4 ms·

you're thinking cost-plus in a value-based pricing world, which means you're essentially viewing this backwards. it's not so much why aren't the chinese shoes c

you're thinking cost-plus in a value-based pricing world, which means you're essentially viewing this backwards. it's not so much why aren't the chinese shoes cheaper, but how is the excess value created by the lower cost being exploited in the supply chain? the price of the shoes will always be set by the (retail) market, and that market seems to be saying (roughly) that the price of shoes (idealized for the sake of argument) is $50, whether made in china or the US. the chinese shoes, being $15 to make, allows more value to be captured and distributed along the value chain, providing crucial flexibility and resilience for operations, distribution, and marketing. the american shoes costing $30 to make means it has less value to capture and less supply chain flexibility. the chinese shoe distributor has more margin to work with to outcompete the domestic shoe through the 4 P's of marketing (price, product, place, promotion). (this is the kind of stuff you learn in an mba program, specifically, marketing & strategy classes)

ipaddr 5y ago
This raises three questions. Why isn't the 5 dollar African made shoe adding enough value to be a player in a more expensive market? Are we sure the market has settled for $50 or is made in America worth and extra $10/15 dollars? The supply chain with additional transportation and others costs would push the price to $20 per hour in China compared to $30 an hour. A tariff of $10 on imports would equalize the price. Would that push the market price to $60 for the shoes from China and would that push the American price to $75? Or would the Chinese shoes sell still sell for $50 forcing profit down or would they need to drop to $40 to set the market lower?
- clairity 5y ago
  > "Why isn't the 5 dollar African made shoe adding enough value to be a player in a more expensive market?" that's too underspecified to provide a good answer in this context. perhaps it's poor market fit, lack of cheap logistics, or merely racism. or something else entirely, it's hard to say. > "Are we sure the market has settled for $50 or is made in America worth and extra $10/15 dollars?" the $50 was assumed/asserted to make the discussion simpler. of course in a real market you'll have a variety of price-quality tradeoffs to choose from, which is the market trying to capture all the surplus value it can. for sure, some folks will pay extra for an american label. > "The supply chain with additional transportation and others costs would push the price to $20 per hour in China compared to $30 an hour. A tariff of $10 on imports would equalize the price. Would that push the market price to $60 for the shoes from China and would that push the American price to $75? Or would the Chinese shoes sell still sell for $50 forcing profit down or would they need to drop to $40 to set the market lower?" in the short term, the market price wouldn't be swayed by mere changes in costs (including tariffs). raising prices changes consumer behavior (i.e., price elasticity), which dampens the ability of the firm to make such unilateral changes. perhaps through advertising/lobbying/public relations, shoe companies can change the perception on what a fair market price is for their shoes (and thereby raise prices without negative affects on sales), but that's a different effect beyond simply costs changing. longer term, market participants may drop out due to unprofitability, which would change supply, and as a result change the market price through the lack of lower-priced alternatives. you sell shoes at the highest price the market will bear (actually a range, given price discrimination techniques), and then adjust the 4 P's in response. the market price is dynamic and part of the function of marketing is keeping tabs on it.

ipaddr 5y ago

This raises three questions. Why isn't the 5 dollar African made shoe adding enough value to be a player in a more expensive market? Are we sure the market has settled for $50 or is made in America worth and extra $10/15 dollars? The supply chain with additional transportation and others costs would push the price to $20 per hour in China compared to $30 an hour. A tariff of $10 on imports would equalize the price. Would that push the market price to $60 for the shoes from China and would that push the American price to $75? Or would the Chinese shoes sell still sell for $50 forcing profit down or would they need to drop to $40 to set the market lower?

clairity 5y ago
> "Why isn't the 5 dollar African made shoe adding enough value to be a player in a more expensive market?" that's too underspecified to provide a good answer in this context. perhaps it's poor market fit, lack of cheap logistics, or merely racism. or something else entirely, it's hard to say. > "Are we sure the market has settled for $50 or is made in America worth and extra $10/15 dollars?" the $50 was assumed/asserted to make the discussion simpler. of course in a real market you'll have a variety of price-quality tradeoffs to choose from, which is the market trying to capture all the surplus value it can. for sure, some folks will pay extra for an american label. > "The supply chain with additional transportation and others costs would push the price to $20 per hour in China compared to $30 an hour. A tariff of $10 on imports would equalize the price. Would that push the market price to $60 for the shoes from China and would that push the American price to $75? Or would the Chinese shoes sell still sell for $50 forcing profit down or would they need to drop to $40 to set the market lower?" in the short term, the market price wouldn't be swayed by mere changes in costs (including tariffs). raising prices changes consumer behavior (i.e., price elasticity), which dampens the ability of the firm to make such unilateral changes. perhaps through advertising/lobbying/public relations, shoe companies can change the perception on what a fair market price is for their shoes (and thereby raise prices without negative affects on sales), but that's a different effect beyond simply costs changing. longer term, market participants may drop out due to unprofitability, which would change supply, and as a result change the market price through the lack of lower-priced alternatives. you sell shoes at the highest price the market will bear (actually a range, given price discrimination techniques), and then adjust the 4 P's in response. the market price is dynamic and part of the function of marketing is keeping tabs on it.