Disney (DIS) The nation’s network of 15 million cable TV subscribers lost power in early September. Operating partners dispute Disney’s retransmission fees. Of course, ripping off customers is a poor business model.
Long-term investors should save money Walmart WMT (WMT). Let me explain.
Legacy businesses are under siege around the world. Thanks to software, innovative and agile companies can quickly gain a foothold and gain an advantage.
The automotive sector is hollowing out Tesla TSLA (TSLA). The Austin, Texas-based company has every aspect, from its design and supply chain to advanced driver assistance systems, defined by software. More importantly, these digital processes are vertically integrated with Tesla’s Operating System, the software platform that governs the company’s decision-making. The benefits are starting to emerge. Volkswagen executives reportedly concluded in 2021 that Tesla’s manufacturing is three times more efficient than traditional companies. bloomberg.
Netflix NFLX (NFLX) Media has similar benefits. More than a decade ago, executives at the Los Gatos, Calif.-based company decided they could use software to develop and distribute media content around the world. Data analysis shows what content is being created. Proprietary compression algorithms enable streaming even at low bandwidth. The Netflix subscription video-on-demand service, introduced on January 16, 2007, sparked a cord-cutting revolution. SVOD offered consumers an on-demand alternative to cable TV at a lower price.
At the heart of Disney Blackout is cord cutting.
Charter Communications CHTR (CHRT) is the third largest cable TV operator in the United States. Executives allege that Disney is jacking up pay-TV prices by forcing carriers to distribute ESPN and other expensive Disney-owned channels in so-called bundles. Customers want lean, inexpensive bundles. The impasse is leading to a loss of subscribers, according to a Charter press release.
variety reported in May that U.S. pay-TV subscribers fell to 75.5 million in the first quarter of 2023, a 7% year-over-year decline and the lowest level since 1992. Analysts attributed the decline to higher costs in ESPN’s retransmission fees.
Price gouging has become the go-to strategy for legacy companies that have failed in the digital transformation era.
The Ford F-150 is America’s best-selling car. The median price rose from $49,831 in 2019 to $77,040 in 2023, according to data from . US News and World Reports. This is three times the rate of inflation. It’s worth noting that vehicle prices across the auto industry are rising faster than inflation, even though sales are declining. The exception is Tesla, whose prices have fallen even as sales have increased.
Traditional company leaders need to think more about their customers.
Walmart (WMT) operates 11,500 stores under 72 flags in 28 countries. The Bentonville, Arkansas-based company had 2022 sales of $572.8 billion. Sales in 2023 are expected to reach $611.3 billion, an increase of 6.8%. Walmart is a traditional company, but management doesn’t rely on price gouging to win over investors. They responded with the following confusion: Amazon.com (AMZN) With a positive mindset and commitment to our customers. They leveraged Walmart’s natural strengths. store.
90% of Americans live within 10 miles of a Walmart. We found that customers prefer ordering products online and picking up bagged products in-store. This omnichannel, click-and-collect strategy gives consumers control over prices and lower prices.
In 2021, click-and-collect e-commerce orders reached $20.4 billion. Walmart accounted for 25% of the purchase, according to Chief Financial Officer Brett Briggs.
Briggs is an architect of aggressive e-commerce acquisition strategies. Jet.com, Bonobos, Eloquii, and Modcloth were acquired for $3 billion, $310 million, $100 million, and $60 million, respectively. But the acquisition happened in 2016, when Walmart spent $16 billion to acquire a 77% stake in Flipkart, India’s largest e-commerce company. Executives then spent $1.4 billion to buy additional Flipkart shares in 2023.
Not all legacy businesses will succeed with digital transformation. Too often their strategies are flawed. Management prioritizes short-term profits over customer acquisition. With a stock price of $161.57, Walmart stock looks attractive on a pullback toward $140. Investors should accumulate stocks on the weak side.
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