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the new cheap

06/08/2007 02:45:55 PM
Nokia, Coca Cola and P&G are just three examples of companies that have found smart, cheap ways to make products for developing markets.

Coke and P&G produce the “concentrate” of their secret ingredients and then use contract manufacturers to add standard stuff and mix and package.

Nokia produces a budget model that accounted for 42% of their 2006 sales.

Selling to developing countries hurts margins because prices have to go down, so companies are scrambling for ways to offset that. Like selling on volume. (As if we needed more of the negative effects of overproduction.)  Furthermore, what if cheap versions find their way back into the domestic market? Cost cutting would be absorbed by American consumers in other ways. Like jobs.

But in a more idealistic vein, isn’t it a great thing? Introducing products to developing countries can create new jobs as well as streamline their businesses (for instance, the use of computers in farming).  Besides, in our beauteous free market, the best product prevails. We’ve all been labeled “prosumers” now because we’re actively seeking the lowdown on product quality, ingredients, and standards. From a competitive standpoint it just doesn’t make sense to bring cheap to the domestic market.

If the American consumer doesn’t benefit from global cheapness it’s because the American consumer doesn’t want to.

We’re a tough crowd.
 
Tags: developing (1) cheap (1)

Articles for tag developing (1 total).