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I don't understand why they would have to lower prices just because they bought more efficient machines. That defeats the point (as mentioned) but has two obvi
by lgas 9y ago
I don't understand why they would have to lower prices just because they bought more efficient machines. That defeats the point (as mentioned) but has two obvious solutions that I can think of: keep prices flat, or raise prices.
- thisisit 9y agoIt's all about the moat. If other people have the same efficient machines they will try to get price advantage by lowering prices. And because one person does it, everyone follows the suit, starting the race to the bottom. I have included a link in my previous post where Charlie Munger talked about this.
- sumedh 9y agoThey have to lower prices because their competitors buy the same machines and thy pass on the savings to the customers, xo your company needs to do that as well. That is the problem with commodity business because consumers dont care where there corn or cloth material comes from. Consumers will go for the cheapest option.
- lgas 9y agoIt doesn't make sense that they would refuse to buy the efficient machines then... because they would be forced out of the market by people who did.