> The price can float more freely,
> far less anchored to the underlying production costs.
To expand on this a little bit:
Say you want to be a wheat farmer. Wheat doesn't have a lot of
differentiation points that have a grandiose impact on price. Sure,
there are different types of wheat, grown under different conditions,
and so on, but as much as they're different, they are also, in very
significant ways, the same -- it's still wheat. Wheat is wheat.
The agricultural processes involved in producing wheat are well-known
and easily discoverable. There are abundant quantities of wheat
ubiquitously consumed across a broad swath of economic sectors and
market segments, at all levels of income and so on. So, the real
question in going into wheat production is simply whether you want to do
it -- that is, whether you want to and are able to make the investments
in capital machinery, land, seed, and so on, and whether you can make it
scale in a way that is competitive and make it efficient enough to
compete with modern, high-volume agro-industrial conglomerates.
Aside from that, though, it's not really hard to figure out what the
machinery costs, what the land costs, what the seed costs, and what kind
of pricing your competitors are getting from this source, that source,
to make this type of wheat, that type of wheat, and the techniques they
use to get this yield and that yield and sell it here or sell it there,
and so on.
That is the main reason why it is structurally a commodity, aside from
its ubiquity. This dynamic results in a very visible cost structure
that creates aggressive competition almost exclusively focused on price.
As said before, wheat is wheat. The way that you innovate your way into
success as a wheat-grower is by tweaking various parts of the process on
an economic level; increasing efficiency, finding ways to squeeze down
the prices of your inputs, and so on. In marketing wheat, you can't
really tack a lot of "value-added" characteristics onto it stemming from
some sort of inherent opacity. It's wheat.
That's kind of how it is with PC hardware, although obviously, not
immensely so.
Proprietary communications systems are not like that at all, and have
not ever been historically. The engineering is relatively opaque and
secretive, as is the underlying cost structure. Furthermore, PBX
systems have always been a business-focused product whose value lies
almost exclusively in its being a capital good. PC hardware is a
mass-market product for all sorts of consumers, and attempts to mark it
up in business target markets are predicated on additional value-added
characteristics (support, service, perception of higher quality, etc.).
Otherwise, they're still anchored to that underlying transparency of
cost structure.
-- Alex
--
Alex Balashov
Evariste Systems
Web : http://www.evaristesys.com/
Tel : (+1) (678) 954-0670
Direct : (+1) (678) 954-0671
Mobile : (+1) (706) 338-8599
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