[monochrome]

SG&A costs by selling as many cameras possible

SG&A is distinctly variable by volume of units sold.

DEFINITION of 'Selling, General & Administrative Expense - SG&A'

Reported on the income statement, it is the sum of all direct and indirect selling expenses and all general and administrative expenses of a company.

Direct selling expenses are expenses that can be directly linked to the sale of a specific unit such as credit, warranty and advertising expenses. Indirect selling expenses are expenses which cannot be directly linked to the sale of a specific unit, but which are proportionally allocated to all units sold during a certain period, such as telephone, interest and postal charges. General and administrative expenses include salaries of non-sales personnel, rent, heat and lights.

R&D is small potatoes. People are expensive over the short term. Plant & Equipment (Capital Investment) is expensive over the long term. Every major corporation on earth (including Ricoh) has spent the last 7 years shedding people (SG&A) and P&E (Capital Expense) to reduce their cost structure - but they haven't shorted R&D in their core businesses at all.

The last 8 or 10 post are what I've tried to say for nearly three years. Ricoh Imaging cannot, does not want to and will not compete with Canon and Nikon on the high-volume, low-margin business model they've constructed. The investment necessary to become profitable using that business model would have a significant effect on the Parent Company earnings statement for many fiscal quarters, and it would still be a business risk, not a certainty. Ricoh corporate, quite simply, said, "NO!"

Ricoh has been fortunate they aren't servicing a business model dependent on meeting 2012 unit volumes.

You are conflating the manufacturer with the distribution channel - never a good idea.

The DA560 is not a Ricoh product, rather it is an old Pentax (telescope), pre-Hoya product that was just thrown out there at an extremely high price, with no development cost, precisely because Ricoh could still make profit at the factory dock on such low volume.

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Last edited by monochrome; 08-18-2015 at 04:22 PM.

[biz-engineer]

SG&A is distinctly variable by volume of units sold.

So, if I understand correctly, if Ricoh sell more camera models, it costs them more, then they should not do a full frame camera, otherwise their SG&A expenses will increase and since SG&A is the most expensive it's going to make Ricoh loose more money.

Ricoh corporate, quite simply, said, "NO!"

I was at Ricoh's management meeting and I don't remember that they said this :

[biz-engineer]

Considering some of the other dubious claims you've made in this thread, forgive me for having my doubts, especially considering, according to your profile, you live in Austria, and Ricoh corporate decisions are made behind closed doors in Chuo.

Of course it was kind of ironic silly joke, since I guess that like monochrome, I was not a Ricoh's general management meeting or with whoever is involved in the corporate strategy (and if I was, I'd for sure not disclose anything in a forum). I make this kind of joke when I read statements that suppose that the person know internal private corporate information which officially and legally can't be disclosed to the public. Generally, I guess anyone can comment on what Ricoh could do or should do , but it's kind of interesting to read statement like Ricoh management did this or that. Firstly, evidence should be provided. Secondly, if this was true from an employee of Ricoh, then of course this person could be sued by Ricoh.

[monochrome]

Dude. Published Corporate Research from an Investment Bank is public domain. The Investment Banker(s) may very well have been in the room as consultants and heard - or even said - the very words. Spring, 2012, referring to "Digicams," during the Ricoh global retrenchment.

More unit volume requires more everything, to produce, market, distribute and support the 'more'. SG&A is not fixed. To gather market share against two dominant, entrenched competitors who have successfully fragmented the product market with multiple variations of a basic product is a classic marketing case study. CaNikon have made the unit margin too thin for the maker of any single 'size' to profitably gather more than a fragmentary market share without making many years of investment, and losing money doing it. Classic Moat Building. The alternative business model (First-year MBA textbook stuff) is low volume, high-value, high-margin. Sound familiar?

Sony is trying to displace 1&2 by innovating - and losing money doing it. They just made a dilutive stock offering to raise the cash to make the investments in sensors and imaging. Institutional investors are unimpressed.

Far being from benighted old men, Ricoh are very smart, very good businessmen.

But whatever. I defer to your superior intellect and depart the field.

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Last edited by monochrome; 08-18-2015 at 07:48 PM.

[IchabodCrane]

There is no one way to approach and run a business otherwise they'd all be doing the same thing (and they all have plenty of employees who kept their first-year MBA textbooks). Instead, a company has to determine what it wants to be from which they can create and execute a strategic plan to achieve that. Some will succeed and some won't.

One of the best books I read on succeeding as a small player in a market talked about approaching or viewing your business as a guerrilla. The essential element is finding a weakness in the competition's strength and then attacking/exploiting that. This "can" work because entrenched companies don't want to go against their strengths when responding.

Separately, weren't there all kinds of posts in this forum not many years ago claiming Ricoh desired to be a dominant player in the DSLR market?

[monochrome]

Separately, weren't there all kinds of posts in this forum not many years ago claiming Ricoh desired to be a dominant player in the DSLR market?

That's the twenty-year Vision. The intermediate term Goal is to be the third full-line camera company, to be the alternative to the big two. Those words are directly from Jim Malcolm's mouth to my ears, personally, as reported on the Forum April 30, 2013. I submit the High Volume model with expensive marketing, many salespeople (required to support B&M stores), Dealer Financing / Dealer Credit and all the other techniques necessary to make the HV business model work - the High Volume model IS the Canon / Nikon strength. (Well, it was. They're paying dearly right now with overcapacity, too many employees and a distribution channel stuffed with unsold, obsolete models).

Ricoh's alternative IS the guerilla model.

They're patient, and their time horizon is not aligned with ours.

Extract from April, 2013 interview. Note the competitor inventory build did occur and continues as dSLR volume declines toward 2004 levels:

Lastly he counseled a bit of patience. He cited CIPA data that show other manufacturers are producing significantly more cameras than they are selling, and thus experiencing an involuntary inventory build. Pentax is not subjecting itself to this risk. As a company Ricoh is twice the size of Nikon and half the size of Canon, so these business decisions are strategic, all made under an intermediate term belief that there can be a third major camera brand and it will be Pentax, and that the 20 year Vision remains to be Number 1. Within that strategy there are shorter tactical actions that don’t appear to make sense without the intermediate and long term context. He asked again that we be patient.

Read more at: https://www.pentaxforums.com/forums/136-pentax-q/223633-q-user-group-had-goto...#ixzz3jE7TmDe7

[mee]

bottom of 8 pages now.. do we have any more information beyond the incredibly unsubstantiated rumor in the OP?

[rawr]

do we have any more information beyond the incredibly unsubstantiated rumor in the OP

No. Nothing that I've seen. Reliable information is very hard to find.
For all we know, Ricoh could have abandoned the FF project entirely 6 months ago.

[biz-engineer]

SG&A is not fixed.

SG&A is not fixed for fixed for the most of it, and that precisely why it is not accounted as cost of units sold but deducted from the gross margin. The most variable part of SG&A expenses is due to the variable compensation of the sales personnel.

The alternative business model (First-year MBA textbook stuff) is low volume, high-value, high-margin. Sound familiar?

lol, yes sounds familiar, I got my MBA from the MIT Sloan School of Manager and now back in business since 15 years, so after the MBA I continued to learn a lot in the industry (beyond books, BTW, books are often written by people with little practical experience, so the best is is to know the theory and the practice). And, MBA accounting text books define SG&A not as sold unit related expenses, in other words in theory fixed cost :-) Curiously, I can't find the same definition of SG&A as yours:

"Selling General & Administrative Expenses (SG&A)
Definition:

Here is another place where language can be confusing. For many companies, operating expenses and SG&A are the same thing. SG&A stands for Selling, General, and Administrative expenses and includes the day to day expenses NOT directly related to manufacturing the product or selling the service. Some companies refer to operating expenses as SG&A, or just G&A, while others treat G&A as one subcategory and give sales and marketing (and possibly other specific categories of expenses) its own line, all under the heading of operating expenses. Often a company will make this distinction based on the relative size of each."

To gather market share against two dominant, entrenched competitors who have successfully fragmented the product market with multiple variations of a basic product is a classic marketing case study.

I NEVER considered this in my suggestions that Ricoh would trying to gain market share from Canikon, if you read correctly, I wrote the opposite. And obviously, making multiple variations of a (not necessarily basic) product is a classic marketing "case study". The point is that to generate more money, you have different options:
1) - acquire new customers (e.g such as via compelling entry level offerings), + avoid to lose more customers than the acquisition rate.
2) - acquire new customers from competitor + avoid to lose more customers than the acquisition rate.
3)- Or, keep you existing customer as much as possible and sell them in depth, i.e sell more products to the same customer

A company can select #1 or #2 or #3 , or a mix.

Back to the point that I insist on: Making two spins of a common full frame camera platform is a valid approach for option #3, which neither is an attempt to compete with Canikon; nor require high volumes and does not increase SG&A. In the camera industry, gross margins are roughly. 40%, SG&A expenses 20%, R&D 10%, 10% EBIT, so there are different ways to reach an average 40% gross margin. For a full frame product line, Ricoh can decide to do it with one product or more then one product. You made it a fixed idea that Ricoh can't make it with more than one full frame product.

Dude. Published Corporate Research from an Investment Bank is public domain. The Investment Banker(s) may very well have been in the room as consultants and heard - or even said - the very words. Spring, 2012, referring to "Digicams," during the Ricoh global retrenchment.

Our PR department say anything to investors, the goal is not to tell the truth, the goal is to manage stock prices and sources of finance, banks and investor are suppliers of money.

What you write is not stupid and is logical, but in management there is no single absolute right way. Different strategic paths can succeed, and also a lot of strategic paths are doomed to fail.

Far being from benighted old men, Ricoh are very smart, very good businessmen.

Sure. I agree.

But whatever. I defer to your superior intellect and depart the field.

Not the goal. I acknowledge your point of doing high margin low volume ff camera (like the 645D+Z) is a valid approach, as the APSC multiple product approach was also valid, and now the full frame could be high margin low volume for the pro segment, and higher volume lower margin for the enthusiast amateur full frame segment.

[pathdoc]

No. Nothing that I've seen. Reliable information is very hard to find.
For all we know, Ricoh could have abandoned the FF project entirely 6 months ago.

That's going from the sublime to the ridiculous.

[Ian Stuart Forsyth]

That's going from the sublime to the ridiculous.

It would not be the first FF they killed

[pathdoc]

It would not be the first FF they killed

If they kill this one, they're finished.

[rawr]

While the Pentax FF may not be dead or abandoned (as far as anyone knows), it's certainly not alive yet either.

[thibs]

It would not be the first FF they killed

And if they hadn't, they'd be long dead.

[repaap]

So...no FF. Damn!