While I'm not saying that it will always be cheaper to build it yourself, it most assuredly is when you have your own department, that produces (among others) products very much alike. And it should be, if a company decides to step into that market.
When I started this particular view of this argument, I stated that profit margins make up the very most of the price of any product. And I would like to add here, that a part of those margins are hidden costs themsleves, like salaries for people who are paid by prestation and investments in general. But most of it is Return On Investments.
There are lots of parties involved before any product reaches the consumer. And investors demand a ROI of at least 15%, as long as they can get that. It adds up.
Large corporations consist of lots and lots of divisions, companies and departments, who all have to turn a profit individually. Although the conglomeration of all those might and should add up to much less overhead and less stages that have to turn in a good ROI by themselves.
But, if that is the case, the benefit of scale works in their favor as well: such a large corporation has a much bigger budget to invest in new opportunities to turn in a good ROI, like a semiconductor division.
Sure, that's extremely expensive in initial investments, but after that the quarterly or yearly ROI is huge as well. And that can be used in turn to invest in new opportunities that deliver a good ROI. Or the other way around, as is the case for Sony.
But it doesn't really matter. Just count and add all individual (investments in) ROI's, substract the running costs and extrapolate the expected profit made. And divide that by the amount of shares.
Ok. To make a long story short: as long as most of the costs are investments and/or paid internal, the only thing the conglomerate has to worry about is their own, overall ROI. Which is made up of all the ROI's of all the individual parts. And which do better if the turn around is higher.
In short: If you make all of it yourself, the cost of the individual parts is almost irrelevant against the projected sales, as long as you can sell other products that use the same infrastructure or the volume is high enough. And a hundred million units or more is probably the wet dream of any CEO by itself, no matter what the product is.
When I started this particular view of this argument, I stated that profit margins make up the very most of the price of any product. And I would like to add here, that a part of those margins are hidden costs themsleves, like salaries for people who are paid by prestation and investments in general. But most of it is Return On Investments.
There are lots of parties involved before any product reaches the consumer. And investors demand a ROI of at least 15%, as long as they can get that. It adds up.
Large corporations consist of lots and lots of divisions, companies and departments, who all have to turn a profit individually. Although the conglomeration of all those might and should add up to much less overhead and less stages that have to turn in a good ROI by themselves.
But, if that is the case, the benefit of scale works in their favor as well: such a large corporation has a much bigger budget to invest in new opportunities to turn in a good ROI, like a semiconductor division.
Sure, that's extremely expensive in initial investments, but after that the quarterly or yearly ROI is huge as well. And that can be used in turn to invest in new opportunities that deliver a good ROI. Or the other way around, as is the case for Sony.
But it doesn't really matter. Just count and add all individual (investments in) ROI's, substract the running costs and extrapolate the expected profit made. And divide that by the amount of shares.
Ok. To make a long story short: as long as most of the costs are investments and/or paid internal, the only thing the conglomerate has to worry about is their own, overall ROI. Which is made up of all the ROI's of all the individual parts. And which do better if the turn around is higher.
In short: If you make all of it yourself, the cost of the individual parts is almost irrelevant against the projected sales, as long as you can sell other products that use the same infrastructure or the volume is high enough. And a hundred million units or more is probably the wet dream of any CEO by itself, no matter what the product is.
