Lollypop said:
I like your entire argument, but it bothers me that a manufacturer can contracually enforce a price on someone for a period.. is that completely legal? What will happen to the contractual price if the entire processor lines price drops??
The only things that really bothers me with the mini... the integrated graphics and the dual channel memory, the PPC minis allowed me to upgrade to 2gigs with cheaper memory and without a performance penalty when using unmacthed sizes.
The example I wrote was purely conjecture, as I previously stated. But, it is not fantasy. These types of deals are very common nowadays. I will give you an example:
I worked for an aerospace manufacturer. Our customer was Boeing. In 1990, we were the incumbent supplier of over 2000 different parts (3rd largest in the world). We had won all of these jobs through competitive bidding. Boeing came to us with a 'package' of all these parts, at their current price, and wanted us to commit to a five-year contract. We would sell them the entire 'statement of work' at the same price. Otherwise, ALL ~2000 parts would be sent out for rebidding.
Boeing's SOW was terribly incomplete, many prices were totally wrong and their projected purchase quantities were a joke. Also, we had not actually made some of the parts yet. We had our bid amount, but no actual COGS. I was told to re-assign everything I was doing and focus all my time analyzing the 'package'. It took me nearly six months to compile a SOW our company could work with. Boeing was constantly 'rattling their sabers' about this being all or nothing. However, we eventually agreed to a SOW of ~1600. They did rebid the remaining ~400 and we won back the ones we cared about, but at a higher price.
In this example, Boeing was in a stronger negotiating position than us. We had millions of dollars in inventory, programming, tooling, etc. And that is usually the case in B2B contracts; one of the parties have the stronger negotiating position and will get more concessions. However, there is almost always enough benefits for both companies to prosper from the arrangement.
Between 1995 and 2000, I negotiated several contracts with our company's suppliers and service providers. I did not have to resort to arm-twisting like Boeing did.
These contracts and SOW can be written in any way imaginable. However, they will usually involve pricing and order quantities. However, there could be codicils that protect both parties against unusual circumstances, like a major product line price reduction.