MMB Chapter 15: The Focus is on Stable Product Quality
Chapter 15: The Focus is on Stable Product Quality
Huang Xiaochuan immediately jumped off the bench, stood up, and asked, "Really?"
He took the quotation from his uncle Zeng Jiahua and began to read it carefully.
Zeng Jiahua asked Huang Xiaochuan somewhat nervously, "What price would be appropriate?"
Huang Xiaochuan plopped back down on the bench, glanced at the flange specifications and quantity required in the quotation, and said nonchalantly, "They're asking for the moon and then haggling. In my opinion, they should just quote a higher price."
Zeng Jiahua, however, was somewhat worried and subconsciously reached into his pocket for a cigarette: "Won't scare them away if we quote too high a price?"
Huang Xiaochuan had already finished reading the quotation. He casually put the document on the bench, curled his lip, and said, "Run? How is that possible? The profit margin on this deal is enormous. I've roughly calculated that even if we double the original ex-factory price, Jiadao Company can still earn double the profit."
Zeng Jiahua had just put a cigarette in his mouth, about to light it, but after hearing Huang Xiaochuan's analysis, he was so shocked that he stopped smoking, looking at Huang Xiaochuan with disbelief. He couldn't understand how Huang Xiaochuan could be so certain that doubling the price would still allow the other party to make several times the profit. Did these foreigners' money grow on trees?
"How did you figure that out? How could you even guess something like that?"
Huang Xiaochuan casually pulled a small stack of receipts from his pocket: "Here, this is my international long-distance call bill. You tell me how I calculated it? Of course I had to find out. I estimated it by understanding the current sales prices of flanges in Europe, America, and Japan, as well as the current purchase prices of flanges in some countries."
Zeng Jiahua had never seen anything like it before. He really had to look at his nephew in a new light. Where did he learn these ideas? Are the brains of smart people different from those of ordinary people?
In fact, Huang Xiaochuan replicated the entire process based on his memories from his previous life and by learning some details over the phone.
Based on this, it can be concluded that Jiadao Company can earn two or even several times the profit through this transshipment trade, which is not an exaggeration or boast.
华夏法兰的平均出厂价大致在RMB35至55之间，而国际上欧洲日本法兰的销售价在75美元至110美元之间，而目前美元对RMB的汇率是1比4.8这样，这还是官方牌价，而民间兑换汇率已经到了1比8了。
Based on the official exchange rate, the price of flanges abroad is equivalent to RMB 360 to 528. In comparison, the selling price of flanges in China is only one-tenth of that abroad. Moreover, even if the flanges produced in Zeng Jiahua's factory are sold at a price of RMB 35 to 55, there is still a 15% gross profit.
How much profit does Jiadao Company make from reselling it? What do you think?
Even if the flanges produced in Zeng Jiahua's factory can only reach 80% of the quality of flanges produced in Europe and Japan, they can still defeat these products and obtain more profits simply by relying on cost and price advantages. This is the secret to Jiadao Company's profits, and this is the "information gap".
During this period, many Chinese enterprises lacked information and technology, with information being particularly crucial. Most domestic companies were completely unaware of overseas demands, while state-owned foreign trade companies, responsible for foreign trade, could not possibly understand the detailed needs of all their overseas clients.
Therefore, before the 21st century, before the Internet was fully developed, information asymmetry was a magic weapon for some companies to make huge profits, far exceeding the profits from selling specialty flour.
Therefore, without Huang Xiaochuan, the reborn individual, the vast majority of the profits from this deal would have gone to Jiadao Company. This is because Jiadao Company held all the advantages: foreign exchange, the market, customers, and most importantly, the information gap.
However, after Huang Xiaochuan got involved in the transaction, Jiadao Company's advantages were greatly weakened. Moreover, Zeng Jiahua's flange factory was not without its advantages. Stable quality was one of its advantages, and low cost control was another. Otherwise, Jiadao Company would not have chosen Zeng Jiahua's flange factory as its procurement target.
Zeng Jiahua didn't even bother with his cigarette. He asked Huang Xiaochuan to come with him to the factory to discuss how to submit a quote. Zeng Jiahua was now pinning all his hopes on his nephew, since he was the one who found the client, and Huang Xiaochuan's abilities so far gave Zeng Jiahua a lot of confidence in him.
Since it involved a large commission, Huang Xiaochuan naturally felt obligated to help. Zeng Jiahua rode his Bentian 125 motorcycle with Huang Xiaochuan on the back and headed towards the factory.
The two older sisters were left bewildered. After their father, Zeng Jiahua, entered the room and exchanged a few words with Huang Xiaochuan, the two of them ran away. What was going on? Could their younger brother be helping their father with business deals?
You can't compare goods to others, and you'll end up throwing them away. But you really can't compare people to each other. While the two sisters were still busy helping their father, Zeng Jiahua, spend money, their younger brother was already helping the family earn money.
Upon arriving at the factory, Huang Xiaochuan calculated the required number of flanges for Jiadao Company and compared the cost of each type of flange. After several calculations, Huang Xiaochuan set a figure and showed it to Zeng Jiahua.
Zeng Jiahua took the money and glanced at it. His heart nearly jumped out of his throat. This kid really dared to ask for money! The total was $230 million, which is about RMB 1100 million. His factory's annual sales were less than RMB 300 million. This amount nearly quadrupled, and it even earned foreign exchange for the country.
Moreover, Zeng Jiahua roughly estimated that the cost of this batch of flanges was less than 300 million RMB, and the net profit could reach 800 million RMB, with a gross profit margin of 266%. That's just too damn scary!
Therefore, Zeng Jiahua dared not agree to Huang Xiaochuan's offer. He shook his head vigorously, saying, "No, no, your offer is too ruthless. You're not even leaving anyone a drop of soup!"
Huang Xiaochuan scoffed: "Tch! Uncle, I've been very generous, okay? The lion's share actually went to Jiadao Company, okay? And do you think this is a fixed price? Jiadao Company definitely won't agree to our offer. The final price will have to be negotiated between the two parties."
Zeng Jiahua knew his nephew had a point, but he was still a little worried: "What if your price scares people away?"
Huang Xiaochuan laughed confidently: "Run? Only a fool would run. It's just a matter of how much profit Jiadao makes. Besides, I've left them enough profit margin. They won't be scared away, otherwise they'd be working for nothing!"
Zeng Jiahua was very curious about how Huang Xiaochuan estimated Jiadao Company's profits: "How do you know how much money Jiadao Company can make?"
Huang Xiaochuan took out the small stack of international long-distance call bills and slammed them on the table. He looked at Zeng Jiahua with a smile but didn't say anything, but the meaning was clear: you have to reimburse me.
Zeng Jiahua was amused by Huang Xiaochuan's antics: "You little rascal! Fine, fine! I'll reimburse you, okay?"
Huang Xiaochuan then explained why he reported $230 million.
"I made some inquiries and found that oil-producing countries in Southeast Asia, such as Malaysia, are currently building large-scale oil refineries and chemical plants, which require a large number of flange parts. In the past, they have been purchasing them from European and Japanese manufacturers. The quality of their products is indeed better than that of our factory, but to say exactly how much better, the difference is not that big, just a little bit better."
"But their products are expensive! On average, the price of one of their flanges can buy ten of ours. This is where the price advantage of our products comes in. It was for this reason that Jiadao Company sent us a quotation letter, wanting to purchase flanges from our factory."
"Jiadao Company is just a trading company. It doesn't need flanges itself at all. Its purpose in purchasing them is to resell them to customers who really need them, namely those oil refineries and chemical plants that are under construction or about to be built. These companies under construction don't know that there are factories like ours that can produce the flanges they need. So Jiadao Company is just a middleman, and it makes money from the price difference."
"Although we produce flanges, we don't have Jiadao Company's customer resources, so this business can only be negotiated with Jiadao Company. Therefore, I considered this aspect in terms of profit, so that Jiadao Company wouldn't back down while the factory could make more money. Besides, if the factory makes money, it means you, my uncle, make money. If you make money, it means my work wasn't in vain, and I can then rightfully ask for my share of the commission!"
Zeng Jiahua was both amused and exasperated by his precious nephew. He gave Huang Xiaochuan a light tap on the head: "You little rascal, you're so cunning now, subtly reminding me that I can't skimp on your commission. Don't worry, as long as this deal goes through, you'll get exactly what you're owed."
"Ouch!" Huang Xiaochuan cried out in pain, clutching his head, but then he made another request.
"Uncle, you have one more thing to promise me."
"you say!"
"If I get a commission, you can't tell my mom," Huang Xiaochuan said, giving her a heads-up.
Why?
"If your older sister knew her son had so much money, do you think she would feel comfortable leaving it with me?" Huang Xiaochuan asked his uncle with a mocking look.
Zeng Jiahua knows her older sister very well. What's most worrying is that she is an accountant, so she has an extremely strong desire to control money. She controls the finances of the Huang family. If she knew that her own son had earned so much money, she would definitely be shocked, but after the shock, she would definitely confiscate all the money.
Zeng Jiahua still wanted to maintain his eldest sister's authority in the Huang family, so he coughed lightly and said, "Well, Xiao Chuan, it's normal for your mother to manage your money. Besides, this amount of money is too much for you. I don't even trust your mother to manage it."
Huang Xiaochuan argued logically: "Uncle, I'm not planning to squander this money. I need it as capital for starting a business. If you just blurt out and sell me out, I'll lose my capital for future business ventures. If you do that, I'll have to borrow money from you."
When Zeng Jiahua heard that Huang Xiaochuan was still thinking about doing business, he started nagging again: "Xiaochuan, your main job right now is to study, okay? You can do business after you graduate. Besides, you can put this commission in your mother's bank and earn interest, which will ensure you have a worry-free life in the future. Don't think about these messy things now, focus on your studies. How many people can get into university these days? You should cherish this opportunity."
Huang Xiaochuan shook his head helplessly, thinking to himself, "Uncle! This money will depreciate terribly in the next thirty years. Moreover, the bank deposit interest rate has already begun to decline, and it will be lowered three times this year, with the highest reduction reaching an astonishing 25%. Since the early 1990s, China has experienced wave after wave of inflation."
Saving money in banks for interest? That will gradually become a thing of the past. When bank interest rates drop to a level that can't keep up with inflation, the money in banks will depreciate every day. The government wants to change the people's long-standing habit of saving money for interest and get that money circulating in the consumer market.
But telling his uncle these things now would be like talking to a brick wall. Huang Xiaochuan was caught in a dilemma and could only try to persuade his uncle to keep it a secret from his elderly mother, Zeng Lijuan.
"Fine, Uncle, you're the one who said I shouldn't think about these messy things. Well then, I'm not going to handle this business anymore. You can talk to the people from Jiadao Company yourself. Anyway, I've already told you the price." Huang Xiaochuan pretended to give up.
As expected, this worked. Zeng Jiahua's face immediately changed color: "How can that be? They can't understand what I'm saying, and I can't understand what they're saying either. If you don't take care of things, how can we discuss this business?"
Huang Xiaochuan said resentfully, "Why don't you just spend some money to hire someone at a university who speaks English to help you with translation?"
"You little monkey, you think hiring someone doesn't cost money? Besides, what's the use of just being a translator? It doesn't mean you can negotiate with foreigners like you do. In the end, it'll all end up the same thing." Zeng Jiahua was very clear-headed at this point.
"Uncle, as long as you agree to keep this from my mother for now, I guarantee I'll help you close this deal. And I definitely won't squander the commission. I've already talked to Grandma about it. I'm going to make some money within three years to buy her an old Shanghai-style house so she can live a comfortable life." Huang Xiaochuan directly brought up his grandmother to back him up.
Because his elderly mother was very important to Zeng Jiahua, after much thought, Zeng Jiahua finally agreed to help Huang Xiaochuan keep the secret for a while.