A Little about Cost Markups: What do Balloons, Movie Theater Popcorn, Snow Cones and Starbucks Coffee have in common? They, along with Cotton Candy and Fountain Drinks are on the list of

But what is a “Markup?” and “What does this mean to us?” Markup, or Margin, is a marketing term for the price that a business puts on a product above what it costs to produce and deliver the good, usually determined as a percentage. In other words: the part that is straight profit.

Certainly there are more expensive items than coffee, cotton candy and popcorn –like porsches, condominiums and golf resorts– so what makes these items special? What kind of a markup would cause such a big deal?

How about this: No matter what a company sells, their price is a combination of two numbers: the cost of making and transporting the good they are selling (COGS) and the margin of profit (Markup).

COGS + Markup = Price

COGS is a set cost determined by the various expenses, fixed—such as overhead and insurance, and variable—such as raw materials and employee wages, that go into producing the product. Companies can do very little to affect this aspect of price, or at least that’s how I see it from the marketing side of the fence. The second part of price, however, the markup, can be shifted easily—this has no basis other than the price your customer is willing to bear.

For most consumer products, the average markup (“Retail”) is about 30%. For commodities –sugar, soap, pillowcases– markup is closer to 10%. But for “Premium” products –retail items aimed at the very rich, or the very demading (this is where we talked about Porsches, but also includes watches, Italian shoes, and vodka)– markups often approach 200% of Cost. And then “Ultra Premium” –products called by names like Mikimoto, Piaget, and Alfa Romeo– enjoy 400 and 500% markups. People gladly paying $750,000 for a car that costs around $20,000 to produce. For more on this, here is a great link.

But these don’t touch the 99.9% profit margins of the products mentioned above– the less than 1/50 of a cent that it costs to produce the .5 grams of a latex balloon that is filled with a burst of helium valued at 1/80 of a penny and sold for $3.00 at fairs and circuses across the US. This equates to a 1000% markup above COGS. Similar equations can be run for cotton candy, snow cones, your super-value bucket at the movie theater and your double iced caramel machiatto.

Imagine paying a 1000% markup on your car or your next burrito. That would be a $20,000,000 Altima or an $850 dollar Carne Asada bowl.

Well, it is a beautiful morning here in Shanghai and crowds of nearly-identical brown-haired and beige-skinned people pass below my second-story window of the Charms Hotel in cars, bikes and mopeds. Just as our professor told us, there is English—-or attempts at English-—written all over the place, but there are still plenty of unintelligible signs that feature characters made up of dashes, lines and boxes with no translation at all. This is definitely the most “foreign” of any country I have visited.

There are twenty-two of us including my program director and international business professor. We travel on a chartered bus and remain fairly sheltered from the realities of this, the most populated city in the most over-populated country in the world. We arrived after an 11 hour flight from Paris, on Sunday morning and cleared customs around noon. The time change was six hours from France, but a more convenient 12 hours from EST. Monday morning, at our first company visit with US Commercial Services of our own Nat’l State Dept., our guest speaker told us that Shanghai’s population of 20 million people was like fitting the population of Texas into the state of Delaware. He said that this is a problem that many non-Chinese companies have when they come here, that all they see is a bubble of untapped population or an open market of 1.3 billion potential consumers. They don’t see the reality that over 3/4s of this giant population is living on around $1 a day. The savage need for survival overshadows the wants for the people of most of this subcontinent.

On that note, we enjoyed a quick lunch at McDonald’s; Big Mac, fries, and Sprite for under $2.00, thanks to the PRC’s valuation control of the RMB, keeping the Chinese currency’s exchange rate artificially low. And MickeyD’s proves its core-competency of reproducing consistent “quality” in every venue worldwide. I can attest that the sandwiches served up in cardboard boxes are just as bad in China as they are anywhere in the States.

Yesterday afternoon’s schedule took us to a field trip of Shanghai Krupp Stainless Steel, a Joint-Venure of ThyssenKrupp and the Chinese government that manufactures flat-rolled stainless steel for all sorts of stuff, knives, pots, car exhaust systems… Their British GM gave us an overview of how the German company was sorting out issues with Chinese government regulations and the oddly over-priced yet inexpensive Chinese labor. They are some of the lowest paid nationals in the developed world, but they work a full week and require 3 times pay for overtime and holidays. It’s definitely an interesting system.

It was during our tour of the pounding and thrumming steel presses on the factory floor at about 3:30pm local time that the earthquake hit. And being less than 100 miles away from the epicenter of a 7.8-measured earthquake, it is lame to report that we didn’t feel a thing. The news told us that “Skyscrapers swayed in Shanghai,” and there are skyscrapers a-plenty in this city, but we were not in one at the time of the quake. So, sorry, not much to report there. The tour did get exciting when they used an overhead crane to haul a two ton roll of steel past us to load it on the press. I thought, “Hmmm, Jeff might have really enjoyed this little tour.” My friend in the program, Jaime LaTorre, a GT engineering grad., said he thought it was a great factory tour. I admit I was rather bored.

Last night, we went to dinner at another Chinese food place that served us stir-fried vegetables, pork and rice that tasted like anything I could have ordered up from any mall-chinese restaurant in the US, but I did drink a delicious lemon-watermelon juice with it. So how’s that for exotic Far Eastern cuisine? I’ll have to push my little horizons a bit further for meals tomorrow. –Shawn Butler

The Pearl Tower in Pudong District and Shawn Butler at People’s Square

New York City gets a bad reputation. As the most filmed city in the world, it is no wonder that I had many preconceived notions about NYC. Many of them were true. It is bigger, taller, and even more fast-paced than I had anticipated. I had blisters on my feet by the end of day 2. But I also had been lead to believe that this city was full of rude, selfish, busy and impatient people.

[youtube=http://www.youtube.com/watch?v=IIAdHEwiAy8]

This is a clip from “The Life of Brian” where Brian goes through a Basic Latin Lesson with a Roman Guard. (To See the Full Text Go Here).

CENTURION: Conjugate the verb ‘to go’.
BRIAN: ‘Ire’ – ‘Eo’. ‘Is’. ‘It’. ‘Imus’. ‘Itis’. ‘Eunt’
CENTURION: So ‘eunt’ is…?
BRIAN: Third person plural present indicative. ‘They go’.
CENTURION: But ‘Romans, go home’ is an order, so you must use the…?
BRIAN: The imperative!
CENTURION: Which is…?
BRIAN: Umm! Oh. ‘I’!
CENTURION: How many Romans?
BRIAN: Ah! ‘I’– Plural. Plural. ‘Ite’. ‘Ite’.

This is simply to complete my minimum requirement of Blogs for the month of August because I will be in NYC until after Labor Day. I have found that each month sort of develops an Unofficial Theme… Last month’s theme was “Why Steve Jobs Bugs Me.” The theme for the month of May was “Ambitious Things Other People are Doing.” April’s was “Stuff I Bought.” Well, August’s Unofficial Theme was “How Awesome is Latin?”

And, while searching Google, Ask.com, and Technorati for my blog, I recognized a common error I would like to address: Latin, the Awesome but Dead Language, is often confused with Latin as in Latin America, our Spanish-speaking brothers to the south.

This same error was attributed to Vice President Quayle in the quote: “I was recently on a tour of Latin America, and the only regret I have was that I didn’t study Latin harder in school so I could converse with those people.”

To Clarify this Point- Latin America is the region of North, South, and Central America where Romance languages are spoken, specifically Spanish and Portuguese. Interestingly enough, Quebec, although a fellow Romance-language speaker, is NOT considered part of Latin America. I think they should make an appeal. They don’t speak English, so where DO they belong?

To help you avoid confusion and potential embarassment, here are some examples of
Instances where people say “Latin”
and are NOT referring to
the Awesome but Dead Language:

Latin Dancing: As in “I like watching Latin dancing.” They are NOT referring to dances done by men in Roman togas, but to a whole style of dance including the Samba, Paso Doble, and Cha Cha that are characterized by much hip wiggling, short lop-sided skirts, and men in tight pants.
Fun Fact: All Latin Dancing can be done to the 80′s Madonna hit Holiday.

Latin Music: As in “I love listening to Latin music.” They are NOT referring to their record album of Pange Lingua done in Gregorian Chant, but to a hard-to-categorize genre of music with mostly Spanish lyrics. This includes everything from Mexican Ranchero, Luis Miguel, Control Machete, to Enrique Iglesias and Shakira. They even include Christina Aguilera, just because her last name is Spanish.

Latin Lover: As in “What’s hotter than a Latin lover?” Contrary to what you might think, this does NOT mean someone who took Latin and really loved it, then spent the next few years touring Italy and majoring in the Classics. Most typically, it is referring to a sexual partner, usually not a spouse, that is of hispanic origin. Who knew, right?

Latin Kings: As in “Can I join the Latin kings?” This is apparently NOT a bunch of Latin Professors or Catholic Cardinals that have formed a chess club, but in fact is a Puerto Rican Street Gang from Chicago. You can see how this might lead to confusion.

Um… that’s all I could find. I’m open to suggestions for More Helpful Hints. And… You’re Welcome! –Shawn Butler

Many of you have already found this. This image was taken from space of a hill that looks a lot like A Native American Listening to His iPod. Google Inc.– the same company that gives us Google.com, Blogger.com, Google Moon, and a host of other fun things I use everyday provides Google Maps for Free. This site is great fun, inspiring Andy Samburg to call it “the best. . . Double True.” But I want to tell you that there are things to do on GoogleMaps even after you’re done finding your house, your job, and cyber-stalking your exes from Global Satelites.

Google Sightseeing is one of many spin-off sights where people are posting the funny stuff they find as they mouse all over the planet. Sightings of UFOs and monsters, as well as rumors of amassing armies on the Chinese-India border abound, complete with KML coordinates and clickable photos. Here are some other funny sights at Haha.nu. Including the boy who built his own Location Balloon.

Fast Company labels Google (NASDAQ:GOOG) as an “authentic” brand and calls it “purpose-driven.” Google is not humble about this, boasting a corporate philosophy that they “organize the world’s information and make it universally accessible and useful.” Deeper into their homepage I found this: “You can make money without doing evil,” and, “Work should be challenging and the challenge should be fun.” Busy, busy.

Company shares today trade at $487.11, way down from their high at $513 in Nov, but still well above the market’s avg. share price– I’m predicting a split this summer, like my YUM shares! I think we should all pitch in, buy Google stock, and drive up this share price! (NOTE: The writer is not qualified to give stock advice or counsel, as he knows next-to-nothing about any of this stuff.)

Midway through writing this post, I realized how much Google really does for me to make our modern, internet-facilitated world a better place. Thanks Google! Good luck on your mission of taking over the world! –Shawn Butler