ECON ARTICLE Essay Example | Topics and Well Written Essays - 750 words

ECON ARTICLE - Essay Example The LCD-panel manufactures had been producing flat screens faster than the TV industry could absorb and thus were forced to cut their wholesale prices by as much as 30%, which lowered their profits. Now they demand that TV makers, distributors, and retailers should cut their margin in order to generate more sales. On the other hand retailers complain that their margins are not really much because the high cost of storefront display and marketing TVs does not leave high profits for them. In addition, they have to invest heavily in training sales personnel also. They further have a lot of money tied up in inventories of the costly TVs. Moreover, the average selling price of flat screen TVs have dwindled to about $3000 from $5000 two years ago. The LCD panel makers, meanwhile, face stiff competitive pressure from other screen technologies such as Plasma and High Resolution Projection TVs. Since September 2004, plasma TV prices have plummeted and contributed to high market share gains over LCD sets. Retailers of plasma screen also apply a similar margin to plasma sets as well. But plasma screen factories are not as costly to erect as LCD screen plants, and there is less competition among plasma screen makers, so the profit squeeze is not as bad. A slightly encouraging trend that the flat TV producers can find relief in is that the low price is likely to increase the sales volume. Though there is a gradual decrease in prices and an increase in sales of flat screen TVs, most analysts predict that it won’t take off as quickly as flat screen computer monitors. Monitors primarily being used for commercial purposes, the purchasing has been driven by businesses while TVs are chiefly purchased for domestic use by consumers. These customers rather tend to be more sensitive to price than any other consideration. Due to increased production, the supply of flat TVs has