• The going market prices of standard and superior materials in any one year deviate from their
respective base prices whenever the percentage mix is anything other than 50% for standard
and 50% for superior materials. The going market price of superior (or standard) materials will rise
2% above the base for each 1% that worldwide use of superior (or standard) materials exceeds 50%.
Simultaneously, the global market price of standard (or superior) materials will fall 0.5% for each 1%
that the global usage of standard (or superior) materials falls below 50%. Thus, worldwide materials
usage of 60% superior materials and 40% standard materials will result in a global market price for
superior materials that is 20% above the prevailing $12 base price for superior materials and a global
market price for standard materials that is 5% below the prevailing $6 base price for standard
materials. Similarly, worldwide usage of 55% standard materials and 45% superior materials will result
in a global market price for standard materials that is 10% above the $6 base price and a global market
price for superior materials that is 2.5% below the prevailing $12 base. In other words, greater than
50% usage of superior materials widens the price gap between superior and standard materials, and
greater than 50% usage of standard materials narrows the price gap.
• Materials prices fall whenever global production levels drop below 90% of global production
capacity and materials prices rise when global production levels rise above 110% of global
plant capacity. Should global shoe production fall below 90% of the footwear industry's global plant
capacity (not counting overtime production capability), the market prices for both standard and
superior materials will drop 1% for each 1% that global shoe production is below the 90% capacity
utilization level. Such price reductions reflect increased competition among materials suppliers for the
available orders. On the other hand, when global production levels exceed 110% of the industry’s
global plant capacity (reflecting use of overtime production), the prices of both standard and superior
materials will go up 1% for each 1% that global production levels exceed 110% of global production
capacity. Thus once overtime production exceeds a global average of 10% of installed plant capacity
worldwide, then material suppliers are able to exert pricing power and can command higher prices. In
the event global production reaches the 20% overtime maximum, the prices of standard and superior
materials will be 10% higher than they would otherwise be.
• The going market prices of standard and superior materials in any one year deviate from their
respective base prices whenever the percentage mix is anything other than 50% for standard
and 50% for superior materials. The going market price of superior (or standard) materials will rise
2% above the base for each 1% that worldwide use of superior (or standard) materials exceeds 50%.
Simultaneously, the global market price of standard (or superior) materials will fall 0.5% for each 1%
that the global usage of standard (or superior) materials falls below 50%. Thus, worldwide materials
usage of 60% superior materials and 40% standard materials will result in a global market price for
superior materials that is 20% above the prevailing $12 base price for superior materials and a global
market price for standard materials that is 5% below the prevailing $6 base price for standard
materials. Similarly, worldwide usage of 55% standard materials and 45% superior materials will result
in a global market price for standard materials that is 10% above the $6 base price and a global market
price for superior materials that is 2.5% below the prevailing $12 base. In other words, greater than
50% usage of superior materials widens the price gap between superior and standard materials, and
greater than 50% usage of standard materials narrows the price gap.
• Materials prices fall whenever global production levels drop below 90% of global production
capacity and materials prices rise when global production levels rise above 110% of global
plant capacity. Should global shoe production fall below 90% of the footwear industry's global plant
capacity (not counting overtime production capability), the market prices for both standard and
superior materials will drop 1% for each 1% that global shoe production is below the 90% capacity
utilization level. Such price reductions reflect increased competition among materials suppliers for the
available orders. On the other hand, when global production levels exceed 110% of the industry’s
global plant capacity (reflecting use of overtime production), the prices of both standard and superior
materials will go up 1% for each 1% that global production levels exceed 110% of global production
capacity. Thus once overtime production exceeds a global average of 10% of installed plant capacity
worldwide, then material suppliers are able to exert pricing power and can command higher prices. In
the event global production reaches the 20% overtime maximum, the prices of standard and superior
materials will be 10% higher than they would otherwise be.
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