On 0, ben <benfoley@rcn.com> wrote: [snip] > by that response, you really prove that you have no clue whatsover about what > drives the profit machine. it's not about raw cost versus median price. it's > about whatever price a given market can afford. economics 101. check out > holland, the netherlands, where--pre ec--because the dutch had no homegrown > auto industry, the u.s., the british, the japanese, and the germans were in > such intense competition to grab the market that cadillacs, jaguars, > toyotas, and bmw's were available through the 80's and 90's at prices > american, brit, japanese, and german dealers couldn't possibly match in their > own territory. sale by volume generates presence in the market. walmart, if > they're smart, stands to achieve the same, primarily because they are the > first to offer pc architecture independent of any cumbersome allegiance to > any prior licensing agreement. have you been paying any attention to the > market process that determines the quality of your life--that is, assuming > you live in the u.s? if so, are you really unaware of how much money you and > i and all of us pay to market coca-cola around the world, under the guise of > opening up foreign markets? the reason that u.s. manufacturers locate their > manmufacturing plants in other countries is because it costs less to do the > job over there, so that they can return higher premiums to their > shareholders, not so that they offer the product to you for less. wake the > fuck up. the more people take advantage of what walmart is offering, the > longer the offer will remain available, but once the offer seems to generate > independent revenue, the sooner it will be appropriated as a revenue earner. > get a grip, kid. most of your favorite stores are quite content to break > even. credit means way more than profit. always has, always will. <lecture> Now, I am no economist, although I have studied the field in some small way, but I am distinctly uncomfortable about accepting what you have said. What drives the profit machine is selling something for more than it costs to produce or source, at least on a long time average. If you don't, then you are making a loss. To quote the head of the Australian Securities and Investments Comission, "Every time a company goes bust there are insistent accusations of fraud and embezzeling, but what it usually comes down to, in the end, is that the company has been selling something for less than it costs." You can't keep doing that, as the HIH Insurance Group, Ansett and possibly Enron have proven beautifully for us in the last year. While you can try to grab market share by selling below cost for a while, you can't sustain it, and I would suggest that the retail computer industry is one place where it isn't very effective. You draw a comparison to the Dutch auto industry, but I think this is false, because the auto industry is one where products are well differentiated and there is a history of customer loyalty to a make that has proven itself cheap and reliable in the past, no matter what the cost and reliability is like today. The personal computer industry, on the other hand, is one with a history of customer disloyalty - whoever is selling the product cheaper at the time gets the market share. We may be willing to pay a small premium for convenience or custom building, but in general if someone else does the same thing cheaper then we switch without a thought for loyalty. And products are generally not well differentiated in the PC market. What is the difference between one brand of PC133 RAM and another? What is the difference between one 50x CD drive and another? And, even more to the point, what is the difference between two producers who put identical components in a near identical box and do it for different prices? There is no argument similar to, 'Jags are heaps - the British can't make a car without an oil leak, get a German car,' (I love Jags, by the way, but that's what people say) because when you get down to it you can have an Intel or an AMD and there's not that much difference. The history of the PC industry is one of this type of customer dis-loyalty. If getting in early and securing market share was an effective strategy in the PC industry then we would all own IBM machines. But clone manufacturers have the vast share of the market. Why? Because they can make things cheaper than IBM can/does. Look at the meteoric rise of Dell - they managed to differentiate themselves from the rest of the market with convenience and fast delivery and they took customers from other companies in droves. While there is some loyalty to individual manufacturers of high-end components (Seagate for disks, Creative for sound, Matrox or similar for video, Sony perhaps for monitors) this loyalty is based mostly on continued performance and value, not on past experiences. So if Wal-Mart (I've never heard of them before this thread, but then I'm not in the 'States) start selling PCs below cost then they will eventually decide that either the line has to be discontinued, because it is costing them money, or that the price must be raised to point where the product will break even. Obviously you can't continually raise your prices, because the volume sold will decrease, but there is a point called the market equilibrium where there is the maximum 'happiness' (or social benefit, or social excess) between the supplier and the consumer. If Wal-Mart raise their prices too high, then someone else will do it cheaper and they will lose the market share. If they discontinue the line then the US market has lost what is, apparently, its only option for a box without an OS. </lecture> Tom -- Tom Cook Information Technology Services, The University of Adelaide "That you're not paranoid does not mean they're not out to get you." - Robert Waldner Get my GPG public key: https://pinky.its.adelaide.edu.au/~tkcook/tom.cook-at-adelaide.edu.au
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