This post is in continuation of a series on Environment Scanning for the craft of Business Strategy. Earlier sections are on this web log.
The purpose of this web log is to apply Business Management methods to stock investing.
The focus on this post is on how branding is a significant parameter of Environment Scanning for Sectors. Each sector has a number of industries. Moving sequentially from sectors to industries helps to make top stock picks.
Branding matters for every organization. There is no business without a customer. The latter's mind determines core and sustainable financial performance of all stock.
Branding for industrial clients is easier than for masses of consumer. A management team can meet regularly with key clients to find out their needs and perceptions. The nuclear power industry in the United States is an extreme example. The country's Navy is virtually the only present customer. That is why the industry so persistently supports the construction of nuclear plants in India: they have no hopes of other paying customers!
Now let us go to the other end of the branding pendulum. Consider the Apparel/Accessories Industry. It is part of the Consumer Cyclical Sector. You have to forecast fashion trends to succeed in this type of business. The best executives may falter as new generations of customers take over the bases of cash inflows. You can conduct a random survey and still have incorrect results. The ability to stay in tune with the thinking of unknown faces is a success driver for stocks in the Apparel/Accessories Industry.
Use the following link to see branding in action in this industry and how it can affect stock values:
http://www.stockmarkets.com/blog/a-stock-that-looks-inside-young-minds-part-1
Branding is closely linked to market segments. A stock investor has to scan the environment and make picks of organizations which excel in branding. This implies not only customer insight but sensitivities to trend changes as well.
Stock market regulators do not have any measures of branding. They do not even require that brands are valued and entered in lists and accounts of assets.
Private equity uses this regulation lapse to build moats and to keep small retail stock investors away. They consider venture quality to be more important than even celebrity executives, in picking stocks for their bottomless pits of capital.
Venture quality and branding are nearly synonymous. Both these forms of Business Management jargon deliberate on why customers buy products and services.
You can fly over the cuckoo's nest of misinformed retail stock investing. Visit the following link:
http://www.sba.gov/advo/research/rs315.pdf
What do you think of branding? Do you use this as a factor in making top stock picks?
Please email stockway.myview@gmail.com or leave a post below.
We have covered politics and Environment Strategy in yesterday's post.
What comes after branding?
Domain expertise is another predictor of Sector shifts in the economy. Today's top stock picks may be unprofitable tomorrow. Current losers may be the highest growth achievers in future. The Delphi Technique is the Business Management way to Astrology of Stocks.
Let us celebrate the NASA landing of another spacecraft on Mars with a post on the Delphi Technique tomorrow.
Monday, May 26, 2008
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2 comments:
A very well drafted post I must say. The post is in contrary to my experience I had with transacting branded stocks. Stock values of the branded stocks move up or down with movements of the stock exchange. Short term traders get very severely affected if they, per chance,buy branded scrip when an exchange is at its peak. And suddenly because of environmental reasons, which is beyond control of any ordinary investor, finds the exchange just plummets, and so do the branded stock values. Why does this happen, just because the Crude has gone up, global inflation is taking place, sub prime financial matters get discovered, the WTC collapses etc. The ordinary investor then gets stuck whether to sell the scrip and stop loss and re-enter when the sensex,and do bottom fishing or hold on to the scrip till the sensex recovers again. I fail to understand as to what business strategy one should adopt!
Branding is relevant for stock investment but not for day trading. The latter depends on insider information, or may be pure gambling.
Use branding to pick stocks to which you are committed for ever. Enjoy their dividends. Sell them only when you need cash in a hurry.
Book some net profit from stock investing, and use it for day trading. Resolve before you start that the capital in day trading may be lost at any time. Think of it as a good meal at a restaurant, or another form of recreation. Enjoy it and lose it! Sometimes, day trading in stocks will rake in cash. It is like the restaurant owner giving you a complimentary dish or drink: do not think it will be there everyday.
Does this make sense?
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