Low sales numbers of Olympus M43s

Started May 15, 2014 | Discussions thread
agentul Contributing Member • Posts: 619
Re: Variable and Fixed Costs explained

Marty4650 wrote:

Production labor is a variable cost because it is directly tied to sales. The more you sell, the more production labor you need. If your sales decrease, you shut down production lines and lay workers off.

Other types of variable cost are materials, energy, and supplies. All of these are strictly tied to units produced.

Your fixed costs, or overhead, is everything else.

In the short term, it is very impractical to rent out part of your plant to someone else, or to lay off your support staff. If sales pick up again, it is difficult to evict whoever you rented your equipment to, buy back facilities you sold off, or replace support staff you fired. You might have to hire new people, and then spend years training them.

There is no practical way to have half a CEO or half a CFO. That expense is fixed, whether you produce a million units or a hundred million units.

i see no reason why the CEO should be paid millions of dollars per year, with bonuses and golden parachutes. and when things go bad, they have zero practical responsibility (it's not like they can't make the next month's payment on the house if they get fired). this was my point: overpaid staff that has no direct relation to the production process actually decreases profit.

Although it has been tried. K-Mart tried having one store manager manage four stores.... and it was a disaster. So much time was wasted in travel between stores that this practice only accelerated their decline.

what about cutting the executive's pay?

Up until now, the camera industry has regarded this as a temporary problem, always forecasting improvement next year.

and guess who's ordering these forecasts? everybody loves a lying prophet that only says happy things. if they were to forecast based on current sales trends, then they'd see their stock plummet.

As year after year of declining sales pile up, this view will change as they realize this is a permanent problem. At that point, factories will be closed, companies will merge, and support staffs will be slashed.

and the executives that led the companies to this disaster, with their insistence to make the outlooks bright for the sake of investors, will get their golden parachutes and live happily ever after.

There really is no other option.

yes there is: introduce a sane salary structure, where management is not allowed to cost so much more than people involved in making the products (and i'm talking about the white collar people, like designers). also, have consistent performance reviews across the board: if you're a manager, you have unrealistic sales forecasts that you fail to meet, you don't do the best you can to market and sell you product, you're out! 3 months severance pay, and that's it. your responsibility is to serve the company and its employees, so your failure is a lot more severe.

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