CEO Forum - Q3/2003

5. In the late 90's, companies often enjoyed high sales even with a high priced product. Now as the economy struggles, many are revaluating their costs. In the past few quarters, we have seen a renewed emphasis by consumers on cost. Is this going to be a temporary trend?

CEO #1: With the tech boom, cost was of no issue. With the end of the tech boom and the maturing of the industry, cost becomes more of a factor. This is typical of a maturing life cycle. However, the product will continue to have a high end segment and a mainstream segment with high, mid and low ends and the value segment. … We made improvements to our production and design to be more competitive at the more price sensitive main mid and low and entry levels.

CEO #2: The trend of lowering cost of IT products should be continued by asking by consumers - motherboards are becoming mature. New technology and creativity of new products is the way to avoid that.

CEO #3: As end users are more aware of the cost issue and non-differentiation on product features, the renewed emphasis you mentioned won't be only a temporary trend. It would be a long-term tendency.

CEO #4: Basically, we believe cost is not everything that consumers care about. A balance among cost, performance, and product features is the key issue that they consider about before making decisions on purchasing. Our company dedicated itself in providing reasonably priced, performance enhanced, and feature enriched products for many years, and we will keep on this direction in the future, as well.

CEO #5: Cost down is always the "must" topic in running a company, but a healthy and positive direction should be revaluating the cost to provide a product with quality. So, how to define the "acceptable quality" will be a task for consideration.

CEO #6: This is not a temporary trend; it will be a long-term phenomenon.

CEO #7: We hope it is a temporary trend.

CEO #8: Consumers will enjoy low prices; there is way too much capacity for the manufacturing houses, who will compete hard with no margin.

If you were to look at commercial and consumer buying habits 5 years ago, you would probably have seen price as a consideration on the bottom half of the list. With the economy struggling and consumer confidence faltering, it is hard to predict where this will lead buying habits. Some would think that as the economy recovers and comes full swing, high priced products will begin to enjoy high sales again, because there is more free capital to work with. However, it is hard to say if this will actually happen. Many companies and consumers will be cautiously eyeing the recovery and may be looking to prepare for the next economic slump, and might hold back on capital expenditures. This would mean a continued focus on cost even when the economy is strong. While the emphasis on cost will not go away, it is unknown if it will still remain a primary concern/buying habit.

Differentiation among recent products has certainly been lacking, as much of the market matures, and this will be something to keep our eyes. If new innovation can keep products differentiated enough, we may see something of high sales for high priced products. How large the spectrum of differentiation will be is going to be what much of this boils down to.