Comments on: A Worrisome Trend With Companies Like Porsche, and General Mills http://www.investorgeeks.com/articles/2008/03/25/a-worrisome-trend-with-companies-like-porsche-and-general-mills/ Learning and sharing investment knowledge. Sat, 11 Oct 2008 00:20:06 +0000 http://wordpress.org/?v=2.0.4 by: life insurance in new jersey http://www.investorgeeks.com/articles/2008/03/25/a-worrisome-trend-with-companies-like-porsche-and-general-mills/#comment-463130 Fri, 11 Jul 2008 23:22:55 +0000 http://www.investorgeeks.com/articles/2008/03/25/a-worrisome-trend-with-companies-like-porsche-and-general-mills/#comment-463130 <strong>life insurance in new jersey...</strong> Seagram fraudulent extras.reproducibilities,evaporation ... life insurance in new jersey…

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]]> by: Doug http://www.investorgeeks.com/articles/2008/03/25/a-worrisome-trend-with-companies-like-porsche-and-general-mills/#comment-311318 Sat, 29 Mar 2008 06:32:01 +0000 http://www.investorgeeks.com/articles/2008/03/25/a-worrisome-trend-with-companies-like-porsche-and-general-mills/#comment-311318 One more comment to the original post - the quote about fuel price hedging in the airline industry is correct. If you are in a commodity business where being the low cost producer is essential, hedging specific costs may be a really bad strategy, particularly if your competitors do not hedge this risk. (It may also turn out brilliantly, as it did for Southwest a few years back). Often, in such cases, if you have a cost advantage in some other area, it is best to match competitors (and not hedge) so as to ensure that you cannot be caught at a disadvantage should your hedged price be higher than the market price. But neither Porsche nor General Mills is competing in a commodity business. Both sell products with immense brand value and are successful differentiators, thus hedging allows them to focus on what builds value in their businesses, their products and their marketing efforts and allows them to ignore big moves in currencies. One more comment to the original post - the quote about fuel price hedging in the airline industry is correct. If you are in a commodity business where being the low cost producer is essential, hedging specific costs may be a really bad strategy, particularly if your competitors do not hedge this risk. (It may also turn out brilliantly, as it did for Southwest a few years back).

Often, in such cases, if you have a cost advantage in some other area, it is best to match competitors (and not hedge) so as to ensure that you cannot be caught at a disadvantage should your hedged price be higher than the market price.

But neither Porsche nor General Mills is competing in a commodity business. Both sell products with immense brand value and are successful differentiators, thus hedging allows them to focus on what builds value in their businesses, their products and their marketing efforts and allows them to ignore big moves in currencies.

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