Thoughts on Price of OMD :)
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geikou
New Member
OMG ... it could very well that they shoot before aming ... kekeke
I think they were experimenting with the product and testing the market, since mirrorless is a relatively new thing. Even with the best laid plans, they also could not predict 100% accurately what will happen.
one thing to note is that compared to the Singapore dollar, the US dollar has gone down in value tremendously in the past decade plus...
and similarly, the ¥ has strengthened vs. the US$... for Japanese companies, maintaining a consistent pricing in the US for a similar tier of product line means that after conversion to ¥, they are earning less... so, for the Japanese companies, there is the balance of maintaining prices near historical US$ values for competition sake vs the need to maintain ¥ earnings... if you look at US forums and news, there is always news that camera equipment prices are going up... but the Japanese companies are just trying to minimize losses due to the stronger ¥, while on the other hand they can't raise it too much too quickly due to competition... and in the case of HK, the HK$ is tacked onto US$ value, so when US$ goes down, the HK$ goes down by the same amount...
on the other hand, in Singapore, the ¥ and S$ have both been on the uptrend... while Japanese companies thus don't have much pressure to reduce prices, but due to US$ value going down, even if S$ prices are constant, it would seem that the products prices are more expensive than in the US and HK, all else being equal...
- in recent times, US$1 ~ S$1.2-1.3;
- in the previous decade, US$1 ~ S$1.6-1.8;
- and 2 decades ago, US$1 ~ S$1.6-2.2...
and similarly, the ¥ has strengthened vs. the US$... for Japanese companies, maintaining a consistent pricing in the US for a similar tier of product line means that after conversion to ¥, they are earning less... so, for the Japanese companies, there is the balance of maintaining prices near historical US$ values for competition sake vs the need to maintain ¥ earnings... if you look at US forums and news, there is always news that camera equipment prices are going up... but the Japanese companies are just trying to minimize losses due to the stronger ¥, while on the other hand they can't raise it too much too quickly due to competition... and in the case of HK, the HK$ is tacked onto US$ value, so when US$ goes down, the HK$ goes down by the same amount...
on the other hand, in Singapore, the ¥ and S$ have both been on the uptrend... while Japanese companies thus don't have much pressure to reduce prices, but due to US$ value going down, even if S$ prices are constant, it would seem that the products prices are more expensive than in the US and HK, all else being equal...
- JPY strengthen against USD ... I believed Oly (like a many others) has outsourced their manufacturing to China and therefore should have sufficient capacity to control price levels while maintain profitability (may be that's why the nice accessary promo in the US
)- Cannot raise price due to competition in the US ... I can't think of any key player that is non Japanese in this segment / space for the US or any other markets ... so competition should have in a sense be "equalized" ... so don't quite get you
- SGD strengthen against the USD ... If Oly can make profit in the US, they could similarly be profitable else where ... So shouldn't Oly revise the price lower here then?
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hanzohattori
Senior Member
Very interesting thread so far..
I personally prefer Apple pricing policy where the product price in all market priced similarly. It may be expensive for some, but at least they won't feel cheated.
There are a lot of factor in play, but I think manufacturer also need to consider what the consumer think and how global trading works.
Case in point is where local bookstores are closing down (think of Borders and PageOne) due to competition in distribution channel, whether it is from ebooks or Amazon.
Eventually the local distributor need to provide more added value than just 'distributing' the stuff.
I personally prefer Apple pricing policy where the product price in all market priced similarly. It may be expensive for some, but at least they won't feel cheated.
There are a lot of factor in play, but I think manufacturer also need to consider what the consumer think and how global trading works.
Case in point is where local bookstores are closing down (think of Borders and PageOne) due to competition in distribution channel, whether it is from ebooks or Amazon.
Eventually the local distributor need to provide more added value than just 'distributing' the stuff.
cannedpineapples
New Member
Apple is different because 'marketing' and 'sales' are run by the same people. Did you know that Apple sometimes doesn't even sell iPad/iPhone in bulk for contest prizes, because they think it devalues their brand?
Olympus, however, seems to be run mainly by product people and IT. Not marketing. They've identified distinct segments like good product managers; and they now have four flagship products (EPL3, EP3, EPM1, EM5) going after all the different groups. A marketeer would have told them, this is ridiculously confusing, and bad for PR- but I guess that's not their strength..
Olympus, however, seems to be run mainly by product people and IT. Not marketing. They've identified distinct segments like good product managers; and they now have four flagship products (EPL3, EP3, EPM1, EM5) going after all the different groups. A marketeer would have told them, this is ridiculously confusing, and bad for PR- but I guess that's not their strength..
cichlid
Senior Member
EPL3 and EPM1 are not flagship models, they are like Nikon D3100 and D5100 entry level models in the Nikon line up. It's not confusing, just catering to different segments.
cannedpineapples
New Member
It's certainly a lot more confusing to me than iPhone; iPad; iTouch; iPod Nano. Nikon doesn't even come close to Apple's marketing prowess either. They may have fantastic distribution (esp. in US), but this 'crazy lineup' idea in consumer electronics is totally insane.
EPL3 and EPM1 are not 'flagships', in that they don't cost a lot, but they're 'flagships' in offering the best technology for a specific group. D3100 and D3s, for instance, are completely different. It's obvious which the flagship is. EPL3 and EPM1 vs EP3? Not so much. Same sensor. Released at same time. Same kit lenses. All don't come with viewfinder. All not weather-sealed. You see where I'm going here... The similarities are far more than the differences.
The EM-5 comes with a premium for the EVF. Not exactly comparable to GF-1. Like the GF-1 versus G1/G2. That is if the other features don't interest you. Prob, just on the issue of sensor, you may want to consider the GX-1, which is priced about $700 less than the RRP of the EM-5.
they have been producing cameras in China for some time now, so its not like they are only recently shifting the manufacturing capacity to China from Japan and thus enjoy production cost savings... ie. savings due to shifting to China have already been factored in... so drop in US$ value will still see their margins trimmed...- JPY strengthen against USD ... I believed Oly (like a many others) has outsourced their manufacturing to China and therefore should have sufficient capacity to control price levels while maintain profitability (may be that's why the nice accessary promo in the US
not that they can't raise price, but they cannot raise it suddenly and in a large enough hike to offset the exchange rate difference without affecting market share... now, what you say about "equalization" would be true if all of the Japanese companies will raise their prices together... but some companies are more willing and/or able to absorb slim margins than others due to their company's size or structure, and so their "threshold" for "pain" would be higher and they might be able to justify maintaining a lower price with greater volume, or at least to succumb to price hikes at a later stage, or even to hope to ride out the situation (although this option seems increasingly unlikely)... the situation may eventually "equalize" itself, but if it does, it will probably do so slowly...
and why would they reduce prices when they can and have been able to sell their cameras at the current price point? (especially when demand exceeds supply)- SGD strengthen against the USD ... If Oly can make profit in the US, they could similarly be profitable else where ... So shouldn't Oly revise the price lower here then?
yeah, it's nice... if only all discussions on the web can be like this
sorry for OT :embrass:
Neither is the drop of USD sudden rite? Also, yen strengthening against RMB over time should also help them to offset the "differences" yes?
I tot you were referring to uncontrollable factors (e.g. such as fx exposure or something ...). If you are referring usual competitive forces ... r you saying that there is fierce competition in the US and therefore pricing has to be "aggressive" there but not for other markets?
and why would they reduce prices when they can and have been able to sell their cameras at the current price point? (especially when demand exceeds supply)
Curious to understand how you know that the demand has exceeded supply? If truly so, I am happy as a m43 standard supporter. Hopefully they will longer b in the red for this fiscal year and could further strengthen their brand name (which should demonstrating fairness to all customers without any discrimination and having strong / sound / creative marketing campaign etc.).
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the US$ value was going down gradually compared to the ¥ for some time, but there were some minor recoveries along the way... till the past decade or so, where the drop has been quite drastic... especially with not just the weakening of the US economy, but also the US Gov providing more liquidity to lower cost in the US, partly in answer to their opinion that the value of the RMB was artificially depressed by the China Gov...
changes to RMB will only affect production cost, which is a relatively smaller component of the overall cost of the product, which also includes other operating cost of the company itself (ie. R&D, big fat salaries for top staff ;p, etc.)... typically, it is much less than 50% of the overall cost... (note: this is different from the cost savings of moving from a more expensive manufacturing location to a cheaper one, as was previously discussed, which would have been a more significant change as the cost base is changed rather than just the relative change in exchange rate)...
not necessarily more aggressive than other markets, just as aggressive is enough... other markets might not have as much downward pressure for the Japanese companies as the US market does...
how do I know that demand has exceeded supply?... read the em-5 threads in the forum here... people waiting impatiently for delivery, not enough stock in the first batch, when is the next batch coming... plain to see right
In the decade from 2000 to 2009, trades are done mainly in USD even when your production line is in China, Vietnam or Thailand. Some companies may want to trade in EUR if their HQ are in europe.
Yen has been in the region of 100Yen to USD1 during the most of this period when they have this ultra loose monetary policy. When they sell the product at USD1 (global pricing), their costs may be USD0.90, so their net profit is USD0.10. But when the Yen/USD trade unwind a few years back, Yen to USD dropped to 80Yen to USD1. Companies like Canon and Nikon may have borrowed USD0.90 prior to start of production as payment for any completed production. They are repaying the loan with 90Yen over that loan period. However, as Yen/USD drops to 80Yen:USD1, the revenue is USD1 (or 80Yen), but their costs is still fixed at 90Yen, hence the losses and the increase in pricing required to USD1.3 etc.
During this period, SGD/USD rates dropped from SGD1.60:USD1 to SGD1.20:USD1. If Canon does not change its pricing, we will pay SGD1.20 for the same product with Canon taking on the losses. With the change of pricing to USD1.3, we will pay SGD1.56 for the same product taking into account the changes in the rates.
I am just giving you an example here. In the past I worked in the bank, the local company of the MNCs would normally get the loan locally in USD or the local currency (e.g. Thailand Baht) or a USD credit facility with a hedge in the currency for 6 to 12 months (called the foreign exchange facility). Basically the amount of Yen to be paid is fixed no matter what. This is what the FX trading department of the MNC do, to protect FX fluctuations affecting profits. Of course, when you have the FX hedging contract due, one cannot just cancel the contract. MNC needs to pay the differences as the bank would have to deliver the USD required on the due date to the MNC.
Yen has been in the region of 100Yen to USD1 during the most of this period when they have this ultra loose monetary policy. When they sell the product at USD1 (global pricing), their costs may be USD0.90, so their net profit is USD0.10. But when the Yen/USD trade unwind a few years back, Yen to USD dropped to 80Yen to USD1. Companies like Canon and Nikon may have borrowed USD0.90 prior to start of production as payment for any completed production. They are repaying the loan with 90Yen over that loan period. However, as Yen/USD drops to 80Yen:USD1, the revenue is USD1 (or 80Yen), but their costs is still fixed at 90Yen, hence the losses and the increase in pricing required to USD1.3 etc.
During this period, SGD/USD rates dropped from SGD1.60:USD1 to SGD1.20:USD1. If Canon does not change its pricing, we will pay SGD1.20 for the same product with Canon taking on the losses. With the change of pricing to USD1.3, we will pay SGD1.56 for the same product taking into account the changes in the rates.
I am just giving you an example here. In the past I worked in the bank, the local company of the MNCs would normally get the loan locally in USD or the local currency (e.g. Thailand Baht) or a USD credit facility with a hedge in the currency for 6 to 12 months (called the foreign exchange facility). Basically the amount of Yen to be paid is fixed no matter what. This is what the FX trading department of the MNC do, to protect FX fluctuations affecting profits. Of course, when you have the FX hedging contract due, one cannot just cancel the contract. MNC needs to pay the differences as the bank would have to deliver the USD required on the due date to the MNC.
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Of course if the company does not hedge and the Yen devaluates further, they will have to pay more in Yen to pay their material suppliers. Instead of having that change in the payment chain, they sort of fix it using FX contracts and varies the sales price to maintain profitability.
The opposite happens when they do not hedge and Yen appreciates (pay lesser Yen to buy USD). They will gain from FX trading. That is why you see one of the GLCs actually tried its luck in FX trading and make hundreds of millions of losses.
The opposite happens when they do not hedge and Yen appreciates (pay lesser Yen to buy USD). They will gain from FX trading. That is why you see one of the GLCs actually tried its luck in FX trading and make hundreds of millions of losses.
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Alot of products are priced competitively by the Japanese and the Chinese when they sell them in USA. The first and foremost reason being that it is still the biggest and most matured consumer market in the world, products manufactured today remains very much primed at the US consumer.
Pricing is merely a reflection of value from the eyes of the consumer working in conjunction with the rate of returns desired by the Company. Who is the targeted consumer is often a key question that influence the pricing equation significantly.
Foreign currency exposure may affect pricing, but there are cases where it does not impact a business that much too.
A Japanese company may suffer fx losses from material cost fluctuations due to USD but if they sell their products in USD, they are naturally hedged without the need to enter into derivatives hedging.
The pricing of OMD is inviting debate primarily due to benchmarking and comparison with other competing products in the market. In my view, theres nothing much to debate about as it all boils down to individual perception of value.
In a willing buyer and seller market, if a product can sell at a certain price point, that price will represent its market value. A market participant has all rights to not buy at that price and walk away. In this scenario, the first buyer is happy with his product, and the one that walks away is also happy to not have parted his money for the same item.
Pricing is merely a reflection of value from the eyes of the consumer working in conjunction with the rate of returns desired by the Company. Who is the targeted consumer is often a key question that influence the pricing equation significantly.
Foreign currency exposure may affect pricing, but there are cases where it does not impact a business that much too.
A Japanese company may suffer fx losses from material cost fluctuations due to USD but if they sell their products in USD, they are naturally hedged without the need to enter into derivatives hedging.
The pricing of OMD is inviting debate primarily due to benchmarking and comparison with other competing products in the market. In my view, theres nothing much to debate about as it all boils down to individual perception of value.
In a willing buyer and seller market, if a product can sell at a certain price point, that price will represent its market value. A market participant has all rights to not buy at that price and walk away. In this scenario, the first buyer is happy with his product, and the one that walks away is also happy to not have parted his money for the same item.
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agree with most of what you said in your post except this part above... due to the continuing of the pricing within a product line or to currency hedging, I believe "Canon" would maintain the price at S$1.6, because changes in exchange rate is in the Japanese company's favour in this case... which is why there is the price discrepancy between the currently lower US price (which they would probably eventually have to increase to reduce the forex losses as you had suggested) vs. the relatively higher Singapore price...
that is assuming the Singapore distributor is dealing with the products in US$... they may deal directly in ¥ though, which is the case in some instances I have come across personally... some Japanese companies, especially with the US$ situation, are currently doing their business directly in ¥ now, and converting directly their prices to local currencies... which would still mean the Japanese camera manufacturers would maintain their price regime in Singapore...
but I think we are beginning to get carried away and over analyzing... :bsmilie:
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