ScottGee1 wrote:
> $5600?
>
> A question for those of you familiar with manufacturing processes.
>
On the cost side, it's really research, development, tooling and
manufacturing costs. On the accounting side, assumptions about product
life and number of items produced are determinants.
> Is there anything inherent to this new product that justifies the
> asking price of the M8?
>
The previews say that, although it looks a lot like a modified M7, it is
an entirely new product, designed and built from scratch. It also
includes some entirely new technology, like the pixel lenses with
varying offsets. That means huge R&D and tooling expenses that must be
amortized over a relatively low number of bodies produced.
Beyond that, planned volume of production has a significant impact on
tooling and production design. If you are going to sell 10 million of
something, $1 million spent on automation of production of some piece
adds $0.10 per product cost. If production is 1 million, it adds $1 of
cost. If production is planned at 100,000, it adds $10. If a skilled
technician and non-automated equipment can turn the part out for $6
apiece, that's how you set it up.
So low volume specialty/niche manufacturers tend to have a lot of
skilled labor component in their costs. This is to their advantage from
a marketing standpoint, as they can advertise the hand made aspect of
their product, even when it is that way for hard-nosed cost reasons.
If Leica could realistically plan to sell 5 million M8s over 5 years,
they could probably sell it for something like $700, maybe less. If it
was an even greater success, and the first 5 million sold in 2 years,
they could probably start selling them for $400 after that and make more
profit per camera than on the initial run at $700 - or keep selling for
$700 and smile all the way to the bank.
The thing is, though, that there isn't a market for millions of M8s, at
almost any price. Put in your local Costco at $500 and try to sell a
camera where you have to squint through a little viewfinder and line up
overlapping images by hand, and can't see what you are taking on the
back before you take it, and you won't sell any.
Then there's Leica's existing image, market and intentional market
placement. Even if they could sell it for less than the M7, there is no
way they would. But you only asked about non-marketing aspects of the
cost to manufacture it.
Moose
==============================================
List usage info: http://www.zuikoholic.com
List nannies: olympusadmin@xxxxxxxxxx
==============================================
|