"Richard Knoppow" wrote

If Kodak is doing this is would be breaking a company policy that has been
in effect since the founding of the company.

Well, Kodak has been doing a lot of that: both too much of
it and not enough.

While manufacturing cost goes down with volume for many products there is
usually a plateau where the cost remains steady with increasing volume.

Not really, it's an exponential curve, in most processes if
you double the volume then costs drop 10% to 20%, after a
while, as you say, it is functionally flat because you just
can find market for twice the product.

Making a web process product like film, though, has a terrific
volume/cost fall-off. Batch preparation cost is everything,
material cost is minimal. I am involved in in-vivo clinical
test strip equipment and the economics are such the machine
is run as infrequently as possible and the production run is
as big as possible. The amount produced doesn't have a lot
of impact on the cost of the run: 1 test strip, 10,000,000
test strips or 100,000,000 test strips: the runs all cost
about the same.

The other way to look at it is that there isn't enough market
to use up the machine capacity. And that is certainly Kodak's
current dilemma.

Since Kodak is over capacity in manufacturing then selling
product at the marginal dollar, and pride be damned, is the
right way to go.

There may also be some advantages in reduction of marketing and
advertising costs but I think these are minimal.

Whoo boy, Richard, try selling something and see where
your costs go...

I suspect the sale of seconds are more myth than real: no one is going to
profit by selling a defective product.

Freestyle film isn't defective. Except for that batch
of 90's Ilford with the pin-holes. And it's hard to tell
if Efke is defective or that's just the way it is supposed
to be.

But, at least on the East Coast, selling seconds is
a big and profitable business. Tour busses going
out to huge "Outlet Malls" located in the middle of
nowhere. Just about all the merchandise on offer is
clothing & accessories that were idiotically over
priced to begin with. The customers are 'traditionally
built' ladies wearing purple stretch pants, big hats
and too much make-up.

The Snap-On tool company's outlet store used to be
a huge pit in the back 40: anything that didn't pass
muster was promptly 'destroyed'. I wonder if the EPA
has started test bores to measure the soil's
heavy metal content.

Who knows what the stuff is. Just wait, and in a
month it will be pretty obvious. So far all indications
are that it is Tri-X or something so much like it
that no one can find much difference between the two.

Scenario: Too keep the price at $4/roll, the machine
needs to make 10,000,000 rolls per run. You can
only sell 5,000,000 by the expiry date. Two solutions:
trash 5,000,000 rolls or sell the extra 5,000,000
at the marginal price and drive Efke, Foma and anyone
else in the market into bankruptcy. Doesn't take a
Harvard MBA. A bit beyond the comprehension of LSE,
though.

--
Nicholas O. Lindan, Cleveland, Ohio
Darkroom Automation: F-Stop Timers, Enlarging Meters
http://www.darkroomautomation.com/index2.htm
n o lindan at ix dot netcom dot com