Structural Pricing Advantages

A fundamental tenet of Adam Smith’s free enterprise system is that customers, all other things being equal, have an insatiable demand for lower prices. Witness Wal-Mart. Witness TD Ameritrade, Scottrade, and Charles Schwab.

Similarly, a fundamental tenet of Economics 101 is that in a commodity market good quality and good service are assumed, thereby making price the principal differentiator. Witness the personal computer market. Witness the flight of manufacturing to the Pacific Rim.

And, not to be undone, a founding tenet of the outsourcing movement was that its suppliers would deliver lower costs to their customers. After all, suppliers and customers alike would have the advantage of focusing only on their respective core competencies, and suppliers would be free of the legacy-burdened costs of their customers’ infrastructures.

Yet a funny thing happened on the way to the forum. Today’s outsourcing industry, hung over from its spectacular growth and resulting commoditization, is working feverishly to devise and sell to its markets a new “value proposition”, and the underlying reality behind this desperate effort is that almost any proposition will do, provided it doesn’t include the promise of lower prices.

In contrast, AMI stands shoulder to shoulder with Adam Smith, sharing his conviction that customers have an insatiable demand for lower prices. And AMI embraces the companion conviction, given Smith’s old fashioned principles of supply meeting demand, that the best way to earn the business of these customers is to satisfy their demand for lower prices.

To this end, AMI enjoys important structural advantages that solve the apparent contradiction between the business requirement for sustainable profits and the customer demand for low prices. Although AMI’s margins and markups are similar to those of its competitors, these escalators are applied to a structurally lower cost base, thereby translating into prices that are almost always lower than its competition.

Principal among these structural advantages is AMI’s location in Maine, where, according to the U.S. Department of Labor Statistics, the hourly median wage for its industry is the lowest in the nation. Which means, simply put, that AMI is located in the lowest cost labor region of the world’s largest market.

Summing up, AMI’s location in central Maine and its employee stock ownership program provide significant and unique structural advantages that translate into lower prices for its customers. Moreover, additional support for even lower prices is provided by the variety of service based and entrepreneurially driven cost-down programs described elsewhere in these pages.

AMI is the right size and the best choice for the EMS middle market.