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 The McKinsey Quarterly Newsletter: December 2001 =09
  If you would prefer to view this newsletter as a Web page, point your Web=
 browser to: http://www.mckinseyquarterly.com/newsletters/2001_12.htm   [IM=
AGE]  Greetings from The McKinsey Quarterly!  Why can two nearly identical =
cars, with only minor differences in components and trim, end up with drama=
tically different fates in the marketplace? The Toyota Corolla and the Chev=
rolet Prizm are essentially twins, built side by side at the same plant in =
California. But General Motors sells only one Prizm for every three Corolla=
s sold by Toyota, though GM lays out nearly $750 more per car in buyer ince=
ntives.  This curious case shows how the Big Three automakers have fallen i=
nto the classic trap of commoditizing industries. Carmakers underemphasize =
the emotional relationships buyers have with their cars and the brand attac=
hments forged thereby. As cars become more alike, price too often becomes t=
he reason for choosing one nameplate over another.  The remedy? Detroit mus=
t quit squandering its marketing budgets on rebates and incentives and focu=
s instead on all elements of brand affiliation. Steer your cursor toward "R=
evving up auto branding " to read the new rules of the road.  See you at th=
e site!  Lang Davison Editor, mckinseyquarterly.com  [IMAGE]  This month at=
 mckinseyquarterly.com   Facing disconnection: Hard choices for Europe's te=
lcos   Can it be only two years since the fate of the Continent's telecom c=
ompanies seemed to rest on how quickly they could enter new markets and buy=
 up expensive assets? Survival may now depend on the unpalatable task of sh=
edding assets and stepping away from areas that telcos once regarded as cen=
tral to their business.  Chips off a new block   The semiconductor industry=
 is already reeling from the technology slowdown, yet a new generation of p=
lastic-based chips could soon make things worse. Although these ICs current=
ly underperform silicon, as the gap narrows they may well take market share=
 from commodity chips produced by the likes of Hitachi, Rohm, and Toshiba. =
 The case for on-line communities   Remember virtual communities-the busine=
ss model that was supposed to make World Wide Web-based companies profitabl=
e? Just another overhyped myth from the days of bubbledom, right? Not so fa=
st: research from McKinsey and Jupiter Media Metrix shows that community fe=
atures create substantial value for both content and retail sites.   Portal=
s for all platforms   Nobody wants to own a narrowband portal these days. B=
ut the future looks rosy for broadband portals, to judge by the many compan=
ies jumping into that space. This piece sorts out the competitors and sugge=
sts that they focus on their "native" broadband platforms-PCs, TVs, or mobi=
le devices-while preparing for the multiplatform future.  Power by the minu=
te   Can the electricity industry be deregulated without the threat of a Ca=
lifornia-style meltdown? A nifty technique called "dynamic pricing" may pro=
vide the answer-though it requires huge upfront expenditures to retrofit or=
 replace household meters.  [IMAGE]  New! The McKinsey Quarterly Reader   T=
his month we are pleased to announce the debut of The McKinsey Quarterly Re=
ader, featuring selected articles from our archive. They are grouped togeth=
er by theme and presented in convenient PDF format.  The articles in our fi=
rst Reader, "Strategy in an uncertain world ," present tools and techniques=
 that managers can use to reduce the risks involved in making strategic dec=
isions.  Note: Adobe Acrobat version 3.0 or higher is required. The large f=
ile size (740K) may require a lengthy download time for users without a bro=
adband connection to the Internet. [IMAGE]  Share the wealth!  If you know =
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