Globalstar Telecommunications Limited GSAT Message Board

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Microcap & Penny Stocks : Globalstar Telecommunications Limited GSAT

GSAT 48.26

-5.6%

3:59 PM EST

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To: Jim Parkinson who wrote (279)	1/19/1998 5:46:00 PM
From: Maurice Winn	Read Replies (2) of 29986

"Yes, they might be able to pick up more customers by lowering prices but, that will negatively impact their earnings". Not necessarily Jim. Let's do some maths. Say they charge $100 per minute. Take a guess at the minutes they would sell at that price. Now take $0.01 per minute and take a guess at how many minutes they would sell at that price. One of the prices will leave the system nearly empty. The other will leave everyone with busy signals. Total revenue and therefore profit for both methods will be hopeless. So somewhere between is the best place to put the price. The question is, just exactly and precisely where should that price be put. Iridium have done some market research which tells them that at $3 per minute they'll sell enough to half fill it and make a really good return on investment. Globalstar has done some research and come up with a lower figure, because their system is cheaper. The best way to positively impact their earnings is to have the systems fully loaded. Although Iridium cost a cool $2.5bn more, if they have 50% more customers, they can charge much less than Globalstar. At present it seems that both marketing strategies are to run half empty and maintain low profits. If both operate efficient pricing and run full systems with maximum profits, Globalstar could provide a cheaper service. But neither seem to have figured it out. Although it might seem counterintuitive, selling at a cheaper price is often the best way to maximize profit. "Room for both" is also a concept I dislike. To me, the best system is the one that will be successful and expand. The weaker one will whither and die. No room for two. That implies a price fixing arrangement whereby anticompetitive behavior is indulged. I don't really mind price fixing, but I think competition is the more successful commercial strategy for the long term wellbeing of shareholders. Tough luck for the shareholders backing the weaker system. The best pricing system is customer priced! Start cheap and let customers bid the price up. The busier the system, the higher the price. A pretty simple and straightforward if daringly innovative concept really. I thought I might call it "Supply and Demand". Empty systems are a waste of space. Maurice

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