The thresh-hold of the high and the low -Pursue profits fairly-

Inamori shared with Seiwajuku workshop members his view on the theme: Pursue profits fairly. What Inamori said is referred with “”.

“A company cannot survive unless it keeps making profit. Making profits should be done in completely fair and legal approaches. A price determined under the harsh competition in a free market should be the fair price, and profit should be earned under such a free and open market. Efforts to increase value-added among the harsh competition allows companies to maximize their profits. In our world, sometimes people are driven by speculation or illegal approaches to make huge profits instead of keeping endeavors to reduce costs and maximize sales volumes, taking into account the customer satisfactions. Kyocera has always been telling our people to take the latter and steady approaches, not the speculative ones. ”

Two following points should be kept in mind.

Let me explain one by one, by referring to Inamori’s words.

1 Pricing is the management

Mr. Inamori has made this one of the 12 pillars of management.
“Pricing is the key to generate revenue streams, however some top management looks comfortable in leaving such an important responsibility to senior managers. The pricing has strictly to be conducted by top management himself/herself.

First, identify the value of the product or service that you are about to promote. Secondly, identify the proper margin thoroughly and analyze your cost structure. Thirdly, anticipate the possible sales volumes as precisely as possible. Fourthly, by simulating and analyzing, identify the balance of the price and the volume to maximize the figure of the price multiplied by the volume. Fifthly, double check whether the price you delivered is the highest point in which your targeted customer is willing to pay.

Forget about all the prejudice and so-called market practice that you believe as the common-sense. The poor analysis of the pricing is the cost-approach. Some leaders tend to establish the price based on the cost, how much investment/ expense has been spent to create that product or service. This is highly likely to end up a poor pricing model. They consider that the cost should be a part of the price and can not be reduced. The price is decided by the customer/ client. This is the business to design the product/ service to be profitable under the given price. Do not get caught by the price prevailing in your industry. Do not stick with the cost structure that you have believed in your life so far.”

→I think it is important to get integrated with the customer to make an accurate price decision. In Aikido, we aim to remove the boundaries between ourselves and your counterparts, so that we could be one entity. I think being impartial and getting rid of obsessions, prevailing common senses as well as manuals are so important for us to achieve such an integration.

2 Avoid speculation

while seeking profit.” Speculation is the act of taking advantage of an opportunity and trying to make a profit in a short term

In the United States, in 2022, Bill Hwang, the head of an investment fund called Arquegos, was arrested on suspicion of securities fraud. In addition, Sam Bankman-Fried, the founder of the crypt currency exchange FTX, was arrested and found guilty of electronic fraud due to the company’s bankruptcy. Bill Hwang was a devout protestant and had done a lot of charity activities. Bankman-Fried was also a devout Jewish whose idea was the redistribution of wealth among the world.

I wondered why those who looked to maintain good philosophies in themselves had to end their career in the failures. I think it’s probably because they lacked reality and the laws of nature (laws of the universe).

Inamori said as follows.
“Even if you’ve found an ideal business where you can make huge profits, competitors would soon enter the market and the price would go down. Prices are determined through the harsh competition, so under the reality, there is no such a super lucrative business. In other words, the only short-cut to accumulate the profits is following the reasonable approaches under the open market. The profit of the company is the result of your striving to earn such an appropriate and decent profit and chipping out such efforts.

Mr. Bill Hwang profited from manipulating stocks of Chinese companies whose actual business administration were questionable. Bankman also made a lot of money trading virtual currencies. I think that dealing with something without reality was a sort of deviation from the “high-road”. Those approaches also imply irrational tricks underneath.

In summary, in order to pursue profits fairly, it is essential to set appropriate prices and avoid speculation. Our businesses, dealing with real estate, tend to be lured into speculation depending on the market trends. We always pay attention to such principles even under favorable circumstances so as not to run into speculation.

Further queries or doubts, please email to ytomizuka@abrilsjp.com

News Letter subscription is here