Doubling down
How Chronext, Migros and Viola Amherd highlight the value of 2nd-order thinking in Swiss business
Dear Insider,
Being first has its advantages.
First across the finish line usually results in a trophy. The top spot by market share also means big bucks.
But there are deeper layers to business than what first meets the eye.
Sophisticated investors and business leaders know that 2nd- and 3rd-order consequences often mean as much or more than the immediate effect.
This comes out clearly in some recent news in Switzerland…where only time will tell if the follow-on effects of today, will dramatically change tomorrow.
Quick hits:
💣Bombs‘away’
International relations is always a balancing act. Swiss Defense Minister' Viola Amherd finds herself in the middle of the debate with her recent conversations with NATO’s General Secretary Jens Stoltenberg. Switzerland seeks to anchor itself more closely in the general European family of nations. On the defense topic, the traditionally neutral country may have to accept the atomic bomb…
⌚Disruption disrupted
Watches are a massive industry in Switzerland. To take advantage, Chronext bet big on e-commerce disruption. Now the online reseller of luxury models, based in Zug and launched in 2013, faces some challenges. Its CEO Philipp Mann will depart and be replaced by Philippe Roten. At the same time, the company is cutting 25% of its 150 person workforce.
💊Own medicine
Migros is a Swiss giant - not only in commerce but also in culture. Now its going big into medicine. The national competition monitoring agency Weko has announced that ‘big orange’ (as Migros is sometimes referred to) may go ahead with its purchase of the 'zur Rose’ pharmacy business it had targeted.
💡The Point:
👉 Viola Amherd has a hard job. As the sole representative of the Centre group of parties, she finds herself without a constant ally in the Swiss Federal Council. At the same time, pressures from the Ukraine war and the simmering tensions around a European framework agreement make it geopolitically important to stay close to NATO. The question of accepting the existence of nuclear weapons, however, is sure to ignite a fantastically complicated discussion in Switzerland.
👉With the uninterrupted rise of Rolex (and others…but mostly Roles), the market for used watches has gone bananas. Chronext was one of the first to take advantage. But like many in business today, it finds itself at the whims of the macro-economic situation. When inflation cuts into living standards, the target market for a nice (but used) Rolex is automatically reduced. Meanwhile, Bucherer - with its strong brand presence and luxury appeal - has moved strong into the reseller space.
👉 Many would say that Migros is already big enough. The Swiss icon owns around 20% of the market in the country - but extends its reach by owning multiple other business lines and supporting culture and learning around the country. Given the hot debate around the UBS/Credit Suisse merger and its implications for competition, it comes as somewhat of a surprise that Migros is allowed to (once again) double down on its powerful position.
💡The Insider Advantage:
Anticipating the ‘second wave’ often leads to distinct advantages. First-order consequences are easy to detect - but those of the second and third order are more difficult…and often slide under the radar.
With Switzerland increasingly in need of a secure position vis-a-vis Europe, discussions about defense and ‘the bomb’ have (so far) gone almost without notice. Political figures in Bern will now need to carefully consider whether an economic agreement is important enough to accept the risk of an election storm about watering down Swiss neutrality.
Few would have anticipated that the complicated discussions would come so far.
Likewise, second-order consequences are extremely important to consider for disruptive (and monopolistic) businesses like Chronext and Migros. The underlying currents of high inflation, uncertainty and competition have hurt the former. The latter benefits from a lack of competition - but may overextend itself by moving into yet another vertical.
Overall, the deeper question is - how well do you prepare for the unforseen consequences and the trends that you never thought would affect you?
We would love to hear your thoughts…!
➕The Bonus:
🤴King Raiffeisen - In the annual Handelszeitung Private Banking ‘mystery test case’ - Raiffeisen came out on top…again. (Link)
💸Gone with the wind - Credit Suisse reported its numbers this past week - they weren’t pretty: over CHF 60bn in outflows. (Link)
⏲Workaholics - Surprisingly (or not), Swiss labor organizations are suggesting that workers stay longer on the job…for longer - all because of the ongoing labor shortage. (Link)
Interesting question about how to consider the less obvious impacts on business and culture.. tectonic plates moving under the surface.