Quote:
Originally Posted by rbfowler9
Hey there,
....I price my cars usually 2.5X the building costs for small cars, 3X for middle-ranged cars and 5X for luxury limousines. It's 1906 now and I grossed about $40m last year, selling about 1500 cars a month, being 1100 small cars, 350 middle-ranged cars and 150 limos - I sell only one of each model at a time.
Also, I have lots of branches across all countries (5+), and I offer a 20% discount for dealers in each region. Still, I spend no more than $3k on advertising.
Seeya
Fowler
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Sorry for my bad english, but i have to say it: Your method to find the cournot point is suboptimal.
With your method "2.5x the building costs for small cars....3x medium..." you can easily generate a loss, cause you dont pay attention to the overall costs.
If your fixed costs are too high, you can generate a loss, even when you sell a small car at 5x the production costs.
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example for the optimal car price:
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Lets say you have e.g. 4 factories, each produces 210 cars/month.
Every factory has 900 workers.
Every worker earns 50$/month.
Each factory has building occupancy expenses of 4000$.(= even if you fire all workers and the factory is still open it generates costs)
Overall costs of labor/month:
----------------------------
4 x 900 x 50$ + 4 x 4000$ = 3600 x 50$ + 16.000$ = 196.000$
.
.
Labor costs for 1 car:
---------------------------
196.000$ / 840 cars = 233 $
======================
.
.
.
Costs for parts for one car:
--------------------------
car engine:...200 $
chasis:........150 $
car body:.....300$
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all parts:......650$
.
.
.
.
You have also e.g. 7 selling shops in england, 7 in germany, 10 in france, 5 in italy and 5 in austria.
The rent costs in england are 7500$ for each shop, 3800$ in germany and 5000$ for each shop in italy, france and austria.
You also advertise in every shop with 2000$.
So the distribution costs/month are:
-------------------------------------------
germany:....7 x (3800$ + 2000$) = 40.600$
england:.....7 x (7500$ + 2000$) = 66.500$
france:.....10 x (5000$ + 2000$) = 70.000$
italy:.........5 x (5000$ + 2000$) = 35.000$
austria:......5 x (5000$ + 2000$) = 35.000$
-------------------------------------------
..............................................247. 100$
distribution costs for 1 car:
-----------------------------
247.100$ / 840 cars = 294 $
=======================
soooo in the end ... ONE car cost you exact:
650$....for parts
294$....for labor
252$....for distribution (inc. advertising)
==============================
1196 $ per car
============
So if give every shop a sales discount of 20%, you have to sell your cars
at least at 1495$ to not make a loss. (1495$ - 20% = 1196$)
To max. your profit its very important to find the optimal profit margin.
I have done a little research after i bought every sales shop in europe.
At that time I had 2 models (both small cars) lets say model "A" and model "B".
Profitmargin:..................20%................ .30%..............50%
sales volume of car A:....1718.................695...............522
sales volume of car B:....1598.................1258..............459
turnover:..................6.487.000.......4.283.0 00........2.450.000
profit:......................2.438.000.......1.900 .000........1.650.000
So... a profitmargin of 20% will give you the most profit...but ONLY if:
- you own all sales shops in europe
- you have the production capacity for 1718 cars model "A" and 1598 cars model "B" (=30 Factories)
- you avertise in every sales shop with 5%-10% of your local turnover
I dont remember my costs for model "A" and "B", but lets say the overall costs for one model "A" were as mentioned (in the example before) 1196$.
So the perfect price for model "A" would be:
1196$ + 20% (profitmargin) = 1435$
1435$ (=price without sales discount of 20%)
so:
1435$ / 80 x 100 = 1794$
that means:
1794$ - 20% (sales discount) = 1435$ which is our perfect price inc a profit margin of 20%
Sorry for my bad english, and for the long explanation but i hope everybody gets ist.
greetings
dos-junkie
