Originally Posted by
dracir1
I hear this philosophy all the time.
But let me ask the question differently . . . let's say you sell widgets. You've got pretty good ones too - so they sell pretty well. There are other widgets sellers - some better some worse but for the most part the market is pretty stable. Then, one of your competitors comes along and changes the widget just enough that they can make them cheaper and better at the same time. And, they train their customer service people to be friendlier than yours. They start making a greater profit margin and taking away business from you. Other widget sellers change/adapt their business to compete better. You continue on, continually striving to lower costs, hiring/training new/cheaper workers (as the older/more expensive ones leave) despite market wages going up 40%. Your union workers are now asking for a raise to "market" rates.
You realize that you're already selling at your lowest price and there are quarters that you don't even cover all your costs and you have investors asking what your next move is.
What would be the smartest thing for you to do?
a). Continue on the same, placate labor as long as possible w/ fake concern for their raise demands and just hope they don't get to strike
b). Decide to compete by investing in your labor (and other areas) such that you still remain lower cost than others but improve your product to where you can increase widget prices to cover
Do you see how absurd your above outlook appears?
Of course, there is always options c) sell the company but that's a whole nother discussion...
Either way, as aptly put so many times, it is NOT OUR PROBLEM. All we need to do as a group is stand strong and continue the demand (and let the system work).
Your example is flawed, because you are not accurately describing the relationship between indigo, Frontier and where the money actually comes from.
let’s say a rich dude calls four of his rich dude buddies and proposes the following:
Hey, I found a plastic resin supplier that will sell us polypropylene for half the cost that anyone else is getting it for as long as we buy 10M lbs.
If we build a shell company that manufactures a widget and that company only buys the resin from us, our profit margin on selling resin would be XX%. As long as our widget company can keep the lights on by selling widgets, we are in the black. It doesn’t matter if we have a good widget. It doesn’t matter what competitive widget manufacturers are doing. The shell company just has to sell enough crappy, ol’ widgets to cover their resin costs and stay above water and we make money on resin sales.
Great plan, Jeeves. But what if the shell company can’t remain in business because of the competition and/or employees wanting competitive benefits?
No worries. We sell the remaining resin to our competitors, close the shell company and call it a day. Now let’s go play some golf.