Profit Margins

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   JaxsonRaineposted 12 years ago

   Companies like Shell and Exxon operate on a 7% profit margin. This currently means we are paying them approximately $0.25/gallon of gas. Yet, many people call outrage that they charge such high profits as 7%.
   
   Insurance companies operate on a 4% profit margin, but they are blamed for the high costs of health care.
   
   Hmm, what about Apple? Apple runs a 28% profit margin! Maybe we are mad at the wrong industries.
   
   
   Interestingly enough, the Post Office runs on a -7.6% profit margin... government efficiency at its best.

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   1. 83

      Max Daltonposted 12 years agoin reply to this

      The price point on Apple products is so high because there are a very large number of people who will pay it. The backlash for Apple's prices is minimal because it's viewed more as a want than a need. Other companies who compete with Apple, such as Amazon and BlackBerry, sell considerably cheaper products that do similar things, but a very large number of people don't care and want the Apple product bad enough to pay the higher price. There's nothing wrong in that. With regard to your Exxon example, they could hike their prices, and the people who are loyal to Exxon or think Exxon offers a superior product may continue to pay those higher prices, but I suspect the vast majority of the people will purchase their oil-based products from someone other than Exxon or who doesn't purchase oil from Exxon. Further, I don't understand why you'd be mad at either of these companies. If you don't like their prices, don't buy their product.

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         JaxsonRaineposted 12 years agoin reply to this

         The whole post is tongue-in-cheek to a degree, I don't think it makes sense for anybody to be mad at the oil companies for the price of gas, as they contribute so little to the high prices.
         
         The Apple example is just to show that profit isn't necessarily an evil thing, and companies should be allowed to charge what they want for their products.
         
         I was hoping some of the big-business haters might take a new look at how the free-market operates, and who they should really be angry at.

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2. 83

   Max Daltonposted 12 years ago

   Hi Jaxson,
   
   Cool. Without knowing it was tongue-in-cheek, the whole post just seemed so weird to me, lol, as I'm more on your side of the fence. Just to throw another example out there, it's similar to people getting angry about athletes making obscene salaries. They get that kind of money because people spend so much on those products, going to the games and so on, and because TV stations are willing to shell out huge dollars to broadcast the games. If it doesn't go to the athletes it will just get filtered to someone else in the organization -- probably the owners. If people think Apple is making too much money, they don't have to buy its products, and if people don't like athletes making mountains of money, they don't have to support the teams.
   
   Max.

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3. 59

   Evan G Rogersposted 12 years ago

   Profits guide the hand to build what is required by society.
   
   People look to the market, see profits in some sectors, and realize that they can safely build a production change in such sectors. Then profits reduce as competition increases.
   
   IF the oil companies make 7%, and people think it is too high, then they should start their own oil companies and break the margin.
   
   If they can't do this, or they refuse, then they are just blowhards who want government to restrict freedom.
   
   This is how the road to serfdom begins: a failure to understand economics.

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