Also If I have 2 products each making $100 profit and both taking R&D
well the one that sells 10,000 units and the other sells 10 million
units profit per unit is NOT the whole picture.
R&D costs, start up costs (which may include a bunch of one time fees
to make proof of concepts, mold or templates or masters, factory
rejects of parts written off, negotiate business partnerships) still
have to be recouped out of profit something not obvious to a sloppy
analyst or journalist looking at per unit profit.
So someone noting that a Kindle reader cost $x to manufacture and
sells for $x + $y profit is not really familiar with business. Because
as part of the R&D process, Bezos may have burned say $n million in
designing it with himself and hardware and software and programming
staff making prototypes, paying factories and designers and spending
his valuable time (which is valued at $z per hour he could be managing
other aspects of the company) to make proof of concepts, paying for
rejects when certain parts just don't pan out, and paying again to
research or replace those parts. Meetings with all these people:
designers, programmers, factory reps, hardware manufacturers, lawyers
making contracts at $p per hour and renegotiating when parties don't
like those contracts, the salaries or consulting hours paid to all in
the HW and SW of project.
So if he burned say 7 million in that part of process which is easy,
then the product sold 1/2 million at $10 profit he has only $5 million
profit - 7 million R&D. Something the sloppy analyst or journalist did
not factor in. Also subtract what customer service and returns cost.
But Amazon and Apple are smart, by taking a % of all sales of software
and content they get some added profit minus what it costs in R&D and
customer service and servers to serve it so if market share gets big
and software + content gets big they get some added profit as well
without having to manufacture anything.
On Sat, Oct 19, 2013 at 6:29 AM, Charles Carroll <911@learnasp.com> wrote:
> Anything that does not get significant market share even if profitable
> per unit, the profit is too low for the ROI.
>
> If I have 2 products each making $100 profit and both taking R&D well
> the one that sells 10,000 units and the other sells 10 million units,
> it does not make sense to keep selling the one making a lesser volume,
> unless some faction in the company think it will reach a tipping point
> later and appeals to management to 'stay in'. Management is about ROI
> and R&D is expensive so if R&D translates into high volume ROI is
> high, if not ROI is low.
>
> The other thing is the press and the public do like to mock a loser or
> low seller and many companies don't like that PR stench, so lack the
> fortitude to wait for it to reach a 'tipping point'.
> http://en.wikipedia.org/wiki/The_Tipping_Point
>
>
> On Sat, Oct 19, 2013 at 6:19 AM, David H. Bailey <dhbailey52@comcast.net> wrote:
>> On 10/19/2013 5:34 AM, Charles Carroll wrote:
>> [snip of appropriate response to Ted]
>>
>>> BTW Apple has not sold anything at a loss yet.[snip]
>>
>> Was the Newton profitable? Why did they discontinue it if it was
>> profitable?
>> (and I'm asking your opinion because I know you're an astute observer,
>> not because I'm trying to be argumentative.) I have always been curious
>> as to why the Newton didn't continue.
>>
>> --
>> David H. Bailey
>> dhbailey@davidbaileymusicstudio.com
>> http://www.davidbaileymusicstudio.com
>>
>>
>> ------------------------------------
>>
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>>
>>
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