This PPT slide, part of the 91-slide Computer Industry Analysis Training PowerPoint presentation, presents a comparative analysis of the economic implications of indirect versus direct channels for commercial PC products, specifically from the year 1998. It outlines the percentage of the average sales price attributed to various cost components for both channels.

For the indirect channel, gross margin is shown to range from 20% to 25%. This indicates a healthy margin, suggesting that companies leveraging indirect sales methods can maintain significant profitability. However, the slide also details SG&A (Selling, General and Administrative expenses) at 6-10%, which reflects the operational costs associated with indirect sales. Development costs are minimal at just 1%, indicating that product development is not heavily impacted by the sales channel. Channel costs, which are crucial in understanding the expenses incurred in managing indirect relationships, range from 8% to 18%.

On the direct/BTO (Build to Order) channel side, gross margin remains consistent at 20-25%, mirroring the indirect channel. However, SG&A costs are higher, ranging from 13% to 17%. This suggests that direct sales may require more substantial investment in sales and administrative functions. Development costs are zero, which could imply that direct sales may streamline product offerings, reducing the need for extensive development. Channel costs are also lower, at 6-10%, indicating that direct sales may be more cost-effective in managing customer relationships.

This analysis provides valuable insights into the financial dynamics of different sales channels, highlighting the trade-offs between operational costs and profitability. Understanding these metrics is essential for strategic decision-making in channel selection.

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