Why isn't the 5 dollar African made shoe adding enough value to be a player in a more expensive market?
Are we sure the market has settled for $50 or is made in America worth and extra $10/15 dollars?
The supply chain with additional transportation and others costs would push the price to $20 per hour in China compared to $30 an hour. A tariff of $10 on imports would equalize the price. Would that push the market price to $60 for the shoes from China and would that push the American price to $75? Or would the Chinese shoes sell still sell for $50 forcing profit down or would they need to drop to $40 to set the market lower?
> "Why isn't the 5 dollar African made shoe adding enough value to be a player in a more expensive market?"
that's too underspecified to provide a good answer in this context. perhaps it's poor market fit, lack of cheap logistics, or merely racism. or something else entirely, it's hard to say.
> "Are we sure the market has settled for $50 or is made in America worth and extra $10/15 dollars?"
the $50 was assumed/asserted to make the discussion simpler. of course in a real market you'll have a variety of price-quality tradeoffs to choose from, which is the market trying to capture all the surplus value it can. for sure, some folks will pay extra for an american label.
> "The supply chain with additional transportation and others costs would push the price to $20 per hour in China compared to $30 an hour. A tariff of $10 on imports would equalize the price. Would that push the market price to $60 for the shoes from China and would that push the American price to $75? Or would the Chinese shoes sell still sell for $50 forcing profit down or would they need to drop to $40 to set the market lower?"
in the short term, the market price wouldn't be swayed by mere changes in costs (including tariffs). raising prices changes consumer behavior (i.e., price elasticity), which dampens the ability of the firm to make such unilateral changes. perhaps through advertising/lobbying/public relations, shoe companies can change the perception on what a fair market price is for their shoes (and thereby raise prices without negative affects on sales), but that's a different effect beyond simply costs changing. longer term, market participants may drop out due to unprofitability, which would change supply, and as a result change the market price through the lack of lower-priced alternatives.
you sell shoes at the highest price the market will bear (actually a range, given price discrimination techniques), and then adjust the 4 P's in response. the market price is dynamic and part of the function of marketing is keeping tabs on it.
Why isn't the 5 dollar African made shoe adding enough value to be a player in a more expensive market?
Are we sure the market has settled for $50 or is made in America worth and extra $10/15 dollars?
The supply chain with additional transportation and others costs would push the price to $20 per hour in China compared to $30 an hour. A tariff of $10 on imports would equalize the price. Would that push the market price to $60 for the shoes from China and would that push the American price to $75? Or would the Chinese shoes sell still sell for $50 forcing profit down or would they need to drop to $40 to set the market lower?