By Jane Wallace INVESCO's European team is focusing on businesses with strong brand and which can su...
By Jane Wallace
INVESCO's European team is focusing on businesses with strong brand and which can successfully use new technology.
The group argued that in the low growth, low inflation economic backdrop, companies need access to tools which can help them differentiate themselves from the competition and gain in market share. In such circumstances the internet, for example, must be central to a company's business model.
Steven Chamberlain, European fund manager at INVESCO, said: "Customers are promiscuous and keeping them is difficult. They have zero patience and want instant gratification. The rivals are just one click away. There are no barriers-to-entry to any business, particularly a dot.com one, and competitive advantages are more difficult to maintain."
There are a number of factors INVESCO looks for when picking stocks. Chamberlain said companies should be focusing on convenience. Unless buying the product or service is easy, customers will not bother.
The second area is value for money, as consumers will walk away if the product is not good enough. Finally, the content of any advertising material, and anything interactive is a bonus, must be good enough to retain the interest or even command the attention of increasingly time-starved customers.
An example of this last requirement is Endemol, a TV production company in Holland which makes a programme called Big Brother. The fly-on-the-wall soapumentary follows a group who have volunteered to live in a shared house and have their every action filmed, 24 hours a day.
Viewers can vote by telephone or internet whether to expel or keep an individual on the programme.
The website has so far generated 30 million hits in Holland alone. Brand too is all important in this environment, especially new ones looking to establish themselves and old ones trying to keep up as there is global overcapacity for many goods, according to Chamberlain.
He said companies also need to understand that products must be associated with values that customers want to identify with or lifestyle assumptions. On this basis, investors should be looking at, for example, Gap not Marks & Spencer.
Another theme in the portfolios is the rise of the mobile phone, Chamberlain said.
He noted that Alexander Bell once forecast that his invention would be so popular that eventually there would be a telephone in every town.
In fact, there will be one billion mobile phone subscribers by 2002, he said. In addition, he predicted between 30% and 50% of business to consumer e-commerce will be transacted by mobile phone by 2004. Chamberlain added that in Finland the consumer can already pay for using a car-wash using a mobile phone.
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