This question always seems to vex the non-financial folks: how can I sell it cheap? Top management wants to know: are they the low cost producer—or are we—or who is? Manufacturing and purchasing folks want to know: what target do we need to hit on costs, purchase prices, etc.? And in the very beginning, designers need to be well aware of the cost and price targets for which they are designing. All of these challenges come back to the finance folks to pull together. I will share a proven approach for comparing competitive positions. It may not be perfect, but with some reasonable estimates and diligent competitive intelligence gathering, this is far better than each group assuming what makes them feel or look good.
Companies with publicly traded securities must publish financial statements. That is one starting place. What is the typical gross profit margin and operating profit margin of the competitors? What are typical spending levels on sales, marketing, product design and development? What is overall SG&A. as a percent of sales. For some information, industry studies can provide ranges of spending on things like R&D. If you know what kind of sales force competitors have, you can make educated guesses at commission levels or sales costs.
Continues at: Comparing Competitive Costs – The Way to Win : Money :: American Express OPEN Forum.
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