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High-volume/low-margin or a low-volume/high-margin company

1) What premium-priced companies can you identify that are successful?
- What premium-priced companies have you seen fail?
- What justifies a premium price?
- What are the risks starting your price too low?
- What are the risks starting your price too high?

2) How do you determine whether you will aim to be a high-volume/low-margin company or a low-volume/high-margin company?

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A successful premium priced company that I can think of right away is Louis Vuitton. They make upscale purses, belts, scarves and other accessories. Their purses can be analogous to works of art; they are individually hand crafted by artisans in France. The watches are made by master-craftsmen in Switzerland.
Having a LV product is a sign of prestige, of luxury. Having a LV purse draws attention, and shows to the world that you have great taste and can afford such prestigious products.

A premium priced company that failed is FAO Schwarz. This was an upscale toy store in the United States. They only carried upscale expensive toys. However, in 2009, after being in business for 145 years, they were acquired by Toys R us. In 2009 FAO listed assets of $257.4 million and liabilities of $238.4 million. Unfortunately, due to intense competition in the toy market, and the ...

Solution Summary

A high-volume/low-margin or a low-volume/high-margin company is examined.