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The many faces of ‘pricing power’

Supply chain updates

The global shortage of semiconductors has its positive side — at least to BMW and Daimler Chief Financial Officers: it reveals how much “price-determining power” they have. bottom. In the future, the two automakers plan to limit sales of the finest cars, permanently fix higher prices and boost inflation, even if the chip shortage is mitigated. ..

Comments from car manufacturing executives, Interview with the Financial TimesI am concerned that a temporary disruption in the international supply chain could lead to higher prices. This turmoil can have many causes, from factory closures and turmoil caused by pandemics to global transportation and the aftereffects of natural disasters.But the top Logistics Chain UPS Executive This week, multinationals said they have already withdrawn from globalization as a result, shifting production to more expensive but closer locations. He said this would cause permanent damage to the economy.

Sustain Higher inflation As the coronavirus pandemic eases, we are heading to the top of the investor’s list of concerns. The combination of high consumer savings, easy monetary policy and government stimulus has boosted total spending, but the economic capacity to supply goods and services to meet that demand has lockdown limits and other bottles. Damaged by the neck. Discussions among economists will focus on whether these pressures will be temporary and relieved when the economy resumes, or whether they will lead to more permanent ones and will soon be incorporated into long-term expectations. I’m guessing.

Daimler and BMW’s belief that their ability to charge more is due to their own pricing power will be tested by competitive pressure in the market. Today, competitors are facing supply shortages as well. Potential buyers of luxury cars face waiting times and rising prices no matter who they buy from. Once the bottleneck is mitigated, consumers may instead have the option of paying more for luxury BMWs or less for one of their competitors’ cars. The rate of return that can be maintained in one market is not always sustainable in all.

Enterprises will face similar calculations when it comes to de-globalization. Adopting a more “resilience” but less efficient production process can increase costs. This may make sense for some companies. “Just in case” instead of “just in time” A process as a form of insurance against confusion. Still, others can be exposed to low-cost producers who stick to a farther, but cheaper supply chain, returning savings to customers and lowering prices for more cautious competitors. I can.

However, it is the labor market that the central bank is most closely watching for signs that temporary bottlenecks and shortages are leading to more permanent price increases. At this point, Truck driver And others in certain high-demand professions have enjoyed their first pricing power in decades, and there are still few signs of a significant rise in wages. The ability of today’s workers to limit the same kind of supply that their stronger unionized predecessors enjoyed in the 1970s, the last period of sustained inflation in many rich countries. It is unlikely that you will have one.

When companies also face higher wage demands from workers, it makes more sense to absorb those costs, maintain market share and achieve lower rates of return, rather than passing them on to customers. You may notice that it is. Unfortunately for BMW and Daimler, it is not always clear where the “power” is.

The many faces of ‘pricing power’ Source link The many faces of ‘pricing power’

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