The pain of major corporation planning.
February 15th, 2008 | Posted in Uncategorized
A thought popped into my head today and it’s just something I’d like to share with all of you - especially if you’ve never had experience or thought much about the various planning and strategies involved in major corporation business.
This will be of course a fairly simple example and in the real world it isn’t as simple as popping an extra pound on here and there. Gets the concept across well enough though.
Let’s take the Xbox360 games console, the brainwave of Microsoft which was released sometime in late 2005.
Total sales have now reached 10.32 million - 10,320,000 units.
I’m not sure of the precise figures but lets say the Xbox360 cost £250 and has sold 10,000,000 units. This is £2.5 Billion revenue. Now lets imagine you were one of the guys at the big executive desk deciding on pricing. You wouldn’t think one pound is much would you? But the fact is if they sold it for £251 instead of £250, they would make an extra £10 million.
So just where would you stop? You wouldn’t think a further pound on-top of that would really effect sales much but that’s another £10 million in revenue. How about another pound, and another, and maybe even another?
So here is my question to you entrepreneurs out there. Just where would you draw the line and how would you decide? Would it drive you insane if you knew that you had to stop rising prices but even just another penny per unit would bring in an extra £100,000 revenue?
Post your opinions and thoughts below in a comment.
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February 15th, 2008 at 5:57 pm
Well this is an interesting dynamic although a couple of things spring to mind.
Firstly for something like an xbox where licensing revenues and development for secodary service (games) actually make or break the console the idea is to recoup or at least try to get back R&D costs and make money through longevity manufacturing and software licensing.
Secondly that amount of revenue verse the upfront cost of developing a platform and then marketing it against competion of Sony and Nintendo and getting big developers onboard in addition to publishing companines is expensive.
Although the revenue looks good its not a dent when you consider that the new extended warranties for the 360 now top 1.5 billion.
The ideal is to develop something not reliant on 3rd party support (games developers) and something that you can sell less for more.
A better comparrision would be looking at company like porsche who are one of the most profitable yet have conservative product output levels. They are almost looking to be the majority share holder in the VAG Group of companies for example.
November 13th, 2008 at 3:53 am
fdnwqhi7azofihm4
January 18th, 2009 at 8:50 pm
amazing think))
January 22nd, 2009 at 2:03 pm
such a real story..
February 28th, 2009 at 10:15 am
Does someone know when Ninja Blade for Xbox360 will be released?