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It takes a given amount of money to design a new Handtop unit. This amount must be recovered from profit on sales. The larger the number of sales, the smaller the percentage mark-up required to recover the initial cost in a given period of time. Consequently, more sales = lower cost, fewer sales = higher cost.
In a market of a fixed size, the larger the variety of units offered for sale, the lower the number of sales for each individual unit type. In a fixed size market, more variety = fewer sales per unit = higher cost.
But in order to expand the size of a market like the Handtop market, where various groups require different things from their units, a variety of units is necessary.
If approximately 15 designs were needed to basically meet all reasonable user requirements, and permit each of us to select the "perfect" unit, this would mean that the market would be split into 15 competing segments instead of the current three. This in turn would lead to higher costs per unit if the manufacturers were to recoup their costs. It would however lead to market size growth. If the variety of units in the market was insufficient to meet all user requirements, this would inhibit market growth. The smaller the variety, the more inhibited the market growth. Very much a chicken and egg scenario.
Once markets reach critical mass, they tend to grow quickly. Prior to that point, growth tends to be slow.
Until the Handtop market reaches critical mass, the number of manufacturers able to compete and make a profit will remain small, and the variety of units will remain small. If too many manufacturers come into the market too rapidly, this will dilute the number of sales on the individual unit types, and the manufacturers will either have to increase prices across the board, sell the units at a loss, or get out of the Handtop business.
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06/16/10
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