{"id":25490,"date":"2017-11-15T20:06:21","date_gmt":"2017-11-16T01:06:21","guid":{"rendered":"https:\/\/digital.hbs.edu\/platform-rctom\/submission\/hubble-contacts-in-an-era-of-isolationism\/"},"modified":"2017-11-15T20:06:21","modified_gmt":"2017-11-16T01:06:21","slug":"hubble-contacts-in-an-era-of-isolationism","status":"publish","type":"hck-submission","link":"https:\/\/d3.harvard.edu\/platform-rctom\/submission\/hubble-contacts-in-an-era-of-isolationism\/","title":{"rendered":"Hubble Contacts in an Era of Isolationism"},"content":{"rendered":"

Hubble Contacts in an Era of Isolationism <\/strong><\/p>\n

In 2016, close friends Ben Cogan and Jesse Horowitz founded Hubble<\/a>, an e-commerce startup that sells daily contacts as a subscription offering. [1] [2] After meeting every few weeks to discuss startup ideas, Cogan and Horowitz felt they had landed on a massive opportunity to disrupt the contact lens industry by offering contacts at half the price of companies like Johnson & Johnson. [3] In its first full year of operation in 2017, Hubble will earn more than $20M in revenue. [4]<\/p>\n

Central to the company\u2019s success has been strong management, an outstanding performance marketing engine, and a strategic supply chain operation. While Hubble\u2019s supply chain has been an efficient platform for the company to produce its affordable contact lens offering, the company\u2019s reliance on a Taiwanese manufacturer represents a significant risk as the geopolitical landscape has shifted towards isolationist movements that have targeted free trade.<\/p>\n

Hubble\u2019s Supply Chain \u2013 Are Challenges Coming? <\/strong><\/p>\n

Hubble has a simple supply chain that consists of a manufacturer in Taiwan, a freight forwarder, a fulfillment center, and a packaging center. [5] The company\u2019s manufacturer, St. Shine, is one of the largest producers of contact lenses in the world. [6] In 2016, Hubble signed an exclusive contract with St. Shine to sell daily contacts in the United States. [7] While the relationship has provided the company with a strategic avenue for growth, the business has begun to feel the effects of President Trump\u2019s \u201cAmerica-First\u201d strategy, in which President Trump claims that America will \u201cno longer surrender this country or its people to the false song of globalism.\u201d [8]<\/p>\n

With the Trump Administration\u2019s decision to abandon the Trans-Pacific Partnership (TPP), Hubble will incur a 2.2% tariff on goods entering the country from Taiwan, versus no tariff in a world where the TPP progressed. [9] [10] Hubble\u2019s business model rests on its ability to produce contacts cost-effectively from St. Shine. During the 2016 presidential election, Donald Trump campaigned on a trade war against China, in which he called for as much as a 45% tariff on imported good from China. [8] In recent months, President Trump has softened his tone towards China and recognized the \u201cOne China\u201d policy, which has worried Taiwan that the United States \u201cmight be tempted to sacrifice its interests in a grand US-Chinese bargain.\u201d [11]\u00a0\u00a0 While it is unclear how US foreign policy will unfold under the Trump Administration, a retreat away from America\u2019s long-standing tradition of free trade inevitably puts Hubble at risk.<\/p>\n

Despite this risk, aside from the 2.2% tariff, Hubble has yet to deal with significant problems from isolationism. Cogan believes that geopolitics are ultimately difficult to manage and that as a fast-growing startup, the company has so many other challenges in front of it that isolationism is not its top priority. [12]<\/p>\n

While Hubble remains an early-stage startup, the company\u2019s explosive growth and the shift in geopolitics will likely require the team to confront challenges related to isolationism earlier than they anticipate. Hubble will require a robust supply chain strategy that will enable the business to thrive in the face of a changing global economy. To prepare for this challenge, Hubble should consider the following recommendations.<\/p>\n

    \n
  1. Eliminate the Risk of a Single Point of Failure \u2013 <\/strong>Even though a trade war with Taiwan may be less likely than other nations, Hubble should develop relations with a robust set of domestic and global partners that are unlikely to incur increased trade tariffs. With its exclusive relationship with St. Shine, the company\u2019s success is inextricably linked to the factory being allowed to manufacture and distribute products in the United States. Diversifying this risk may become essential in the coming years.<\/li>\n<\/ol>\n

    \u00a0<\/strong><\/p>\n

      \n
    1. Develop a Business Plan for Domestic Manufacturing \u2013 <\/strong>While Hubble should continue to use St. Shine\u2019s Taiwanese operation as its primary manufacturer, the company should work with the manufacturer to explore building a factory in the United States over the coming years. Creating American jobs and boosting American manufacturing would likely welcome tax benefits, eliminate potential tariffs, and reduce freight costs that are subject to volatile spot rates. [13]<\/li>\n<\/ol>\n

       <\/p>\n

        \n
      1. Prioritize Global Isolationism as a Board-Level Issue<\/strong> \u2013 Although much is yet to be determined for the future of free trade in Asia, the potential risk for increased tariffs is significant. Hubble should monitor this threat with careful attention and discuss as a board regularly.<\/li>\n<\/ol>\n

        Going Forward<\/strong><\/p>\n

        In its first year of business, Hubble has achieved a tremendous amount of success. As Cogan and Horowitz scale the company, they will inevitably confront significant challenges in a fast-moving global economy. As a high growth startup with limited resources, should they assume business as normal or develop a full-fledged plan to confront isolationism? How likely will Hubble and similar US-based startups with foreign operations be impacted as a result of policy shifts from the Trump Administration?<\/p>\n

        (Word Count: 795)<\/p>\n

        Sources: <\/strong><\/p>\n

        [1]\u00a0 Hubble Contacts, \u201cHubble Contacts \u2013 Why We Started Hubble,\u201d YouTube, published August 2, 2017, [URL]<\/a>, accessed November 2017.<\/p>\n

        [2]\u00a0 Burt Helm, \u201cHow Facebook\u2019s Oracular Algorithm Determines the Fates of Start-Ups,\u201d New York Times Magazine, November 2, 2017, [URL]<\/a>, accessed November 2017.<\/p>\n

        [3] Ibid.<\/p>\n

        [4] Amy Feldman, \u201cHubble Contacts Wants To Do For Contacts What Harry\u2019s Did For Razors,\u201d Forbes Magazine, March, 20, 2017, [URL]<\/a>, accessed November 2017.<\/p>\n

        [5] Ben Cogan, phone interview by author,\u00a0 New York, New York, November, 10, 2018.<\/p>\n

        [6] Ibid, Feldman.<\/p>\n

        [7] Ibid, Feldman.<\/p>\n

        [8] \u201cThe New Nationalism,\u201d The Economist, November 19, 2016, [URL]<\/a>, accessed November 2017.<\/p>\n

        [9] Peter Baker, \u201cTrump Abandons Trans-Pacific Partnership, Obama\u2019s Signature Trade Deal,\u201d New York Times, January 23, 2017, [URL]<\/a>, accessed November 2017.<\/p>\n

        [10] Ibid, Cogan.<\/p>\n

        [11] Kausikan, Bilahari. \u201cAsia in the Trump Era.\u201d\u00a0Foreign Affairs<\/em>, vol. 96, no. 3, June 2017, pp. 146\u2013153., www.foreignaffairs.com\/reviews\/review-essay\/2017-04-17\/asia-trump-era<\/a><\/p>\n

        [12] Ibid, Cogan.<\/p>\n

        [13] Willy Shih, \u201cFuyao Glass: America\u2019s Sourcing Decision,\u201d HBS No. 9-618-007, (Boston: 性视界 Business School Publishing), accessed November 2017.<\/p>\n

         <\/p>\n

         <\/p>\n

         <\/p>\n

         <\/p>\n

         <\/p>\n

         <\/p>\n

         <\/p>\n","protected":false},"excerpt":{"rendered":"

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