Advisor


NON SUBSTITUTABLE
Caribbean Yacht  Charters

Sailors love to dream about sailing in the Caribbean.  Blue sky...the sun shining brightly, full sails and the feel of the kick of the helm as your own yacht glides through the surf. 

Caribbean Yacht Charters (CYC) of Marblehead Massachusetts was founded in 1968, and has grown to become the largest bareboat charter company in the U.S. Virgin Islands.  The company maintains a fleet of individually owned sailboats from 38 to 52 feet in length.  Charter parties can book bareboat charters, instructors, airline fares and even provisioning from CYC. 

CYC is an example of a business that sells a product that is non-substitutable.  If you really want a sailing holiday, you don't want to go skiing, or sit on the beach.  Sailors want to sail, and are willing to pay a premium for the only product that fully meets their demand.
 


SOMEWHAT SUBSTITUTABLE
Luxury Cruise Ships

In 1884, the square-rigger Tyburnia sailed with passengers on a round trip cruise from England to the Caribbean.  The fare was a guinea per day and included food and wine.  Customs inspectors interrogated passengers, not believing the wealthy clientele was cruising for pleasure. 

The years between the two world wars were the heydays of luxury cruise ships.  Companies such as Cunard, White Star, Canadian Pacific, and Holland America competed with each other to provide their customers with the most luxurious floating holidays. 

However, the product of a luxury holiday proved to be somewhat substitutable with the advent of the jet airliner.  Tastes amongst a great many of the luxury liner's wealthy clients changed.  The new "jet set" substituted flying and luxury resorts for their holidays at sea.  This new product competed with the luxury liners as a prestige holiday, and thus indirectly reduced demand.
 


VERY SUBSTITUTABLE
Clipper Ships

The clipper-ship era began in New York in the late 1840's and ended in London about 1872.  Clipper ships were originally built for the profitable New York to China tea trade.  American customers were willing to pay a premium for the freshest tea, so speed of delivery became the prime concern of ship owners.  A few years later, the Calcutta to London also became an important Clipper ship run.

By 1854 the vessel Champion of the Seas made a record run of 465 nautical miles in a single day...an average of almost 20 knots.  This is a sailing speed record, which stood until very recently.

The end of the clipper ships era was not caused by competition by steamers as common wisdom would hold.  The first steam ships appeared in the 1830's.  The end of the clipper ship era was caused by two events that took place in 1869:

  • Workers laid tracks that joined the Central Pacific and Union Pacific Railways, forming the first transcontinental railway in North America.  As a result, tea was trans-shipped via San Francisco avoiding the long and perilous trip around Cape Horn.
  • The Suez Canal opened shortening the distance from India to England by 6,000 mi. (9,700 km). 

The demise of the clipper ships is an example of a business based on a premise that was very substitutable.  Clipper ship owners viewed other ships as their competition, when in fact, technological innovation created unforeseen competition from new sources that directly reduce demand.
 

©Copyright 1998-2003 Ron K. Mitchell under license to Wayne Brown Institute