SV650.org - SV650 & Gladius 650 Forum - View Single Post - Suffering from falling car sales? Put up the price then!

03-02-09, 12:31 PM

If you use an example of the difference in price being the difference between a per-unit loss and a per-unit profit, it might make more sense?

E.g. keeping the same price, they will make a loss of £50 on every unit they sell, increasing the price they will make a £150 profit on every unit they sell.

So if they then reduce their production capacity by laying off/closing factories/etc, they may end up as a smaller, but profitable company. If they continue to make losses on every unit they will end up unprofitable, whether they resize or not.

This ignores factors such as fixed overheads and bulk cost savings, of course. But I would think it easier to then reduce your fixed overheads on the smaller company as a lot would be related to (now) unused capacity, etc.

I'm sure it's a lot more complicated but I could see the above being a reason.

03-02-09, 12:31 PM	#6
muffles Guest Posts: n/a	Re: Suffering from falling car sales? Put up the price then! If you use an example of the difference in price being the difference between a per-unit loss and a per-unit profit, it might make more sense? E.g. keeping the same price, they will make a loss of £50 on every unit they sell, increasing the price they will make a £150 profit on every unit they sell. So if they then reduce their production capacity by laying off/closing factories/etc, they may end up as a smaller, but profitable company. If they continue to make losses on every unit they will end up unprofitable, whether they resize or not. This ignores factors such as fixed overheads and bulk cost savings, of course. But I would think it easier to then reduce your fixed overheads on the smaller company as a lot would be related to (now) unused capacity, etc. I'm sure it's a lot more complicated but I could see the above being a reason.