are now trying to stop those airlines from coming to an airport near you.
When it comes to price and the domestic U.S. routes, not only are prices not coming down but there is persuasive evidence of price-fixing. The veteran investigative reporter James B. Stewart described this market as a classic oligopoly in a penetrating piece in The New York Times .
However, this is far from being a new phenomenon. These tactics began long before the final round of consolidation mergers when US Airways was swallowed by American Airlines in 2013. They have merely been continually refined to the point now when the airlines, suddenly enjoying profits, have responded not by lowering fares but by tightening control over the number of seats available and cutting back on flight frequency and destinations.
The reality is that the airlines don’t need to expose themselves to charges of collusion on fares and the operation of a hidden cartel that mutually governs capacity. That’s so 20th century.
These days their key tool is “yield management”—being able to precisely calculate how many seats should be available on any given route at any time of the day or night and adjusting the price hour-by-hour according to demand. This algorithm has become so refined and the market so controlled that each of the major airlines ends up looking at the same numbers on their computer screen. No human intervention is needed. In all but name it is a cartel—but one run entirely by unaccountable robots.
So?
We live in the world’s most vigorously capitalist marketplace. What’s wrong with airlines trying to make a decent profit, for once? And what is the point of them flying empty seats around the skies?
But I come back to my earlier point: How do these airline executives behave when, joy of joys, they find their balance sheets deeply in the black? Like a lot of other corporate minders they think a lot more about their shareholders than their customers. Short-termism rules. Wall Street responds to quarterly earnings, not patient long-term strategy.
A good example is Jet Blue. This airline was a rare example of a successful startup based on a maverick idea: super-chummy cabin staff and generously spaced seating. A new CEO (previously schooled by the stingy bean-counters at British Airways) is undermining that spirit by jamming more seats into the cabin and raising baggage charges, all at the behest of shareholders.
The problem is that the people running airlines in the U.S. have one part of their brain missing, the part that provides the service ethic. As well as fare-gouging they’re space gouging in the cabins. Even with the newest jets like the Dreamliner they are packing more seats into coach than the airplane designers (or nature) intended.
Q1. Read the above article and answer the questions that follow.
a. Why did the investigative reporter James B. Stewart describe US airlines as a classic Oligopoly?
b. What is the meaning of yield management as described in the above article?
c. Why did the writer accuse people running airlines of missing service ethics
In: Economics
1. The Cartel That Makes Sure Airplane Tickets Never Get Cheaper
SKY HIGH
It’s been a windfall year for the industry, but you won’t be getting any better accommodations or more affordable fares. What gives?
Updated Apr. 14, 2017 10:33AM ET / Published Jun. 22, 2015 5:21AM ET
Jim Young/Reuters
Screw the passengers.
That appears all too often to be the governing philosophy of the airline business.
Take the case of a United Airlines flight from Chicago to London last weekend. A technical problem forced the plane to abort its trans-Atlantic route and divert to Goose Bay in Canada. The 176 passengers were marooned there for more than 20 hours, sleeping in unheated military barracks at near-freezing temperatures.
“There was nobody from United Airlines to be seen anywhere,” one passenger told NBC News. “No United representative ever reached out to anybody, no phone calls, no human beings, no nothing. Nobody had any idea what was going on.”
It so happened that this came at the end of a week in which the world’s airline chiefs, junketing in Miami, celebrated their most lucrative year ever. They are projecting profits totaling $29.3 billion in 2015—almost double what they made in 2014.
And you must have noticed if you’re flying anywhere in the U.S. this summer that seat prices are not falling. Indeed, if the owners of those seats are suddenly feeling fat and happy, they are in no mood to pass on their swell feelings to you. It’s hard to imagine any other service industry being run like the airline business—but then there is no other business like the airline business.
So now we have a novel opportunity to see how airlines behave when, suddenly and much to their surprise, they find themselves with a business model that is working. If making a profit is a new experience for them, what effect will that have on their behavior?
First, let us consider why the numbers have been transformed.
There has been a steep change in the efficiency of jets. Beginning with the Boeing 787 Dreamliner, the combination of lighter but stronger composite materials in structures and a quantum leap in engine efficiency, using far less fuel, has slashed operating costs per airplane by as much as 30 percent.
In the last year, this windfall has been boosted by the large decline in oil prices.
However, these dual benefits are not being evenly spread either among airlines or continents. Airlines stuck with fleets of older airplanes are not getting these benefits. Fleet age has become far more decisive in deciding an airline’s profitability, particularly true in the U.S.
The three major U.S. legacy carriers—American, United, and Delta—failed to get in early to order the new generation of airplanes—the 787, the Airbus A350, revamped versions of the Boeing 777, the Airbus A320, and the Boeing 737—and allowed European, Middle Eastern, and Asian competitors to become first adopters and, thereby, reap the benefits of lower fuel costs.
The average age of the jets in the American fleet is 12.3 years; for United 13 years; and for Delta 17.2 years. It won’t be until at least 2020 that they can finally dump the oldest of their airplanes. (American has actually been delaying the delivery of some new jets that it ordered.)
Age doesn’t mean that an airplane is unsafe. Properly maintained 20-year-old jets are not in danger of falling apart. The frequency of flights determines retirement age more than years and the smaller single-aisle jets used on domestic routes age the fastest because they are making up to seven flights a day.
Age may not be dangerous but it sure registers with passengers when it contrasts with the comforts they encounter in the new generation of jets with their better cabin climate and quieter engines. So it’s not surprising that when airlines show up with all-new fleets as well as gracious cabin crews people start wondering, Why can’t it always be like this?
It’s also not surprising that the major American carriers are now trying to stop those airlines from coming to an airport near you.
When it comes to price and the domestic U.S. routes, not only are prices not coming down but there is persuasive evidence of price-fixing. The veteran investigative reporter James B. Stewart described this market as a classic oligopoly in a penetrating piece in The New York Times .
However, this is far from being a new phenomenon. These tactics began long before the final round of consolidation mergers when US Airways was swallowed by American Airlines in 2013. They have merely been continually refined to the point now when the airlines, suddenly enjoying profits, have responded not by lowering fares but by tightening control over the number of seats available and cutting back on flight frequency and destinations.
The reality is that the airlines don’t need to expose themselves to charges of collusion on fares and the operation of a hidden cartel that mutually governs capacity. That’s so 20th century.
These days their key tool is “yield management”—being able to precisely calculate how many seats should be available on any given route at any time of the day or night and adjusting the price hour-by-hour according to demand. This algorithm has become so refined and the market so controlled that each of the major airlines ends up looking at the same numbers on their computer screen. No human intervention is needed. In all but name it is a cartel—but one run entirely by unaccountable robots.
So?
We live in the world’s most vigorously capitalist marketplace. What’s wrong with airlines trying to make a decent profit, for once? And what is the point of them flying empty seats around the skies?
But I come back to my earlier point: How do these airline executives behave when, joy of joys, they find their balance sheets deeply in the black? Like a lot of other corporate minders they think a lot more about their shareholders than their customers. Short-termism rules. Wall Street responds to quarterly earnings, not patient long-term strategy.
A good example is Jet Blue. This airline was a rare example of a successful startup based on a maverick idea: super-chummy cabin staff and generously spaced seating. A new CEO (previously schooled by the stingy bean-counters at British Airways) is undermining that spirit by jamming more seats into the cabin and raising baggage charges, all at the behest of shareholders.
The problem is that the people running airlines in the U.S. have one part of their brain missing, the part that provides the service ethic. As well as fare-gouging they’re space gouging in the cabins. Even with the newest jets like the Dreamliner they are packing more seats into coach than the airplane designers (or nature) intended.
Q1. Read the above article and answer the questions that follow.
a. Why did the investigative reporter James B. Stewart describe US airlines as a classic Oligopoly?
b. What is the meaning of yield management as described in the above article?
c. Why did the writer accuse people running airlines of missing service ethics?
In: Economics
Q1. The Cartel That Makes Sure Airplane Tickets Never Get Cheaper
SKY HIGH
It’s been a windfall year for the industry, but you won’t be getting any better accommodations or more affordable fares. What gives?
Updated Apr. 14, 2017 10:33AM ET / Published Jun. 22, 2015 5:21AM ET
Jim Young/Reuters
Screw the passengers.
That appears all too often to be the governing philosophy of the airline business.
Take the case of a United Airlines flight from Chicago to London last weekend. A technical problem forced the plane to abort its trans-Atlantic route and divert to Goose Bay in Canada. The 176 passengers were marooned there for more than 20 hours, sleeping in unheated military barracks at near-freezing temperatures.
“There was nobody from United Airlines to be seen anywhere,” one passenger told NBC News. “No United representative ever reached out to anybody, no phone calls, no human beings, no nothing. Nobody had any idea what was going on.”
It so happened that this came at the end of a week in which the world’s airline chiefs, junketing in Miami, celebrated their most lucrative year ever. They are projecting profits totaling $29.3 billion in 2015—almost double what they made in 2014.
And you must have noticed if you’re flying anywhere in the U.S. this summer that seat prices are not falling. Indeed, if the owners of those seats are suddenly feeling fat and happy, they are in no mood to pass on their swell feelings to you. It’s hard to imagine any other service industry being run like the airline business—but then there is no other business like the airline business.
So now we have a novel opportunity to see how airlines behave when, suddenly and much to their surprise, they find themselves with a business model that is working. If making a profit is a new experience for them, what effect will that have on their behavior?
First, let us consider why the numbers have been transformed.
There has been a steep change in the efficiency of jets. Beginning with the Boeing 787 Dreamliner, the combination of lighter but stronger composite materials in structures and a quantum leap in engine efficiency, using far less fuel, has slashed operating costs per airplane by as much as 30 percent.
In the last year, this windfall has been boosted by the large decline in oil prices.
However, these dual benefits are not being evenly spread either among airlines or continents. Airlines stuck with fleets of older airplanes are not getting these benefits. Fleet age has become far more decisive in deciding an airline’s profitability, particularly true in the U.S.
The three major U.S. legacy carriers—American, United, and Delta—failed to get in early to order the new generation of airplanes—the 787, the Airbus A350, revamped versions of the Boeing 777, the Airbus A320, and the Boeing 737—and allowed European, Middle Eastern, and Asian competitors to become first adopters and, thereby, reap the benefits of lower fuel costs.
The average age of the jets in the American fleet is 12.3 years; for United 13 years; and for Delta 17.2 years. It won’t be until at least 2020 that they can finally dump the oldest of their airplanes. (American has actually been delaying the delivery of some new jets that it ordered.)
Age doesn’t mean that an airplane is unsafe. Properly maintained 20-year-old jets are not in danger of falling apart. The frequency of flights determines retirement age more than years and the smaller single-aisle jets used on domestic routes age the fastest because they are making up to seven flights a day.
Age may not be dangerous but it sure registers with passengers when it contrasts with the comforts they encounter in the new generation of jets with their better cabin climate and quieter engines. So it’s not surprising that when airlines show up with all-new fleets as well as gracious cabin crews people start wondering, Why can’t it always be like this?
It’s also not surprising that the major American carriers are now trying to stop those airlines from coming to an airport near you.
When it comes to price and the domestic U.S. routes, not only are prices not coming down but there is persuasive evidence of price-fixing. The veteran investigative reporter James B. Stewart described this market as a classic oligopoly in a penetrating piece in The New York Times .
However, this is far from being a new phenomenon. These tactics began long before the final round of consolidation mergers when US Airways was swallowed by American Airlines in 2013. They have merely been continually refined to the point now when the airlines, suddenly enjoying profits, have responded not by lowering fares but by tightening control over the number of seats available and cutting back on flight frequency and destinations.
The reality is that the airlines don’t need to expose themselves to charges of collusion on fares and the operation of a hidden cartel that mutually governs capacity. That’s so 20th century.
These days their key tool is “yield management”—being able to precisely calculate how many seats should be available on any given route at any time of the day or night and adjusting the price hour-by-hour according to demand. This algorithm has become so refined and the market so controlled that each of the major airlines ends up looking at the same numbers on their computer screen. No human intervention is needed. In all but name it is a cartel—but one run entirely by unaccountable robots.
So?
We live in the world’s most vigorously capitalist marketplace. What’s wrong with airlines trying to make a decent profit, for once? And what is the point of them flying empty seats around the skies?
But I come back to my earlier point: How do these airline executives behave when, joy of joys, they find their balance sheets deeply in the black? Like a lot of other corporate minders they think a lot more about their shareholders than their customers. Short-termism rules. Wall Street responds to quarterly earnings, not patient long-term strategy.
A good example is Jet Blue. This airline was a rare example of a successful startup based on a maverick idea: super-chummy cabin staff and generously spaced seating. A new CEO (previously schooled by the stingy bean-counters at British Airways) is undermining that spirit by jamming more seats into the cabin and raising baggage charges, all at the behest of shareholders.
The problem is that the people running airlines in the U.S. have one part of their brain missing, the part that provides the service ethic. As well as fare-gouging they’re space gouging in the cabins. Even with the newest jets like the Dreamliner they are packing more seats into coach than the airplane designers (or nature) intended.
Q1. Read the above article and answer the questions that follow.
a. Why did the investigative reporter James B. Stewart describe US airlines as a classic Oligopoly?
b. What is the meaning of yield management as described in the above article?
c. Why did the writer accuse people running airlines of missing service ethics?
In: Economics
1. The Cartel That Makes Sure Airplane Tickets Never Get Cheaper
SKY HIGH
It’s been a windfall year for the industry, but you won’t be getting any better accommodations or more affordable fares. What gives?
Updated Apr. 14, 2017 10:33AM ET / Published Jun. 22, 2015 5:21AM ET
Jim Young/Reuters
Screw the passengers.
That appears all too often to be the governing philosophy of the airline business.
Take the case of a United Airlines flight from Chicago to London last weekend. A technical problem forced the plane to abort its trans-Atlantic route and divert to Goose Bay in Canada. The 176 passengers were marooned there for more than 20 hours, sleeping in unheated military barracks at near-freezing temperatures.
“There was nobody from United Airlines to be seen anywhere,” one passenger told NBC News. “No United representative ever reached out to anybody, no phone calls, no human beings, no nothing. Nobody had any idea what was going on.”
It so happened that this came at the end of a week in which the world’s airline chiefs, junketing in Miami, celebrated their most lucrative year ever. They are projecting profits totaling $29.3 billion in 2015—almost double what they made in 2014.
And you must have noticed if you’re flying anywhere in the U.S. this summer that seat prices are not falling. Indeed, if the owners of those seats are suddenly feeling fat and happy, they are in no mood to pass on their swell feelings to you. It’s hard to imagine any other service industry being run like the airline business—but then there is no other business like the airline business.
So now we have a novel opportunity to see how airlines behave when, suddenly and much to their surprise, they find themselves with a business model that is working. If making a profit is a new experience for them, what effect will that have on their behavior?
First, let us consider why the numbers have been transformed.
There has been a steep change in the efficiency of jets. Beginning with the Boeing 787 Dreamliner, the combination of lighter but stronger composite materials in structures and a quantum leap in engine efficiency, using far less fuel, has slashed operating costs per airplane by as much as 30 percent.
In the last year, this windfall has been boosted by the large decline in oil prices.
However, these dual benefits are not being evenly spread either among airlines or continents. Airlines stuck with fleets of older airplanes are not getting these benefits. Fleet age has become far more decisive in deciding an airline’s profitability, particularly true in the U.S.
The three major U.S. legacy carriers—American, United, and Delta—failed to get in early to order the new generation of airplanes—the 787, the Airbus A350, revamped versions of the Boeing 777, the Airbus A320, and the Boeing 737—and allowed European, Middle Eastern, and Asian competitors to become first adopters and, thereby, reap the benefits of lower fuel costs.
The average age of the jets in the American fleet is 12.3 years; for United 13 years; and for Delta 17.2 years. It won’t be until at least 2020 that they can finally dump the oldest of their airplanes. (American has actually been delaying the delivery of some new jets that it ordered.)
Age doesn’t mean that an airplane is unsafe. Properly maintained 20-year-old jets are not in danger of falling apart. The frequency of flights determines retirement age more than years and the smaller single-aisle jets used on domestic routes age the fastest because they are making up to seven flights a day.
Age may not be dangerous but it sure registers with passengers when it contrasts with the comforts they encounter in the new generation of jets with their better cabin climate and quieter engines. So it’s not surprising that when airlines show up with all-new fleets as well as gracious cabin crews people start wondering, Why can’t it always be like this?
It’s also not surprising that the major American carriers are now trying to stop those airlines from coming to an airport near you.
When it comes to price and the domestic U.S. routes, not only are prices not coming down but there is persuasive evidence of price-fixing. The veteran investigative reporter James B. Stewart described this market as a classic oligopoly in a penetrating piece in The New York Times .
However, this is far from being a new phenomenon. These tactics began long before the final round of consolidation mergers when US Airways was swallowed by American Airlines in 2013. They have merely been continually refined to the point now when the airlines, suddenly enjoying profits, have responded not by lowering fares but by tightening control over the number of seats available and cutting back on flight frequency and destinations.
The reality is that the airlines don’t need to expose themselves to charges of collusion on fares and the operation of a hidden cartel that mutually governs capacity. That’s so 20th century.
These days their key tool is “yield management”—being able to precisely calculate how many seats should be available on any given route at any time of the day or night and adjusting the price hour-by-hour according to demand. This algorithm has become so refined and the market so controlled that each of the major airlines ends up looking at the same numbers on their computer screen. No human intervention is needed. In all but name it is a cartel—but one run entirely by unaccountable robots.
So?
We live in the world’s most vigorously capitalist marketplace. What’s wrong with airlines trying to make a decent profit, for once? And what is the point of them flying empty seats around the skies?
But I come back to my earlier point: How do these airline executives behave when, joy of joys, they find their balance sheets deeply in the black? Like a lot of other corporate minders they think a lot more about their shareholders than their customers. Short-termism rules. Wall Street responds to quarterly earnings, not patient long-term strategy.
A good example is Jet Blue. This airline was a rare example of a successful startup based on a maverick idea: super-chummy cabin staff and generously spaced seating. A new CEO (previously schooled by the stingy bean-counters at British Airways) is undermining that spirit by jamming more seats into the cabin and raising baggage charges, all at the behest of shareholders.
The problem is that the people running airlines in the U.S. have one part of their brain missing, the part that provides the service ethic. As well as fare-gouging they’re space gouging in the cabins. Even with the newest jets like the Dreamliner they are packing more seats into coach than the airplane designers (or nature) intended.
Q1. Read the above article and answer the questions that follow.
a. Why did the investigative reporter James B. Stewart describe US airlines as a classic Oligopoly?
b. What is the meaning of yield management as described in the above article?
c. Why did the writer accuse people running airlines of missing service ethics?
In: Economics
Company Case Trader Joe’s: Cheap Gourmet—Putting a Special Twist on the Price-Value Equation
Apple Store openings aren’t the only place where long lines form these days. Early on a summer morning, there’s a crowd gathered, eagerly awaiting the opening of a Trader Joe’s out- post. The waiting shoppers discuss all things Trader Joe’s, in- cluding their favorite items. One customer suggests the chain will be good for the neighborhood even though there are already plenty of grocery stores around, including various upscale food boutiques.
This is a scene that plays out every time the Southern California–based Trader Joe’s opens a new store—something that only happens a handful of times each year. Within mo- ments of a new opening, a deluge of customers makes it al- most impossible to navigate the aisles. They line up 10 deep at checkouts with carts full of Trader Joe’s exclusive $2.99 Charles Shaw wine—aka “Two-Buck Chuck”—and an assortment of other exclusive gourmet products at impossibly low prices. Amid hanging plastic lobsters and hand-painted signs, a Hawaiian- shirt-clad manager (the “captain”) and employees (the “crew”) explain to first timers that the prices are not grand opening specials. They are everyday prices.
What is it about Trader Joe’s that has consumers everywhere waiting with such anxious anticipation? Trader Joe’s seems to have cracked the customer value code by providing the perfect blend of benefits to prices.
High on Benefits
Trader Joe’s isn’t really a gourmet food store. Then again, it’s not a discount food store either. It’s actually a bit of both. One of America’s hottest retailers, Trader Joe’s has put its own special twist on the food price-value equation—call it “cheap gourmet.” It offers gourmet-caliber, one-of-a-kind products at bargain prices, all served up in a festive, vacation-like atmosphere that makes shopping fun. Trader Joe’s isn’t low end, it isn’t high end, and it certainly isn’t mainstream. “Their mission is to be a nationwide chain of neighborhood specialty grocery stores,” said one business professor who does research on the com- pany. However you define it, Trader Joe’s inventive price-value positioning has earned it an almost cult-like following of devoted customers who love what they get from Trader Joe’s for the prices they pay.
Trader Joe’s describes itself as an “island paradise” where “value, adventure, and tasty treasures are discovered, every
day.” Shoppers bustle and buzz amid cedar-plank-lined walls and fake palm trees as a ship’s bell rings out occasionally at checkout, alerting them to special announcements. Unfailingly helpful and cheery associates in aloha shirts chat with custom- ers about everything from the weather to menu suggestions for dinner parties. Customers don’t just shop at Trader Joe’s; they experience it.
Shelves bristle with an eclectic assortment of gourmet quality grocery items. Trader Joe’s stocks only a limited assortment of about 4,000 products (compared with the 45,000 items found in an average supermarket). However, the assortment is uniquely Trader Joe’s, including special concoctions of gourmet pack- aged foods and sauces, ready-to-eat soups, fresh and frozen entrees, snacks, and desserts—all free of artificial colors, flavors, and preservatives.
Trader Joe’s is a gourmet foodie’s delight, featuring every- thing from organic broccoli slaw, organic strawberry lemonade, creamy Valencia peanut butter, and fair-trade coffees to corn and chile tomato-less salsa and triple-ginger ginger snaps. Trader Joe’s sells various items that are comparable to other stores, like organic vanilla yogurt, almond milk, extra pulp orange juice, smoked gouda cheese, and roasted garlic hummus. But the quirky retailer also maintains pricing power by selling things that are uniquely Trader Joe’s. Try finding Ginger Cats cookies, qui- noa and black bean tortilla chips, or mango coconut popcorn at any other store.
More than 80 percent of the store’s brands are private-label goods, sold exclusively by Trader Joe’s. If asked, almost any customer can tick off a ready list of Trader Joe’s favorites that they just can’t live without—a list that quickly grows. People go into the store intending to buy a few favorites and quickly fill a cart. “I think consumers look at it and think, ‘I can go and get things that I can’t get elsewhere,’” says one food industry ana- lyst. “They just seem to turn their customers on.”
Low on Prices
A special store atmosphere, exclusive gourmet products, helpful and attentive associates—this all sounds like a recipe for high prices. Not so at Trader Joe’s. Whereas upscale competitors such as Whole Foods Market charge upscale prices to match their wares (“Whole Foods, Whole Paycheck”), Trader Joe’s amazes customers with its relatively frugal prices. The prices aren’t all that low in absolute terms but they’re a real bargain compared with what you’d pay for the same quality and coolness elsewhere. “At Trader Joe’s, we’re as much about value as we are about great food,” says the company. “So you can afford to be adventurous without breaking the bank.”
All that low-price talk along with consumers’ perceptions is valid. A recent report from Deutsche Bank compared prices at Trader Joe’s with those at Whole Foods for a basket of 77 products—a mix of perishable items, private-label products, and non-food items. Trader Joe’s was 21 percent cheaper than Whole Foods and had the lowest price on 78 percent of the items. Even when comparing private-label brands, Trader Joe’s was 15 percent cheaper. What’s more, Trader Joe’s price advan- tage has been increasing, a point that is particularly telling given that Whole Foods has focused strategically on lowering its prices over the past few years.
How does Trader Joe’s keep its gourmet prices so low? By maintaining a sound strategy based on price and adjusting the nonprice elements of the marketing mix accordingly. For starters, Trader Joe’s has lean operations and a near-fanatical focus on saving money. To keep costs down, Trader Joe’s typically locates its stores in low-rent, out-of-the-way locations, such as subur- ban strip malls. Notorious for small parking lots that are always packed, Trader Joe’s points out that spacious parking lots require more real estate and that costs money. Its small stores with small back rooms and limited product assortment result in reduced fa- cilities and inventory costs. Trader Joe’s saves money by eliminat- ing large produce sections and expensive on-site bakery, butcher, deli, and seafood shops. And for its private-label brands, Trader Joe’s buys directly from suppliers and negotiates hard on price.
Finally, the frugal retailer saves money by spending almost nothing on advertising. Also, it offers no coupons, discount cards, or special promotions of any kind. Trader Joe’s unique combination of quirky products and low prices produces so much word-of-mouth promotion that the company doesn’t really need to advertise. The closest thing to an official promotion is the company’s website or The Fearless Flyer, a newsletter mailed out monthly to people who opt in.
In the absence of traditional advertising, Trader Joe’s most potent promotional weapon is its army of faithful followers. If you doubt the importance and impact of fanatical Trader Joe’s fans, just check out the numerous fan sites (such as trader- joesfan.com, whatsgoodattraderjoes.com, clubtraderjoes.com, livingtraderjoes.com, and cooktj.com) where the faithful unite to discuss new products and stores, trade recipes, and swap their favorite Trader Joe’s stories.
Something Extra
Although the simple calculation of benefits to prices equates to strong value, there’s something bigger that plays in Trader Joe’s favor. Beyond all the wonderful and unique products, friendly staff, quirky store design, the combination of all these things pro- duces synergy. It adds up to an atmosphere and kind of trust that eludes most companies. One industry observer who is not a fan of grocery shopping sums it up this way:
Walking into a Trader Joe’s, my demeanor is noticeably different than when I’m shopping anywhere else. Somehow I don’t mind
going there. At times—and it’s still hard for me to believe I’d say this about shopping—I actually look forward to it. Trader Joe’s does something pleasant for my brain, as it does for millions of others. There’s more transparency in my dealings with TJ’s than most other places. Authenticity is something you can feel—it’s cru- cial to the buzz. Trader Joe’s proves that even when you get the other elements of the experience right, people still matter most.
Finding the right price-value formula has made Trader Joe’s one of the nation’s fastest-growing and most popular food stores. Its 482 stores in 45 states now reap annual sales of at least $13 billion by one analyst’s estimate (the private company is tight-lipped about its financial results), an amount that has quadrupled in the past decade. Trader Joe’s stores pull in an amazing $1,750 per square foot, more than twice the supermar- ket industry average. In Consumer Reports’s “Best Supermarket Chain” review, Trader Joe’s has occupied one of the top two spots every year for the past five years.
It’s all about value and price—what you get for what you pay. Just ask Trader Joe’s regular Chrissi Wright, found early one morning browsing her local Trader Joe’s in Bend, Oregon.
Chrissi expects she’ll leave Trader Joe’s with eight bottles of the popular Charles Shaw wine priced at $2.99 each tucked under her arms. “I love Trader Joe’s because they let me eat like a yup- pie without taking all my money,” says Wright. “Their products are gourmet, often environmentally conscientious and beautiful . . . and, of course, there’s Two-Buck Chuck—possibly the greatest innova- tion of our time.”
Questions for Discussion
10-18 Under the concept of customer value-based pricing, explain Trader Joe’s success.
10-19 Does Trader Joe’s employ good-value pricing or value- added pricing? Explain.
10-20 Does Trader Joe’s pricing strategy truly differentiate it from the competition?
10-21 Is Trader Joe’s pricing strategy sustainable? Explain.
10-22 What changes—if any—would you recommend that
Trader Joe’s make?
In: Operations Management
Read these articles and answer the following questions is a well written essay not to exceed 2 pages. (Same standards apply as in the 1st assignment) QUESTIONS: 1. Do you use Uber? Have you used Lyft? Do you think there is there a real difference between the services? 2. How has the Chinese market altered the market for ride-hailing services in the US? How does the acquisition of Uber China by Didi alter the face of global strategy in this burgeoning industry? 3. According to the article, how well is Lyft doing right now? Does this latest deal in China help Lyft or hurt Lyft, all things considered? 4. If you are the CEO of Lyft, what strategic moves would you make now? How does Lyft need to readjust its strategy in the US, based on the events in the Chinese market?
Uber-Didi Tie-Up Threatens Lyft in U.S.
Lyft sees ally Didi team with its biggest rival, which is now no longer burdened by China
Lyft, whose cars are recognized by fuzzy pink mustaches, is sustaining big losses at a time when venture capital is harder to secure. PHOTO: GETTY IMAGES
By GREG BENSINGER and ROLFE WINKLER
Updated Aug. 2, 2016 12:07 a.m. ET
Uber Technologies Inc.’s retreat from China creates ripples in what will now become its biggest market, the U.S., where it can refocus on its simmering rivalry with hometown competitor Lyft Inc.
The merger of Uber’s China operation with Didi Chuxing Technology Co. adds a twist to the rapidly shifting landscape of ride-hailing alliances and brings more uncertainty for San Francisco-based Lyft, which has been shopping for a financier to keep it flush with capital.
Didi had been Lyft’s biggest ally after the two companies in recent months touted an anti-Uber alliance that would effectively link their apps and share access to passengers traveling abroad. The two companies also teamed up with India’s Ola and southeast Asia’s Grab to make their apps globally accessible.
By tying together their apps, the companies aimed to better compete with Uber. Didi also is an investor in Lyft.
But Didi now has agreed to align with Lyft’s fiercest rival by combining its operations with Uber’s China business. Uber will receive a 18% stake in Didi, meaning Uber becomes an indirect stakeholder in Lyft. Didi also will invest $1 billion in Uber’s global operations, making Didi both a friend and foe to Lyft.
“Over the next few weeks, we will evaluate our partnership with Didi,” a Lyft spokesman said in an emailed statement. “We always believed Didi had a big advantage in China because of the regulatory environment.”
The deal also means Uber can stanch the hemorrhaging in China, where it had pumped in billions of dollars. Uber has raised over six times more capital than Lyft, and its latest valuation of $68 billion far outpaces Lyft’s $5.5 billion value.
Lyft has been in a bruising four-year battle with Uber for passenger and driver loyalty. The Wall Street Journal reported in June that Lyft hired boutique investment bank Qatalyst Partners LP, which is known to help tech companies find a buyer.
Lyft has tried to keep up with its larger competitor as both San Francisco companies pour millions of dollars into subsidizing low-price rides and giving cash bonuses to new drivers.
Uber and Lyft have sought to edge one another out by poaching employees and have accused each other in the past of ordering up fake rides that hinder service. The two firms believe they can be a central means of transportation, rather than just replacing existing taxi services.
FURTHER READING
Uber’s Retreat Shows Limits U.S. Companies Face in China
China Circuit: Financial Pressures Shaped Didi-Uber Deal
Heard on the Street: Why Foreigners Never Win in Tech
Uber Sells China Operations to Didi
5 Things to Know on Uber-Didi Deal
Didi: Chinese Rival Buying UberChina
Lyft is sustaining big losses at a time when venture capital is harder to come by, likely encouraging the company to find a suitor.
Last year, Lyft posted an operating loss of around $360 million on revenue of roughly $200 million, according to a person familiar with the company’s financial statements. Riders paid a total of about $1 billion for Lyft rides in 2015, and the company kept 20% of that amount as its revenue.
The company has ample cash on hand to sustain itself for now. As of June, Lyft had about $1.4 billion in cash, this person said. It has recently been burning about $50 million in cash a month, according to another person familiar with the matter, suggesting it has more than two years of cash left at that rate. But its spending could go up if the promotional arms race with Uber kicks up a notch, and Lyft is forced to subsidize price cuts.
Lyft does have a major ally in auto maker General Motors Co., which invested $500 million for a 10% stake and indicated the ride-hailing service could be crucial to the future of automobiles. The two companies have since agreed to develop self-driving cars and to offer deals on rental cars to Lyft drivers.
That partnership is critical in helping bolster GM’s electric vehicle strategy. The auto maker’s battery-electric car, Chevrolet Bolt, was designed with a bigger back seat to better appeal to taxi services, for instance. GM also plans next year to begin testing autonomous electric taxis in the Lyft network.
With Uber likely returning its attention on the U.S., it is unclear whether GM is interested in buying all of Lyft or increasing its stake. But GM has been involved in several discussions about the company’s funding needs and strategic alternatives, according to people familiar with the matter.
A GM spokesman said the Uber-Didi announcement doesn’t change its strategic alliance with Lyft, and that the companies will continue work on joint projects.
The Uber-Didi tie-up changes the calculus for Lyft’s other China backers. Along with Didi, China’s largest internet companies, Alibaba Group Holding Ltd. and Tencent Holdings Ltd., invested in a May 2015 round that valued Lyft at $2.5 billion. Those investments were meant to counter Uber’s growth in China.
But Alibaba and Tencent also are investors in Didi and have strategic partnerships including payments services and app integration. So the two internet giants have more at stake in the future success of Didi in China than in Lyft in the U.S. That could put pressure on Lyft and Asian ride-hailing startups to either find new allies or cut a deal with Uber or Didi in the future.
—Rick Carew, Gautham Nagesh and John Stoll contributed to this article.
Write to Greg Bensinger at [email protected] and Rolfe Winkler at [email protected]
Corrections & Amplifications
A person familiar with Lyft Inc.’s financial statements said the company earlier this year was on pace to more than double revenue to around $450 million in 2016, and post an operating loss of more than $200 million. An earlier version of this article incorrectly attributed this projection to Lyft.
TOPICS: Global Strategy
TECH
Uber’s Efforts to Build Chinese Business Ultimately Fail Against Homegrown Rival Didi
So far, no U.S. internet-based company has succeeded in conquering the Chinese market
By EVA DOU and KATHY CHU
Updated Aug. 1, 2016 10:05 p.m. ET
BEIJING—Uber Technologies Co. entered China with billions of dollars to spend and ambitions to dominate the world’s biggest market for ride hailing. It wasn’t enough.
After almost three years, Uber agreed to sell its China business to rival Didi Chuxing Technology Co., the Chinese company announced Monday. Despite launching private ride-sharing services in China a full year before Didi, Uber has been outmaneuvered by the homegrown player, which added localized features, landed powerful investors and wooed Chinese regulators and press. Uber and outside investors in Uber China will get 20% in the merged company, which has a combined valuation of $36 billion.
U.S. internet companies have long struggled in vain to capitalize on the allure of China’s enormous population and growing wealth. Some have been stymied by strict government licensing and censorship, which contributed to Google Inc.’s decision in 2010 to shutter its China-base search engine and has effectively barred access to Facebook Inc. and Twitter Inc.
Others have been bested by deep-pocketed local rivals that adapt quickly to Chinese consumer preferences. Amazon.com Inc. and eBay Inc. both faced off unsuccessfully against Alibaba Group Holding Ltd.
“So far we haven’t seen a foreign internet company that has made it big in China,” said Andrew Teoh, managing partner of Ameba Capital, an early investor in Didi.
Other companies in the technology industry and beyond have struggled with a range of hurdles in China, including government policies that favor domestic players. Apple Inc. and Microsoft Corp., for instance, have felt a sales chill in China amid Beijing’s growing focus on using “secure” domestic equipment.
“The environment has become more challenging,” said Jeremie Waterman, executive director for greater China at the U.S. Chamber of Commerce. “There’s no question that there are Chinese companies that are more competitive than they were five or 10 years ago, but there’s also no question that the government has and is increasingly putting its thumb on the scales to benefit Chinese companies.”
China is extremely important to many companies. General Motors Co., which used decades-old alliances in the region to become one of the largest players in the world’s biggest light-vehicle market, counts on Chinese operations for about $2 billion in operating profit annually and has committed to spend 100 billion yuan ($15.1 billion) between now and 2020 on new car development. Although less profitable than U.S. operations, China accounts for about a third of vehicle sales and its position has grown in 2016 as the wider auto market shakes off volatility.
Still, a survey released in January by the American Chamber of Commerce in China found that only 64% of the U.S. companies surveyed were profitable in 2015—the lowest level in five years. Nearly a third weren’t planning to expand their investment in China, a higher percentage than during the global financial crisis of 2008-09.
Uber Chief Executive Travis Kalanick’s decision to capitulate in China came on the heels of new ride-hailing regulations there, which were announced last week but had been in the works for two years and were known to companies in the industry in advance.
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Didi: The Chinese Uber Rival Buying UberChina
Inside Uber’s Fight With Its Chinese Nemesis, Didi Kuaidi
The guidelines officially legalized the industry, but gave an edge to the player with the largest user base. That was Didi, which is backed by Apple as well as Chinese internet giants Alibaba and Tencent Holdings Ltd.
The rules forbid companies to operate ride-hailing services below cost, putting an end to ruinous subsidy wars but making it difficult for Uber China, with its smaller scale, to match Didi on price.
The guidelines also require companies to implement stricter driver oversight and incur other overhead expenses, measures likely to be less costly per ride the larger the user base.
Didi and Uber disagree on their China market shares, but most third-party researchers put Didi significantly ahead. According to one research firm, Analysys International, Didi had 42.1 million active users in May while Uber China had 10.1 million.
Didi said it would maintain the Uber service and brand separately in China. A similar promise was made after the merger of Didi Dache and Kuaidi Dache in 2015 to form Didi Chuxing, with the smaller Kuaidi product subsequently marginalized.
Mr. Kalanick, in a statement Monday, acknowledged the challenge Uber faced in entering China. “We were a young American business entering a country where most U.S. internet companies had failed to crack the code,” he said. Uber had worked hard to localize in China, setting up Uber China as a Chinese company and giving high autonomy to the local executives at its helm.
Didi began in 2012 as an app to help Chinese taxi drivers find passengers. Although the service didn’t make money for Didi, it helped the company amass loyal users. By the time Didi launched an Uber-like ride-sharing service in 2014, it had more than 100 million registered users.
In July 2014, Mr. Kalanick offered to acquire Didi, saying that he would conquer China one way or the other, recalled Didi Chief Executive Cheng Wei in a 2015 interview. Mr. Cheng said he had refused, saying, “There will be a day when we will surpass you.”
An Uber spokeswoman confirmed the meeting at the time but said Uber executives remembered it differently.
Didi’s status as the local champion helped it best Uber both in relations with local governments and in the media.
Uber China found its accounts on China’s leading messaging app, WeChat, repeatedly shut down, hobbling its attempts to promote its services to regular consumers. WeChat is owned by Tencent, a Didi investor. Tencent has declined to comment.
Uber’s decision to effectively join a rival echoes similar moves by other big Western companies in China.
Wal-Mart Stores Inc., which has struggled to expand in China as shopping rapidly shifts online there, switched gears in June. Rather than continuing to build its own online business in China, the world’s biggest retailer agreed to sell its Chinese website to JD.com Inc., one of the country’s largest e-commerce players. In exchange, Wal-Mart took a 5% stake in JD.com.
—Juro Osawa, Drew FitzGerald and John D. Stoll contributed to this article.
Write to Eva Dou at [email protected] and Kathy Chu at [email protected]
In: Finance
Edwina Haskell was an accomplished high school student who looked forward to attending Southern New England University (SNEU). SNEU was unique in that it operated on a trimester basis, its policy was to actively foster independent development among the students. Edwina’s mother and father each own their own small businesses. Soon after freshman orientation at SNEU, Edwina recognized a need among the students that could be the basis for developing a small business. Freshman students could not bring their cars on the campus. In effect, they were confined to the dorm; if they wished to travel, they had to take school-provided buses that operated on a fixed schedule. Further, the university’s cafeteria closed at eight in the evening. Students who wanted to have some food or snacks after 8:00 p.m. had to call local restaurants that delivered. The few restaurants in the neighborhood around SNEU that had delivery services often were late in their deliveries, and hot food, such as pizza, was frequently delivered cold.
Edwina felt that there was a niche market on the campus. She believed that students would be interested in ordering sandwiches, snacks, and sodas from a fellow student provided that the food could be delivered in a timely fashion. After talking with several students in her dorm complex, she believed that offering a package of a sandwich, a soda, and a small snack, such as potato chips, for $5 and a guaranteed delivery of 15 minutes or less would be a winner. Because her dorm complex consisted of four large adjoining buildings that house nearly 1,600 students, she felt that there would be sufficient demand to make the concept profitable. She talked about this concept with her roommates and with her parents. Her roommates were willing to help prepare the sandwiches and deliver them. She planned on paying each of them $250 per trimester for taking orders, making sandwiches, and delivering them. All three roommates, whom she knew from high school, were willing to be paid at the end of the trimester.
Edwina recognized that for this business plan to work, she would have to have a sufficient inventory of cold cuts, lettuce, tomatoes, soda, chips, and condiments to be able to meet student demands. The small refrigerators in the dorm rooms would not be sufficient. After talking to her parents, they were willing to help her set up her business. They would lend her $1,000 to buy a larger refrigerator to place in her dorm room. She did not have to repay this loan until she graduated in four years, but her parents wanted her to appreciate the challenges of operating a small business. They set up several conditions. First, although she did not have to pay back the $1,000 for the refrigerator for four years, she had to pay interest on this “loan.” She had to repay 3 percent of this loan each trimester. Further, they reminded her that although she could pay her friends at the end of the semester, she would need funds to buy the cold cuts, bread, rolls, soda, snacks, condiments, and supplies such as foil to wrap the sandwiches, plus plates and paper bags. Although Edwina was putting $500 of her own money into her business, her parents felt that she might need an infusion of cash during the first year (i.e., the first three trimesters). They were willing to operate as her bank—lending her money, if needed, during the trimesters. However, she had to pay the loan(s) back by the end of the year. They also agreed that the loan(s) would be at a rate of 2 percent per trimester.
Within the first three weeks of her first trimester at SNEU, Edwina purchased the $1,000 refrigerator with the money provided by her parents and installed it in her dorm. She also went out and purchased $180 worth of supplies consisting of paper bags; paper plates; and plastic knives, spoons, and forks. She paid for these supplies out of her original $500 personal investment. She and her roommates would go out once or twice a week, using the SNEU bus system to buy what they thought would be the required amount of cold cuts, bread, rolls, and condiments. The first few weeks’ worth of supplies were purchased out of the remainder of the $500. Students paid in cash for the sandwiches. After the first two weeks, Edwina would pay for the food supplies out of the cash from sales.
In the first trimester, Edwina and her roommates sold 640 sandwich packages, generating revenue of $3,200. During this first trimester, she purchased $1,710 worth of food supplies. She used $1,660 to make the 640 sandwich packages. Fortunately, the $50 of supplies were condiments and therefore would last during the two-week break between the trimesters. Only $80 worth of the paper products were used for the 640 sandwich packages. Edwina spent $75 putting up posters and flyers around the campus promoting her new business. She anticipated that the tax rate would be approximately 35 percent of her earnings before taxes. She estimated this number at the end of the first trimester and put that money away so as to be able to pay her tax bill.
During the two weeks off between the first and second trimester, Edwina and her roommates talked about how they could improve business operations. Several students had asked about the possibility of having warm sandwiches. Edwina decided that she would purchase two Panini makers. So at the beginning of the second trimester, she tapped into her parents’ line of credit for two Panini grills, which in total cost $150. To make sure that the sandwiches would be delivered warm, she and her roommates spent $100 on insulated wrappings. The $100 came from cash. The second trimester proved to be even more successful. The business sold 808 sandwiches, generating revenue of $4,040. During this second trimester, the business purchased $2,100 worth of food supplies, using $2,020 of that to actually create the 808 sandwich packages. They estimated that during the second trimester, they used $101 worth of supplies in creating the sandwich packages.
There was only a one-week break between the second and third trimesters, and the young women were quite busy in developing ideas on how to further expand the business. One of the first decisions was to raise the semester salary of each roommate to $300 apiece. More and more students had been asking for a greater selection of warm sandwiches. Edwina and her roommates decided to do some cooking in the dorms so as to be able to provide meatball and sausage sandwiches. Edwina once again tapped into her parents’ line of credit to purchase $275 worth of cooking supplies. One of the problems they noticed was that sometimes students would place calls to order a sandwich package, but the phones were busy. Edwina hired a fellow student to develop a website where students could place an order and select the time that they would like a sandwich package to be delivered. The cost of creating and operating this website for this third trimester was $300.
This last semester of Edwina’s freshman year proved to be the most successful in terms of sales. They were able to fulfill orders for 1,105 sandwich packages, generating revenue of $5,525. Edwina determined that the direct cost of food for these sandwich packages came out to be $2,928.25. The direct cost of paper supplies was $165.75. At the end of her freshman year, Edwina repaid her parents the $425 that came from her credit line that was used to purchase the Panini makers and the cooking utensils.
In: Accounting
13a. Mary is transferred from the emergency department to the pediatric intensive care department. In developing the plan of care, the nurse identifies the nursing diagnosis, “Acute pain related to tissue ischemia” as a priority.
13b. Which intervention should be included in the care plan?
1. Explain how to use a patient controlled analgesic pump.
2. Apply cold compresses periodically to painful joints.
3. Administer acetaminophen PRN for pain.
4. Assess pain by using a numerical pain scale
14. The night nurse assesses Mary and notes that her vital signs are now T 98.3, P 108, R 22, BP 96/60. Which action should the nurse implement?
1. Encourage Mary to turn, cough, and deep breathe
2. Notify the healthcare provider immediately
3. Document the findings on the graphic sheet.
4. Retake and assess the vital signs in 1 hour
15a. The ICU night nurse is making rounds and hears Mary crying. The nurse says, “Mary, are you hurting?” Mary cries harder and replies, “No, I just miss my Mommy.” Mary’s grandmother has gone home to rest for a few hours.
15b. How should the nurse intervene initially
1. Pull up a chair, hold Mary's hand, and allow her to cry
2. Tell Mary she needs to try and quit crying and get some sleep.
3. Call Mary’s grandmother and ask her to come to the hospital.
4. Say, “I know how hard it is to lose your Mommy. Mine is gone too.”
16. Mary is in the ICU for 3 days and is transferred to the pediatric floor. Earlene has been at the hospital every day and is very concerns about Mar and he condition. Earlene asks the nurse, “What can I do to make sure this never happens again?” What is the best initial response by the nurse?
1. “When Mary gets a fever give her 1 baby aspirin.”
2. “Make sure she does not participate in any strenuous activity.”
3. There is no way you can make sure this never happens again.”
4.“Keep Mary away from anyone who has an infection.”
17. Mary’s grandmother goes downstairs to get something to eat form the hospital cafeteria. The UAP who is staying with Mary while her grandmother is gone informs the primary nurse that Mary urinated in the bed, is crying, and wants her grandmother. Which intervention should the nurse implement first?
1. Find Earlene in the cafeteria
2. Change Mary’s bed linens.
3. Help Mary change her clothes
4. Document the incident in Mary’s chart
18a. Mary is starting to feel better and is requiring less pain medication, and she is sleeping as the nurse makes evening rounds. Earlene shares with the nurse it has been a long time since she has had a 7-year-old-in her home. Earlene says, “I have no idea what Mary should be allowed to do so she can have some fun.”
18b. Which statement will be the best response by the nurse?
1. “Mary should not be around a lot of children, so her activities will be limited
2. “You should like you are worried about raising Mary by yourself,”
3. “I would recommend enrolling her in a sport with running, such as soccer.
4. Seven-year-olds really like being in groups like Girl Scouts or Girl's Clubs.
19. Which statement by Mary indicates that she is meeting Erickson's stage of development for her age?
1. “When I grow up I want to be a nurse just like you.”
2. “Look, I finished putting the puzzle together.”
3. “I need my stuffed dog so that I can go to sleep.”
4. “I don’t want any of my friends to visit me here.”
20a. Mary is scheduled for discharge the next day. The nurse is completing discharging teaching with Earlene when Earlene tells the nurse that she is planning to take Mary to Colorado to visit her oldest daughter and their family for the Christmas holidays. Mary is very excited and can’t wait to meet her cousin.
20b. What is the best response by the nurse?
1. “Your planned trip may put Mary at risk for a crisis.”
2. “I think you should talk to Mary’s healthcare provider before you go.”
3. “Could your daughter come here for the Christmas holidays?”
4. “I know that Mary will enjoy meeting her family.”
21a. Earlene asks many questions about SCA. She is very concerned about her granddaughter and what will happen to her the future. The nurse is aware that there are many serious complications that Mary could experience.
21b. Which potentially fatal complication(s) can occur? (Select all that apply.)
1. Hypertensive crisis
2. Vasoocclusive crisis.
3. Priapism
4. Heart failure
22. Mary’s HCP has advised Earlene to get pneumococcal and meningococcal vaccines for Mary at her follow-up office visit. Earlene asks the nurse, “Why does Mary need to have those other vaccines? I hate for her to get more shots. She cries, and I know it hurts.” What is the best response by the nurse?
1. “She is susceptible to infections. These vaccinations may help prevent a crisis.”
2. “I will get the healthcare provider to explain why Mary needs the vaccines.”
3. “I know you don’t like to see her hurt, but she must have these vaccines.”
4. “These vaccines are required for all children younger than 10 years of age.”
23a. The charge nurse is transcribing prescription at the nurse’s station. Other responsibilities of the charge nurse include answering the phone assisting with visitor’s questions and answering the clients’ call lights.
23b. Which nursing task would be best for the charge nurse to delegate to the UAP?
1. Take the hourly vital signs for a client receiving a unit of blood.
2. Teach Mary’s grandmother how to apply warm soaks to her joins.
3. Change the morphine vial on the patient controlled analgesia pump.
4. Clean the insertion sites of a client with skeletal traction.
24a. Mary is discharged home with a home health referral. The home health nurse visiting Mary the day after she is discharged from the hospital. Earlene ask the home health nurse, “I received some information form the Sickle Cell Foundation, but I have never heard of it. What kind of group is it?”
24b. How should the nurse respond?
1. “It is a foundation that deals primarily with research to find the cure for sickle cell anemia.”
2. “They didn’t discuss this organization with you when Mary was in the hospital?”
3. “The foundation arranges for families with children who have sickle cell to meet each other.”
4. “It provides information on the disease and on support groups in this area.”
25. To evaluate the discharge teaching completed at the hospital, the home health nurse discusses acute exacerbation of SCA with Mary’s grandmother. Which behavior indicates to the nurse that Earlene understands about acute exacerbation of sickle cell anemia?
1. She does not allow Mary to go outside unless she is with her.
2. She measures Mary’s fluid intake to remain under 1 liter a day.
3. She demonstrates how to accurately read an oral thermometer.
4. She is able to take Mary’s radial pulse within 4 beats of the nurse.
In: Nursing
>> Nike
Nike hit the ground running in 1962. Originally known as Blue Ribbon Sports, the company focused on providing high-quality running shoes designed for athletes by ath- letes. Founder Philip Knight believed high-tech shoes for runners could be manufactured at competitive prices if imported from abroad. Nike’s commitment to design- ing innovative footwear for serious athletes helped build a cult following among U.S. consumers.
Nike believed in a “pyramid of influence” where the preferences of a small percentage of top athletes influ- enced the product and brand choices of others. Nike’s marketing campaigns have always featured accom- plished athletes. For example, runner Steve Prefontaine,
the company’s first spokesperson, had an irreverent attitude that matched Nike’s spirit.
In 1985, Nike signed up then-rookie guard Michael Jordan as a spokesperson. Jordan was still an up-and- comer, but he personified superior performance. Nike’s bet paid off—the Air Jordan line of basketball shoes flew off the shelves and revenues hit more than $100 mil- lion in the first year alone. As one reporter stated, “Few marketers have so reliably been able to identify and sign athletes who transcend their sports to such great effect.”
In 1988, Nike aired the first ads in its $20 million “Just Do It” ad campaign. The campaign, which ultimately fea- tured 12 TV spots in all, subtly challenged a generation of athletic enthusiasts to chase their goals. It was a natural manifestation of Nike’s attitude of self-empowerment through sports. As Nike began expanding overseas, the com- pany learned that its U.S.-style ads were seen as too aggressive in Europe, Asia, and South America. Nike realized it had to “authenticate” its brand in other countries, so it focused on soccer (called football outside the United States) and became active as a sponsor of youth leagues, local clubs, and national teams. However, for Nike to build authenticity among the soccer audience, consumers had to see professional ath- letes using its product, especially athletes who won.
Nike’s big break came in 1994 when the Brazilian team (the only national team for which Nike had any real sponsorship) won the World Cup. That victory transformed Nike’s international image from a sneaker company into a brand that represented emotion, allegiance, and identifi- cation. Nike’s new alliance with soccer helped propel the brand’s growth internationally. In 2003, overseas revenues surpassed U.S. revenues for the first time, and in 2007, Nike acquired Umbro, a British maker of soccer-related footwear, apparel, and equipment. The acquisition made Nike the sole supplier to more than 100 professional soc- cer teams around the world and boosted Nike’s interna- tional presence and authenticity in soccer. The company sold Umbro in 2012 for $225 million.
In recent years, Nike’s international efforts have been focused on emerging markets. During the 2008 Summer Olympics in Beijing, Nike honed in on China and devel- oped an aggressive marketing strategy that countered Adidas’s sponsorship of the Olympic Games. Nike re- ceived special permission from the International Olympic Committee to run Nike ads featuring Olympic athletes during the games. In addition, Nike sponsored several teams and athletes, including most of the Chinese teams. This aggressive sponsorship strategy helped ignite sales in the Asian region by 15 percent.
In addition to expanding overseas, Nike has success- fully expanded its brand into many sports and athletic categories, including footwear, apparel, and equipment. Nike continues to partner with high-profile and influential athletes, coaches, teams, and leagues to build credibility in these categories. For example, Nike aligned with tennis stars Maria Sharapova, Roger Federer, and Rafael Nadal to push its line of tennis clothing and gear. Some called the famous 2008 Wimbledon match between Roger Federer and Rafael Nadal—both dressed in swooshes from head to toe—a five-hour Nike commercial valued at $10.6 million.
To promote its line of basketball shoes and apparel, Nike has partnered with basketball superstars such as Kobe Bryant and LeBron James. In golf, Nike’s swoosh appears on many golfers but most famously on Tiger Woods. In the years since Nike first partnered with Woods, Nike Golf has grown into a $523 million busi- ness and literally changed the way golfers dress and
play today. Tiger’s powerful influence on the game and his Nike-emblazoned style has turned the greens at the majorsinto“golf’sfashionrunway.”
Nike is the biggest sponsor of athletes in the world and plans to spend more than $3 billion in athletic endorsements between 2012 and 2017. The com- pany also has a history of standing by its athletes, such as Tiger Woods and Kobe Bryant, even as they struggle with personal problems. It severed its rela- tionship with Lance Armstrong in 2012, however, after strong evidence showed that the cyclist doped during his time as an athlete and while competing during all Tour de Frances. Nike released a statement explain- ing, “Nike does not condone the use of illegal perfor- mance enhancing drugs in any manner.” Prior to the scandal, the company had helped develop Armstrong’s LIVESTRONG campaign to raise funds for cancer. It designed, manufactured, and sold more than 80 million yellow LIVESTRONG bracelets, netting $500 million for the Lance Armstrong Foundation.
While Nike’s athletic endorsements help inspire and reach consumers, its most recent innovations in technology have resulted in more loyal and emotion- ally connected consumers. For example, Nike’s lead in the running category has grown to 60 percent market share thanks to its revolutionary running application and community called Nike+ (plus). Nike+ allows runners to engage in the ultimate running experience by seeing their real-time pace, distance, and route and by giv- ing them coaching tips and online sharing capabilities. Nike expanded Nike+ to focus on key growth areas like basketball and exercise and recently launched Nike+ Basketball, Nike+ Kinect, and Nike+Fuelband, a bracelet/ app that tracks daily activities.
Like many companies, Nike is trying to make its com- pany and products more eco-friendly. However, unlike many companies, it does not promote these efforts. One brand consultant explained, “Nike has always been about winning. How is sustainability relevant to its brand?” Nike executives agree that promoting an eco-friendly message would distract from its slick high-tech image, so efforts like recycling old shoes into new shoes are kept quiet.
As a result of its successful expansion across geo- graphic markets and product categories, Nike is the top athletic apparel and footwear manufacturer in the world. In 2014, revenues exceeded $27 billion, and Nike dominated the athletic footwear market with 31 percent market share globally and 50 percent market share in the United States. Swooshes abound on everything from wristwatches to skateboards to swimming caps. The firm’s long-term strat- egy, however, is focused on running, basketball, foot- ball/soccer, men’s training, women’s training, and action sports.
In: Economics
Depression Case Study
Subjective
Mr. AK is a 45 yr old African American male who is referred to begin pulmonary rehabilitation. His chief complaint is worsening shortness of breath with exertion due to sarcoidosis involving the lung. He reports that he can now only walk less than 0.75 mi on a flat surface; he cannot walk more than one and one-half flights of stairs without stopping. He states that prior attempts to improve functional capacity through regular exercise or increasing activity habits have fallen short due to disinterest, fatigue, and his dislike for exercising in front of others.
Mr. AK also suffers from grade I obesity, depression, hypertension, and hyperglycemia. Family history indicates that his father, mother, and both sisters are living. Social history indicates that he is married with one child (14 yr of age). He works part-time from home as a graphic artist, he does not routinely exercise, his daily activities are markedly restricted due to shortness of breath, he does not smoke or drink, he has difficulty falling asleep at night and awakening in the morning, and he denies substance abuse. Patient is being cared for by Behavioral Health Clinic, which includes ongoing psychotherapy to manage depression, and by his primary care physician for management of hypertension and diabetes.
He is allergic to penicillin. Medications include methotrexate, prednisone, hydrochlorothiazide, and glipizide.
Objective and Laboratory Data
Patient is a mildly obese male (BMI = 33.4) in no acute distress. Lung volumes and forced expiratory flow rates are reduced per recent spirometry report in medical record, as is lung diffusing capacity. Skin nodules observed on neck, arms, and legs; lungs clear; and cardiovascular examination unremarkable and without evidence of edema. Resting heart rate 86 beats · min–1 and resting blood pressure 144/96 mmHg. Spleen and liver enlarged. Depression screening with PHQ-9 scored at 9.
Assessment and Plan
Patient has active sarcoidosis involving lung, with second organ involvement including skin, liver, and spleen. Comorbidities include hypertension, hyperglycemia, obesity, marked deconditioning, and sleep disturbance likely due to depression (PHQ-9 score = 9).
Mr. AK completed an exercise test using a stationary cycle, achieving a peak power output of 87 W, and stopping due to dyspnea. Peak heart rate 145 beats · min–1 and peak blood pressure 194/100 mmHg. Oxygen saturation fell from 97% at rest to 89% at peak. No ECG ST segment observed, chest pain denied, and isolated PVCs observed.
Plan includes initiating weight management for obesity and enrolling in pulmonary rehabilitation to improve functional capacity and decrease shortness of breath.
In addition to improving functional capacity through aerobic-type large muscle activities, will include respiratory muscle training, as well as upper body strength training to improve skeletal muscle strength and endurance. Monitor oxygen saturation and use oxygen supplementation via nasal cannula, as needed, to maintain oxygen saturation at 90% or greater. To ensure sufficient stimulus and to enhance patient compliance, intensity for aerobic training is set at 3-5 on 10-point Dyspnea scale. Duration of effort should progress to 30 min, but interval work may be needed if patient is initially unable to exercise for 30 continuous min. Frequency of aerobic activity set at 3 times per week and resistance training set at 2 times per week (2 sets of 12-15 repetitions).
Case Study Discussion Questions
Chapter 34
Intellectual Disability Case Study
Subjective
Mr. RK is a 45 yr old male who has a mild intellectual disability (ID) and also Down syndrome (DS) and early stage Alzheimer’s disease. He lives in a community group home with 24 h support and assistance. He works 6 h per day at a local fast food restaurant. His favorite activity is to watch TV, and he enjoys eating popcorn while watching movies.
He does not have any history of heart disease or other serious medical conditions. His case worker has noted that over the past year he has experienced increased shortness of breath when walking up the stairs to his bedroom. However, at his last physical examination there was no note on any suggested pulmonary problems. He has started to display the early stage of Alzheimer’s disease and medical record notes abnormal laxity of the left knee. Mr. RK cannot walk or jog for any extended period of time without pain.
Both his physician and case worker have encouraged him to become more physically active, but at present he performs no physical activity outside of work. He is not currently taking any medications. He is referred by his physician with a request that he be provided assistance with beginning a mild exercise regimen.
Objective and Laboratory Data
He is 5 ft 6 in. (168 cm) and 240 lb (109 kg), with a BMI of 38.8 kg · m–2. Recent laboratory data indicates his total cholesterol is 240 mg · dL–1, with high-density lipoprotein (HDL) cholesterol of 35 mg · dL–1. There is no information on triglycerides or low-density lipoprotein (LDL) cholesterol. His blood pressure was 110/70 mmHg. Other findings on the physical examination were unremarkable.
A graded exercise test was ordered and completed. Mr. AK completed 4 min on a standard Bruce treadmill protocol. His maximal heart rate was 148 beats · min–1 (85% of predicted), and his maximal work capacity was predicted from treadmill time to be 4 METs. Oxygen uptake was not measured. His maximal blood pressure was 150/80 mmHg. He exhibited no ECG abnormalities, and the test was interpreted as negative for exercise-induced myocardial ischemia; but it was noted that maximal effort may not have been reached as evidenced by the low maximal heart rate achieved.
Assessment and Plan
Mr. RK has a mild ID with DS and early stage of Alzheimer’s disease. He is obese and presents with several cardiovascular disease risk factors.
A supervised exercise plan is established. Since Mr. RK has a problem with knee instability and knee pain, he was prescribed a stationary cycling program.
Case Study Discussion Questions
In: Anatomy and Physiology