To: Dennis Nicks who wrote (43394 ) 6/11/2001 8:24:46 PM From: Eric L Read Replies (2) | Respond to Dennis, The key is whether a company can create marketable value within a product that differentiates it from other products. The problem with the word, "commodity," is that it means so many different things to different people. "If you look at Nokia over a 10-year period going forward, they might spend something like $30 billion on R&D. Do you think they would do that if they were producing commodities. The Commodities theory holds no water in my opinion." Remember that many companies have made a killing selling commodities. The key is their ability to differentiate themselves via quality, features, style, and branding. If mobile phones are going to eventually be commodities, Nokia is well on it's way to becoming the "Coke of handsets". I can head down to Chinatown and pick up a Louis Vuitton handbag for $50. The same bag goes for $1100 in a Louis Vuitton shop. Such a deal! Surely handbags are a commodity item. My Chinatown bag looks very similar and holds the same amount of stuff. It's of slightly lower quality, but I can buy 22 for the price of a real Louis Vuitton bag. "There are too many really good cellphones out there, and they are gravitating toward, not away from, commodity status. IMHO, they are already there." This is the intuitive approach to evaluating a market. A lot of analysts use it. Mobile phones are kinda like VCR and kinda like PC - so their margins should be kinda similar.
