Klarinet Archive - Posting 000577.txt from 1999/11

From: Neil Leupold <leupold_1@-----.com>
Subj: Re: [kl] Dichotomitis
Date: Mon, 15 Nov 1999 03:16:56 -0500

--- Tony Pay <Tony@-----.uk> wrote:

> What Neil says, though true, doesn't really address what I was trying to
> talk about, which was not a quality/*price* dichotomy at all.

I apologize for misreading the original thread, but...if you subs-
titute the word "profit" for "price" in the above statement, the
principle I originally outlined continues to hold. Why? Because
profit is simply a function of price relative to how much it cost
to produce the product (right, and Peter-piper-picked-a-peck-of-
pickled-peppers). One is a derivative of the other, which reduc-
es the argument to its basic components and comes up with the
same answer. Because a classless society is not likely to ever
be achieved, there will always be a sizeable market for lowball
versions of a product and, because entrepreneurs always have
their eyes peeled for profitable business opportunities, there
will always be suppliers for that demand. These are the enter-
prises whose strategy is to be the low cost leader. They rec-
ognize, perhaps annoyingly to lots of sympathetic and liberally-
minded people, that the price elasticity of demand at the lowest
levels of society is extremely high. A tiny change in price will
effect a monstrous shift in demand. And when you're dirt poor
(i.e.; a starving MBA student), price rules the day. How does
this relate to profit? Low quality versions of products are going
to be priced accordingly, and they're going to be snapped up by
the lower-income segment of a given market. The fundamental
concept behind profit is (duh): revenues minus explicit costs
(i.e.; expenses). Business will make that crumby product for a
pittance, sell it to wholesalers at 100% mark-up, and make a tidy
profit indeed, laughing all the way to the bank at how crummy a
product they were able to sell. That's their market (low income
consumers looking for low cost merchandise), and that's their
strategy (low cost leader, to capture the broadest portion of
market share). They *aim* for low quality very specifically
because it's inexpensive to produce, there's high enough demand
for it, and they can still put a substantial mark-up on it before
offloading to wholesalers and distributors. Thus, low quality,
high profit. All of this, of course, depends very much on the
nature of the business (clarinets vs. cars vs. Barbie dolls), the
general state of the economy, and a whole host of other factors.
Depending on the industry, it may very well be impossible to take
this low cost strategy too far, but it still applies strongly and
broadly enough in the present to debunk the notion that quality
must climb inexorably higher in order for a profit to be sustained.
Without significant enough competition in a given market, there
is no incentive to innovate, and that exact type of market still
exists to a certain degree when we're talking about clarinets.
SOMEbody has to be at the bottom of the quaility heap, even when
we're talking about clarinets, and they can only continue to pro-
duce as long as there are poor moms out there who can't afford to
pop for a better student model clarinet. I don't know if that
particular dilemma will ever be resolved. Personally, I will be
eternally grateful that Artleys are still in production. I played
on one for 9 years -- from 3rd grade through 12th -- before I even
*realized* that all of my difficulties during those nine years were
the result of owning the worst-made clarinet on the planet. And you
know what? Despite the annoyance of the instrument's drawbacks, I
absolutely *adored* learning to play the clarinet, and was ever so
thankful that Artleys were around so that my mom could buy me one.
My clarinet performance degree was earned on a pair of Prestige's
(and $5600 in students loans to buy them), but you have to start
SOMEwhere.

The high-end versions of a product, just to address the other end
of the issue, attract entrance into that market only to the extent
that the market presents an opportunity to extract a profit. It
applies to the full quality spectrum, and explains why Rossi and
others are able to stay afloat (currently). Clearly, these con-
noiseurs of high-end clarinets are not after the lion's share of
the clarinet-consuming market. Within their niche, their whole
purpose in life is to produce the best-made clarinets they can,
and sell them at a price which exceeds explicit costs to a mini-
mum degree. When that margin gets too thin -- e.g.; demand drops
off due to a slump in the economy, or some other unforeseen ex-
ternality -- some of these fine makers might find it necessary
to shut down (not necessarily exit the market), in order to pa-
tiently await for market conditions to improve before they fire
up the lathes again.

There, you see? I made it clarinet-relevant!

-- Neil
Do You Yahoo!?
Bid and sell for free at http://auctions.yahoo.com

---------------------------------------------------------------------
Unsubscribe from Klarinet, e-mail: klarinet-unsubscribe@-----.org
Subscribe to the Digest: klarinet-digest-subscribe@-----.org
Additional commands: klarinet-help@-----.org
Other problems: klarinet-owner@-----.org

   
     Copyright © Woodwind.Org, Inc. All Rights Reserved    Privacy Policy    Contact charette@woodwind.org