The Business Logic Behind Free Strategy

Weekly Thoughts

The business common sense behind the free code hosting platform Github and CRM system odoo is the Commoditize your Complement strategy. The complement strategy is a classic strategy for technology companies in the modern economic environment. Specifically, in the supply system, while quickly occupying the market share of its own business, it minimizes the premium of upstream and downstream links as much as possible, so as to more effectively obtain the surplus value of users for its own products and increase exposure to potential users.

In 2002, former Microsoft product manager Joel Spolsky discussed the phenomenon of complement strategy being particularly obvious in technology companies, especially software/service companies, in his article Strategy Letter V: The Economics of Open Source.

Any product, service or software in the market actually has corresponding Substitutes and Complements.

Substitutes refer to other products that users consider when they feel your product is too expensive. For example, pork is a substitute for beef. If you sell pork, when the price of beef rises, many users will buy pork instead, and your sales will rise.
Complements refer to mutually complementary products purchased with your product. For example, gasoline is a complement to cars. A typical example is that operating systems and computer hardware are also complements. When the price of computers drops, the sales of operating systems will rise.

For companies, the main strategic direction is to reduce the price of complements corresponding to their core products as much as possible. If you have the ability to reduce the price of complements, you will be able to gain more sales and revenue and enjoy the exposure and popularity brought by the expansion of the audience of complements.

When IBM designed the PC system architecture, it chose a large number of standardized accessories and detailed the specifications and interface standards between various accessories in the legendary IBM-PC Technical Reference Manual. In this way, other suppliers can participate in the design and production of PC accessories very easily. The result is that a large number of low-priced memory sticks, hard drives, graphics cards and other accessories flooded the market, greatly enriching the PC accessories market. For IBM, their goal is to expand the accessories market, because accessories and PCs are complements, and low-priced accessories will greatly promote PC sales. Microsoft used the same trick. When Microsoft initially licensed the PC-DOS operating system to IBM, it dispelled IBM’s request for exclusive licensing through negotiations. Microsoft’s move was intended to eliminate the premium between PCs and expand the PC market. We know the story afterwards clearly. The price of PCs continued to fall and began to be accepted by more and more users. The Windows operating system gradually became the most popular operating system in the world, and Microsoft’s valuation took off all the way until it became the most valuable company in the world.

GitHub was acquired by Microsoft, and odoo cooperated with Inspur Information. The trend of cooperation between SaaS and PaaS products and basic cloud has become more and more obvious. SaaS needs to rely on the ecological resources of basic cloud service providers to expand its product possibilities, and basic cloud service providers need SaaS products as carriers to provide developers and R&D teams with more convenient computing services.

Connecting the Past and the Future

This week, Biden won the election, and Sino-US trade friction is expected to ease in stages, but being tough on China is the consensus of the US Democratic Party and the Republican Party. The United States will still contain China’s development for a long time, just like Britain against the United States more than 200 years ago and the United States against Japan more than 70 years ago.

On November 3, Ant Group suspended its listing, and then the regulatory authorities repeatedly emphasized the risk of consumer loans and required funds to flow into the real economy, warning capital not to play the game of money making money. The funds of investors who successfully subscribed before will be returned the same way. When the listing will be restarted, the new listing scale, valuation, and financing scale are all unknown.

Next week, the M0, M1, and M2 annual supply rates in October, and the producer price index and consumer price index in October will be released.

Weekly Market

Period: 2020-11-02————2020-11-08

Under the influence of the uncertainty of the US election, no one predicted that the market would rise generally in November. Now that the general trend is set, international competition will be controlled by politicians again, which will be milder, more hidden, and more dangerous. Lithium batteries, new energy and other new energy vehicle industry chains led the gains, while concepts related to the new crown such as blood products, new crown pneumonia detection index, and medical devices led the declines.

Market (%)	Index	This Week	1 Week Ago	2 Weeks Ago	3 Weeks Ago
Shanghai Composite	3312.16	2.72	-1.63	-1.75	1.96
Shenzhen Component	13838.42	4.55	0.82	-2.99	1.83
ChiNext Index	2733.07	2.91	2.12	-4.54	1.93
Hang Seng Index	25712.23	6.66	-2.74	2.18	0.8
HSCEI	981.18	7.06	-4.77	2.29	2.6
Red Chip Index	3783.98	6.98	-3.23	1	-0.86
Dow Jones	28323.4	6.87	-6.47	-0.95	0.07
Nasdaq	11895.23	9.01	-5.51	-1.06	0.79
S&P 500	3509.44	7.32	-5.64	-0.53	0.19

Market (CNY, Billion)	This Week	Last Week	2 Weeks Ago	3 Weeks Ago
Shanghai Connect	126.87	-58.34	-51.67	72.39
Shenzhen Connect	87.29	-25.03	-88.58	38.81
Hong Kong Connect	202.80	289.32	105.23	37.82

Positions

Type	Code	Name	Current Dynamic
Stock	SZ000880	Weichai Heavy Machinery	Flat
Stock	HIMX	Himax Technologies	Flat
Fund	F260104	Invesco Great Wall Domestic Demand Growth Mixed	Flat
Fund	F000566	Huatai-PineBridge Innovation Upgrade	Flat
Fund	F320022	Lion Fund Research Selected Stock	Flat
Fund	F001692	Southern National Policy Power Stock	Flat
Fund	F163415	Xingquan Commercial Front-end Fee	Flat
Fund	F001668	E Fund Global Internet Mixed	Flat
Fund	519688	BOCOM Selected Mixed	Flat
Fund	163406	Xingquan Herun Classified	Flat