Take a hard drive and copy some software that can handle multimedia audio formats. Add a navigation wheel, an LED screen and a (slightly tinny) mini-speaker system.
Put it all in a case and paint that some cool colour. Hey presto! You have a portable digital player that doubles as a fashion accessory.
Anybody with a degree of manual dexterity and a working knowledge of the digital world can put one together. A 40-GB hard drive fits comfortably into the palm of a hand and costs about Rs 5,000.
Software that can render digital music is freely available off the Net and bundled with operating systems.
The speaker set or alternatively, headphones would start at around Rs 200 although of course, you could spend a lot more if you opted for top-of-the-range speakers.
The CPU could be an adapted Pentium 1 chip -- a superannuated chip that is quite capable of handling multimedia functions and synchronising with PCs. Add peripherals like USB ports, microphone inlet/ outlets and so on -- all this will be worth another Rs 2,000.
The nav wheel could be cannibalised off a standard FM transistor set along with the case. The LED screen would cost perhaps another Rs 1,000.
For around Rs 8,500 or a little bit more, you have a working portable digimusic player with a huge capacity of around 50,000 songs. This is at retail prices; anybody who sourced the components in bulk would get significant discounts.
However, the cheapest branded players of any note, which perform precisely the functions of the jury-rigged device described above, start at about twice the price.
Most have far lower capacities -- 10GB and 20 GB storage are common configurations. The premier devices like the iPod from Apple cost upwards of Rs 20,000.
Obviously part of the huge price premium is due to the use of custom-manufactured parts and higher quality standards.
Still, much of the component set is available from branded manufacturers, and somebody sourcing off the street would not have major quality issues. If you get a designer to conceptualise a mould for the case you could add to the attractiveness of the packaging.
Therefore most of the price premium comes from the fact that the device is branded. This would make the FMCG marketeers nod approvingly and fall in line with the expectations of automobile manufacturers as well.
After all, we willingly pay different prices for different brands of soap and different models of cars -- even if the specifications are approximately the same.
But in the context of a digital device, the brand premium is astonishing. As hardware manufacturers have learnt to their cost over the past two decades, digital devices are broadly treated as commodities.
The differential between a full-fledged branded PC and an assembled one is much less than that between an assembled digimusic player and a branded one. At best, there will be a premium of 25 per cent for the brand name in a PC and perhaps, not even that.
The premium is perhaps predicated by consumer perception of this as a spin-off from the consumer electronics industry rather than a PC-peripheral. We do pay large brand premiums for sound systems and TV/ DVD players, speakers and so on, with broadly similar specs, on the basis of small nuances and snob-value.
It is possible, however, for the manufacturer of a home-theatre system or its component parts to raise a wide moat in the manufacturing process itself.
A TV cannot be assembled easily through the purchase of off-the-shelf parts. Nor can high-fidelity speakers.
But a digital music player can be, and that means every branded PC maker could provide a potential challenge to the dominance of Apple, Dell, HP, Rio Sonic and the others already in the game.
The street-corner PC-assemblers who run the world' s grey markets can also get into the game very easily -- this is already happening in a small way. How long can the branding moat be maintained?
