I don't believe that

Post #39,178 by ben_tilly 5/18/02 10:31:05 PM Reply	I don't believe that It is possible to make very good profits in a commodity business. What you have to do to do it is first get your overhead as low as possible, and then minimize your turnaround time from expenditure to revenue. Think Walmart. Or McDonalds. Outlays turn into revenue very fast, many times per year, resulting in healthy annual profits. Just in time sounds silly when you first hear it. But if it reduces the time from expenditure to revenue by a factor of 2 then someone in a commodity business doubles their annual profit (actually they do better because of savings on warehousing). Of course this isn't a business model that is consistent with taking risks, being innovative, or doing research. But my opinion is that this is where open source is taking the entire software industry, so it is a model that is worth giving some serious thought to. Cheers, Ben "... I couldn't see how anyone could be educated by this self-propagating system in which people pass exams, teach others to pass exams, but nobody knows anything." --Richard Feynman
Post #39,180 by a6l6e6x 5/18/02 11:03:24 PM Reply	Re: I don't believe that I agree that the battle is on the controlling the expense side because it's cutthroat on the revenue (i.e. product pricing) side. The big guys you mention do have the advantage of being able to squeeze their suppliers more than their smaller competitors. Indeed, companies like Home Depot, bypassed some distributors, who were once their suppliers, to deal directly with manufacturers in the Far East. But, I hasten to point out, the companies you mention are not exactly manufacturers but retailers. Now, Dell is both, and it is doing all the things you say and has gained market share in a declining PC market. H-P/Compaq could, over time, adopt the same business model. Then, Dell would lose its edge and margins for all would drop. After all the consolidations, look at how few disk drive manufacturers there are compared to the past. They're losing money as well. Alex "Men occasionally stumble over the truth, but most of them pick themselves up and hurry off as if nothing had happened." -- Winston Churchill (1874-1965)
Post #39,183 by Andrew Grygus 5/18/02 11:57:38 PM Reply	As a market matures . . . . it trends to a state where there are a very few large "economy of scale" producers dominating the market, and a larger number of small botiques to serve those who need/want something the volume producers can't provide - and very, very little in between. PC manufacturing is going this route rapidly, because under the Windows monopoly there is no significant innovation except in marketing - definitely a mature market. [link\|http://www.aaxnet.com\|AAx]
Post #39,227 by ben_tilly 5/19/02 6:19:09 PM Reply	Applies in manufacturing as well I used retail because that is visible. But both Kimberly Paper and Gillette stand as excellent examples of manufacturers in commodity businesses who had excellent earnings year after year. The economic principles are the same. In commodity businesses, aim for low overhead and rapid turnaround. Cheers, Ben "... I couldn't see how anyone could be educated by this self-propagating system in which people pass exams, teach others to pass exams, but nobody knows anything." --Richard Feynman
Post #39,182 by Andrew Grygus 5/18/02 11:29:57 PM Reply	So your advice to the young would be . . . . "don't go into programming, because it's all going to be done in India to reduce overhead"? I can't really say that I don't agree with that. As a side note, Microsoft's XBox assembler, Flextronics, is closing XBox production in Hungary and moving it to China for lower cost. Former Communist countries are getting too prosperous, so it's time to move the work to a country that's still Communist. Capitalism at work! "The downfall of the Capitalist system came when it ran out of underdelveloped countries with repressed populations to provide exploitable workforces." [link\|http://www.aaxnet.com\|AAx]
Post #39,198 by Ashton 5/19/02 3:40:47 AM Reply	Da tovarisch, kewlovitch____ but pleased be not speakink louds on wonderful ways we havink with words in the new speak. Is beink not good for the babushkas to listened. I am nyever firget first time am hearink Green Chri$tma$, by Komrade Stan Freeburg, dollink. Is bringink tears with eyes. er that is, thou sayest - but try to 'teach that'; it's gonna be Guantanamo, steerage class. (is that like bat guano?) 'Course if the gamers got no more couth than the UAV types, and continue to buy that Box no matter what? Self-immolation. Fun to watch. Die Yuppie Scum (local bumper sticker) OR: Tried to find a CD today at Tower, of Nakariakov (Russ trumpeter phenom). None of course. Said - what's the discount, if you order it? She: "none". Said - I don't pay $16 to RIAA for anything. She: "what's RIAA?". Asked, what ya think they pay the artist? etc. etc. Couldn't believe = <$1 and thought it was kewl to just pay the $16 and buy her own CDs there. Too much trouble to notice. Anything at all. Yup, she and the Box-gamers think alike. And the Suits love 'em all: Just That Way. Unconscious.

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