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Originally Posted by za_hulk  That’s bull shirts pure bull shirt. CNC mills are just sitting in shops looking for work. Every manufacturing tool/machine is not producing to full potential because no one is buying we are in a recession. And less people are playing speed ball (witch DYE products target) because no one has the cash. So why would you raise the price? That’s ridiculous |
And how long can a shop that has machines sitting around doing nothing stay in business for?
Every product a company makes needs a mark-up (selling price less Cost of Goods Sold) in order to stay in business. The mark-up covers all other expenses, other that COGS, and profit, if there is any. The amount of mark-up is determined by a number of things, the most important being the amount of units sold. If more units are sold then the mark-up can be less to cover all those other expense. Less units sold means more mark-up per unit is necessary.
The recession has created a situation where less units are sold (you and I aren't buying as much stuff) and the reason many machines are not producing at full potential. There are two ways to approach this. The first, a company can try to cut prices in order to increase the number of units sold in hopes that the increase in amount of units sold will offset the drop in the amount of mark-up per unit. This is the way MOST companies seem to approach the problem. It's usually a knee jerk reaction. From a business point of view, it may not necessarily be the best way though. It really depends on what you are selling, the strength of the product and the strength of the brand.
The second way is to raise prices in hopes that the drop in number of units sold is small enough that the increase in mark-up will offset that decline and will keep the company in the black. I'm sorry you think that strategy is bull.