Find the weakness of the Big Mac

  Where is the weakness of the Big Mac? It is neither its advantage nor its disadvantage, but its migration cost.
  In the history of business, if the market structure itself has not undergone major changes, and there has been no revolutionary technology, the status of large companies will always be difficult to be shaken. However, in the history of human business, there is really such an exception. The market structure has not undergone major changes. The old Big Mac has always been so powerful, but a new big guy has grown up next to it. This is the Pepsi that grew next to Coca-Cola in the 1930s and 1940s.
  Let’s take a look at the situation at that time. Coca-Cola was founded in 1886, and Pepsi was born in 1898, with a gap of more than ten years. In the American beverage market, until the 1930s, Coca-Cola was the undisputed dominance, with almost no decent competitors.
  The stability of this market is too strong. There is no product innovation, the market structure will not change suddenly, where will the opportunities for Pepsi-Cola appear?
  The first opening of Pepsi-Cola was a divine operation in 1939. In fact, it is very simple, that is, a large bottle of Pepsi was launched. Compared with the competitor Coca-Cola, this bottle has twice the capacity of Coca-Cola, but the price is the same as a bottle of Coca-Cola.
  I have seen this case before. At that time, my attention was focused on the price issue, so I didn’t think it was a big deal. But recently I saw some materials and realized that the beauty is not in the price, but in the bottle.
  At that time, Coca-Cola, which was in full swing, did an extraordinary thing and designed a streamlined bottle. This bottle design has been used until now, and it is the kind we can see on the shelves today. The beverage market back then was chaotic, there was no brand awareness, and the intellectual property protection system was not so developed. With this bottle, Coca-Cola suddenly improved its recognizability. This bottle has become a symbol of Coca-Cola and a super-brand weapon that it monopolizes the market.
  Now that it has this useful thing, Coca-Cola has put tens of billions of glass bottles and massive advertisements on the market. In 1939, the United States had not yet emerged from the Great Depression. In this year alone, Coca-Cola’s advertising reached 15 million U.S. dollars. At that time, this was an incredible number. The advertisement is to show this kind of bottle and make this bottle deeply rooted in the hearts of the people.
  If you understand this background, you will understand the beauty of Pepsi’s action. Pepsi made a bottle that is twice the size of Coca-Cola, and the drinks in it are naturally doubled, but the price is the same as Coca-Cola. In the eyes of consumers, buying Pepsi is more cost-effective than buying Coca-Cola. So how should Coca-Cola respond? If you ignore it, Pepsi will rely on its price advantage to conquer the city. If it is reasonable, is it also possible to make a bottle as big as Pepsi?
  But Coca-Cola has invested a lot of capital in bottles, global supply chains, bottling plants, and massive advertising fees. Do you dare to change bottles? After a change, the advantages that have been established with great difficulty are over, and the previous advertising fees are also spent in vain.
  Ten thousand steps back, even if Coca-Cola is determined, it must be changed. Globally, the bottle mold must be changed. From production to transportation to retail, there are countless details that need to be re-adjusted, and advertising must also be changed. This will take a long time. time. And this time, enough Pepsi to tear a hole in the market.
  This puts the giant Coca-Cola into a dilemma. In fact, this year, Pepsi-Cola got 20% of the market share with this trick.
  If this action is only regarded as a price war, then let us assume that if Pepsi used a bottle of the same size, but the price was halved, what would happen?
  First of all, the cost of a bottle of Coke is not just the sugar water in it. The vast majority of costs are money for the entire supply chain and distributors. Once the price is halved, it means that your supply chain level is poor, the money you give to distributors is less, and your profits are still thin. Even if the price war is successful in a sneak attack and won a part of the market, it will kill the enemy by 8,000 and lose 10,000 by itself.
  Also, for the same product, your price is half cheaper than your opponent, and you may indeed gain some market share temporarily, but after a long time, you are a bargain in the minds of consumers, and you are pressed at the bottom of the consumer contempt chain. It is a great harm to the brand.
  More importantly, if this trick works, Coca-Cola, as a Big Mac, will be too convenient to deal with-the big deal will also lower the price. A giant company’s ability to mobilize capital and bear losses is unmatched by a small business. Once Pepsi is boiled to death, it will be restored to its original price. Moreover, for Coca-Cola to do such an action, there is no need for reaction time, and the headquarters can immediately open the battlefield with a paper order.
  In a market, where is the weakness of the Big Mac? It is neither its advantage nor its disadvantage, but its migration cost. In other words, in the process of building today’s advantages, it must have formed something that is difficult to change and does not work well. These things are in line with the following characteristics:
  first, the cost of change is huge; second, once the change is made, the original advantages are gone, so the loss is huge; third, the change process is very slow and takes a long time.
  For example, in the current market, many brands are emphasizing that I have a cultural heritage, a long tradition, and I serve successful people. These brands originally used these as advantages to promote. However, you will find that the industry where this brand is located actually has an obvious opportunity to rise.
  That is, after entering the market, as long as you emphasize that you are serving young people, you are rebellious, young and passionate, those old-brand Big Macs can’t help it. They are neither willing to give up their current advantages, nor can they hinder your growth. This is happening in China’s current liquor market.
  Looking at the case of Pepsi 100 years ago, we can understand two things: First, why are the advantages of the giants in the Internet age more difficult to shake? Not only because of network effects, but also because of the principle we are talking about today. Because on the Internet, resources can flow freely like water, and migration costs are getting smaller and smaller. Therefore, in the Internet age, there are fewer cases of head-on challenge to the success of the Big Mac. New entrants have to wait until the industrial structure changes before they have a chance.
  Second, whether we are a business or a human being, if we find that the established advantage is on a non-transferable basis, or on the basis of high migration costs, then this advantage may not be as great as it seems.