[DMcCunney]

Originally Posted by axel77

As said, the first conlcusion is correct, the second is IMHO not.

Of course every company wants to make as much profit as possible. Its just not correct that the larger the company is, the more profit it must do per dollar invested.

I didn't say that. The return must be proportional to the investment, and a bigger company makes bigger investments. They have to, to make it worth doing in the first place. And the question senior management will make will be "What is the best place to invest these funds that will produce the highest return?"

As an example, I was involved in a discussion elsewhere on taxicabs, and the desirability of a model designed to be a cab for major metropolitan areas like NYC. In NYC, "livery" cabs require licenses from the city Taxi and Limousine Commission. To operate a taxi, you must have a medallion. Medallions are in limited quantities. New ones are occasionally auctioned by the city, and the going price the last I heard was about $75,000. At any one time, there are about 12,000 livery cabs on the street in NYC.

Another participant in the discussion is an engineer at GM. He managed to avoid rolling on the floor laughing at the idea that GM could produce a vehicle for a market of about 15,000, but it wasn't easy. They can't. They'd need a market about 30 times that large to even think about it. They are simply too big, with too much overhead, to produce that few of a model profitably.

So it is in a different sense for Sony and the Reader. Someone like Bookeen might survive comfortably on sales that would not be sufficient for Sony. Sony makes devices, and must make a lot of them. Aside from the investment in manufacturing to make the actual readers, they also had to create content to offer for the reader and an infrastructure to sell it, as well as substantial marketing expenses to let everyone know about it.

And the size of that investment will impose corresponding requirements for profitability. Again, senior management will ask "Can we make a better return investing these funds elsewhere?", and if they think they can, they may just pull the plug on the existing operation.

thanks for explaining me financing 101, we'll I actually did that much financing already. What you descrive is total return on investment. Yes ROI will increase the larger the production is. "economies of scale". However I still disagree that larger companies have a larger ROI than smaller. This is just not true.

I didn't say that. I said they had a higher cost of entry and proportional return requirements. Big companies cannot profitably undertake small jobs. There have been an assortment of instances where a larger company has spun off a new operation as a separate company, for precisely that reason. As a new operation, the start up may not be able to bear the burden imposed by being a part of the parent. Split off as a legally and financially separate organization, the numbers change.

As long any investment (including management expenses) has a larger ROI than the market interest loan any company will want to do that, big or small. Since it can get the investment needed from the finance market.

It can? Looked at the credit markets lately?
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Dennis