NetNews Usenet Archive 1992 #30/NN_1992_30.iso/spool/comp/os/os2/advocacy/10462

Internet Message Format | 1992-12-16 | 3.2 KB

Xref: sparky comp.os.os2.advocacy:10462 comp.os.ms-windows.advocacy:3252
Newsgroups: comp.os.os2.advocacy,comp.os.ms-windows.advocacy
Path: sparky!uunet!usc!cs.utexas.edu!csc.ti.com!tilde.csc.ti.com!mksol!mccall
From: [e-mail] (fred j mccall 575-3539)
Subject: Re: Rude behavior on this group.
Message-ID: <[e-mail]>
Organization: Texas Instruments Inc
References: <[e-mail]> <[e-mail]> <[e-mail]> <[e-mail]> <[e-mail]> <[e-mail]>
Date: Wed, 16 Dec 1992 21:59:23 GMT
Lines: 56

In <[e-mail]> [e-mail] (Hugh Whalen) writes:

>In article <[e-mail]> [e-mail] (fred j mccall 575-3539) writes:
>>In <[e-mail]> [e-mail] (Rick Schaut) writes:

>[enormous amount of stuff on passing through costs deleted]
>>
>>And you can bet that those costs are 'passed through', or you're
>>looking at a vendor who won't be in business very long.
>>

>Not necessarily. For example.

>Selling price of PC is $1500, cost is $1200 so profit per unit is
>$300. Producer sells 10,000 units so profit is $3,000,000.

An example with a 20% profit after all costs, and you call this a
'competetive environment'?  I'd like to see a clone maker of commodity
PC equipment that is clearing 20% profit per unit shipped.  Not much
competition there, or they wouldn't have that kind of profit margin.

>Producer adds in software with cost of $50. Cost is now $1250 and
>selling price *remains*  at $1500 so profit per unit is $250. But (and
>this is the important part) since software is now included the
>producer sells 12,000 units.

Based on ZERO evidence that this happens, and the complaints of a lot
of people who don't WANT the frigging software.  Once again, a
somewhat less than realistic example.

>Profit is again $3,000,000. If the
>producer sells more than 2,000 extra units his profit will in fact be
>higher. If he sells less than 2,000 extra units he will have made a
>bad business decision and will make less profit. What counts is
>*total* profit not profit per unit. Businesses make these types of
>decisions all the time. While it may seem reasonable that costs are
>*passed through* this is not always the case.

In a highly competitive market, you don't have the kind of profit
margin to eat those kinds of costs.  Take that 20% profit down to
around 2%-5% and see what your numbers do.

>Cost is only one factor that a business considers when setting a
>selling price. Other factors such as price/demand, competition, etc.
>are often as important or more important.

You're assuming a non-competitive market that allows large initial
profit margins.  Do you really think that that's the kind of market
that PC cloners are looking at?


--
"Insisting on perfect safety is for people who don't have the balls to live
 in the real world."   -- Mary Shafer, NASA Ames Dryden
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[e-mail] - I don't speak for others and they don't speak for me.