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Reply to "Ricoh Ikon Letter"

Something to think about as well, adding to what was mentioned by Mega. The Japanese division is making the bulk of their profits on the manufacturing of toner. That is the money tree for them. They sell to Ricoh USA and they work through their channels to distribute the boxes. The ultimate goal is to “place the box” Ricoh USA makes their overhead by the profit on the box moving it to the Dealer and other channels. The profit make by selling the box is what keeps the “Reps paid and the lights on” The profit made by the service annuity is what is in it for the dealer or branch. Due to the economies of scale in manufacturing the larger they are the more advantageous it is for them to reduce their cost of manufacturing. As it goes down they start to become more competitive and have the ability to show more of a profit on the hardware side.

When I started with Minolta they were roughly a 4 Billion dollar company, about the size of IKON before the merger. When Konica and Minolta merged they were roughly a 7 Billion dollar company. Jun went around the country talking to each direct branch about the “Road to Tier One.” How Konica Minolta’s vision was to be a tier one player like Xerox and the like. They talked in depth about how hard it was for them to compete with the Xerox’s and the Ricoh’s due to their size and how just growing to XXX would double their profit on the Japan side and afford all of us a better place to work. I do not remember in his speech how much they had to grow by but it was like a 20% growth factor to cut their manufacturing costs in half.

I have watched this closely trying to learn how the pieces relate to each other and try to understand the economics but they are pretty intricate.

Just my two cents,

Pirate Mike
Digital Printing and the Pirates that Sell it!, http://digitalprintingevolution.blogspot.com/
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