🚀 go-pugleaf

On 14 Oct 1998 03:54:47 -0400, Maciej Stachowiak <mstachow@mit.edu> wrote:
>> Maciej Stachowiak <mstachow@mit.edu> writes:
>> This again is an extended use of the word "market", which is understood in
>> context.  Usually a market is measured in dollars, and "percentage of the
>> market" would mean percentage of the cake that you eat.
>
>Only because dollar markets are easier to analyze quantitatively. In
>any case, if a cheaper piece of software in a category sells twice as
>many copies as an expensive one, they may have the same dollar market
>percentage but the company selling the cheaper software is clearly in
>a strategically superior position.

I disagree, at least with the notion that this is a generalizable
principle. 

Who's in a more "strategically preferable" position in the financial
software industry? 

- Intuit, that sells a ~$50/seat package?  (Quicken)
or
- SAP AG, that sells a ~$1500/seat package?  (R/3)

The latter is a *lot* more profitable, and undoubtedly more strategic in
the marketplace, even though a whole lot less seats get sold. 

Similarly, an airline that sells only "coach seats" is likely to make
more money than one that sells a wider variety, as the latter can make a
lot more money per-seat on the "luxury" class seats.

A facile conclusion would be that it is preferable to cut the price by
50% if that results in sales doubling.  

But if there are significant variable costs, as is the case with both
airlines and with the distribution and support of software, the doubling
of the number of units sold results in a doubling of the variable
costs.   

That may result in a net *loss* of profits. 

>It serves individual demands too. The public demands are served OK as
>a side effect. Lawyers who make arguments in court on behalf of a
>client have publicly beneficial side-effects too - if their arguments
>are effective, they may be cited as precedents in later
>cases. Public-benefiting side effects do not preclude there being a
>healthy market for a given service.

Indeed.

-- 
"Everything should be made as simple as possible, but not simpler." 
-- Albert Einstein
cbbrowne@hex.net- <http//www.hex.net/~cbbrowne/lsf.html>