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Here’s the simple lesson we learned—which others were learning at the same time and which eventually changed the way retailers sell and customers buy all across America: say I bought an item for 80 cents. I found that by pricing it at $1.00 I could sell three times more of it than by pricing it at $1.20. I might make only half the profit per item, but because I was selling three times as many, the overall profit was much greater. Simple enough. But this is really the essence of discounting: by cutting your price, you can boost your sales to a point where you earn far more at the cheaper retail
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Business is a competitive endeavor, and job security lasts only as long as the customer is satisfied. Nobody owes anybody else a living.
When you look at what’s happened to the American auto industry, it’s tempting to want to treat the Japanese unfairly—the way they treat us with their protectionist laws. Our auto industry doesn’t play on level ground. But I don’t think we should counter with protectionism because it doesn’t address the real problem: the quality of our product doesn’t compete with that of the Japanese, whether we want to admit it or not. The challenge is a great one for management. What they have to do is build a partnership with their people.