Yosid,
You have had some very intelligent and well thought out posts on this and other threads. I have and will continue to look forward with eagerness to what you have say on this and other subjects.
What I have to write is not made to be combative or convey an insensibility to your feelings in this matter, but to express my opinions. We just have a difference of opinion.
In your position as an accountant, I'm sure that if you were responsible for keeping the books for a manufacturing company, and your responsibility to management was to certify all profit and loss factors in producing the product to determine whether or not your firm was charging enough for the product to make a profit.
I don't know if in your work experience, you have participated in the decision making that determinations the ultimate selling price of a product for your company. I have had the responsibility as an engineer , for estimating engineering cost factors for Engineering R&D, Maintainability and Quality Assurance, Sales and Customer Support, and
Product Documentation. These cost estimates were only a partial list of the factors and considerations my employer, Rockwell International, had to use in determining a profitable price for the product that would be competitive but fair to the customer. Our desire and indeed the main considerations in the engineering design and manufacturing
the product was to make a product that would satisfy the needs of the customer, at a competitive price that would assure an equitable profit without taking an advantage of the customer. We needed the customers and they needed us and that's how we continued to be number one in a profitable business. Our products were in the very technical and complex data communications systems.
Believe me when I tell you that running a successful business, you don't "look at the last four years" to determine if you were "charging enough" and adjust the price of a product if you were not. If this is the way you do business, you will have unhappy customers, and you will loose customer share to your competitor who knows how to accurately
determine costs factors and charges a fare and legitimate selling price the to conduct a profitable and continued business.
As an example of establishing the cost of a new product, consider Pfizer, Inc. who recently put on the market, the anti impotency drug Viagra. They are charging $10.00 a pill which they feel is a fare price. This price will last as long as there is no competition and a need for the product. How long do you think Pfizer will stay in business if they decide to charge a "royalty" fee of $1.00 per pill or whatever they decided the need to make up for a deficient profit allowance? Not long I would guess.
Summit Technology and VISX have a unique position with needed products with very little competition, but if their business acumen is so bad that they are not making a legitimate profit without charging a royalty fee, they won't be a serious competitor to those who know how to run a profitable business.
So Yosid, maybe we are not living on the same planet. The foregoing account I have given is what I have experienced over many years of participating in the real world of a successful business without the intervention of the Federal Trade Commission (FTC) to question our pricing policy.
Harry |
