What business is good business?

by Thomas Sim, 21 Oct, 2001

Given choices to choose from, which business do you want to be in? VCD, Pharmacies or Microsoft Windows?

Without hesitation, most people would choose Microsoft Windows. Why? Not just because Bill is the richest man on earth! This is the discussion of this article.

• Mr Alex started a VCD selling business. It was lucrative - profit of RM10/piece, of course he has always been lucky and never been caught. Then, comes Ms Juliana, who is married with 4 kids, and desperately looking for some side income. She does not mind having less profit, so she sold VCDs at RM5 profit a piece. She became an instant hit! She made a lot of money but unluckily, she was caught once. Never mind, she said to herself, I have made enough.

The other types of business of this nature are: cellular phones, common electrical goods and largely FMCGs (Fast Moving Consumable Goods). The characteristic of this form of business is fast in fast out and kill the price while you can. This is a cost strategy kind of business.

• Pharmacy is a professional practice. Like all other professional practices, it should be service oriented. On the contrary, it is sadly the case - it is a commodity selling business. Nevertheless, it is a protected business that if you are not a trained pharmacist, you can not operate a pharmacy. This form of business is an illustration of 'I can and you cannot' type of unequal competition, though without maintaining an added service value to the end customer.

Example of business in this nature is optometry, conveyancing lawyers. If you are the first few in this form of business, and you have a good location, this form of business is the shortest to make a lot of money. This is a restricting business, and customers are usually limited because of sub-segmentation of the business - a focus strategy.

• As for Bill Gates, he has all the time to drag on the legal suit on anti-trust law in America. He is launching Windows XP world wide now. He once said while watching a game of table tennis during the 2000 Olympics that he isn't playing for America but he will provide the NET. That will be his next breakthrough. He is the market leader, he is in the most dynamic of ICT business. He employs differentiation strategy to its fullest!

The other businesses of this nature are biotechnology, movie making, oil and telecommunication. This type of industry is a high-tech, high-capital and high-risk business. Once you are in, you would have advantage of high barrier, high profit and high chance to stay ahead. Among Asia's Fortune 500 Companies (year 2000), profitable industries are concentrated in these businesses (double digit % return per unit sale).

Given the choice, you would prefer the last form of business, don't you?

However, high-tech, high capital and high risk are the factors that put most people off. This is the nature of conservation of energy - you can't expect something out of nothing. This is the truth of real world competition, especially in the new economy.

In search of ways to make money, one should be equiped with skilled profession or jobs done by people of certain skill. Notwithstanding, there is a trade back here. The potential is limited. How many patient can a doctor see a day? How many heads can a barber cut a day? How many articles can a reporter write a day? There is always a restriction to one's ability and thus one's limit of earning. This is not business, this is called self-employed.

Rich people make money not by exhausting themselves like the above examples. They may have started that way, but certainly no more in their later career. They make money by doing business, real business! They use technology, employ strategic alliances, maneuver their capital in places which works to generate more money for them. Recent examples are like multilevel marketing, and some get rich quick schemes.

Between working yourself dead making as many sales calls a day and making a movie to sell to the whole world population, which want is a business?

Definition of business - you don't work, you make others work for you to make you rich!