In the lean approach, companies are taught that prices are…
““In the lean approach, companies are taught that prices are set by the market and that one way to improve profit margin is to reduce costs. This thinking flies in the face of "cost plus" thinking, where we look first at our own costs and set prices based on our desired profit margin. The reality is that most companies whether manufacturers or hospitals, do not have market power to set prices as they wish.””
About This Quote
This interpretation was drafted with AI assistance. It is one reading of the quote, not the author's own explanation.
The quote critiques the common lean belief that market forces set prices, arguing many firms lack pricing power and should consider cost‑plus strategies instead.
In simple terms: Lean pricing assumes market control, but many lack it; consider cost‑plus.
Key Takeaway
Assess pricing power before adopting lean cost cuts.
Themes
economics
healthcare
lean management
pricing strategy
Mood
analytical
critical
Type
business
strategic
When to use this quote
- small clinics
- public hospitals
- manufacturing firms
Key Concepts
market dynamics
cost‑plus pricing
profit margins
strategic planning
Questions to Reflect On
- Do we truly have market power?
- When is cost‑plus appropriate?
A Different Perspective
Cost‑plus may reduce competitiveness if market demand is price‑elastic.