Reborn Industrial Tycoon

Chapter 430 New products are out again

Seoul, Yeongdeungpo-gu, LG Group Headquarters.

In the conference room, more than a dozen executive directors gathered together and were discussing whether to continue investing in and building factories in China.

The secretary opened the report and reported: "Chinese microwave oven companies have launched a price war. According to the latest information we have received, the market retail price of each Chinese-made microwave oven has dropped to 1,500 yuan.

According to this price, it is estimated that the ex-factory price of each microwave oven should be between RMB 1,000 and 1,200 yuan, which when converted into Korean won is approximately between 93,000 won and 110,000 won.”

In 1994, China had just ended its dual-track exchange rate system and had a unified standard for converting RMB into U.S. dollars. At that time, the exchange rate of RMB against the U.S. dollar was about 8.7 yuan per U.S. dollar.

In the same year, 1 US dollar can be exchanged for approximately 803 Korean won. If rounded up, 1 RMB can be exchanged for 93 Korean won.

Upon hearing the numbers reported by the secretary, the directors all showed surprised expressions.

Someone even said, "Can the Chinese make microwave ovens so cheap? The cheapest microwave ovens on the Korean market retail for more than 300,000 won. And their prices are only one-third of ours!"

"

A person next to him said: "Labor in China is much cheaper than in Korea. In China, 20,000 won can hire a worker, but in Korea, 20,000 won is not enough for a family dinner!"

"Yes, didn't our LG Group also take a fancy to China's low labor costs, so we decided to set up a factory in China?" Another person said.

"The problem is that if we build a factory in China, we can't achieve this price!" This time it was Director Goo who spoke.

As the future head of LG Group, Director Goo is second only to Chairman Goo in the entire LG Group. So as soon as he spoke, everyone quickly fell silent and waited for Director Goo to lecture.

Director Goo said: "As for the issue of production costs, we hired professionals to conduct evaluations. Assume that we build a factory in China with an annual output of 2 million microwave ovens. With the current labor costs in China, the microwave ovens we produce will be

The final ex-factory price will be around 1,300 yuan, which is equivalent to 120,000 won at the current exchange rate."

"Why is this happening? How can the annual output of 2 million units be higher than the Chinese price?" Someone showed an incredulous expression.

From the perspective of Koreans, since they are setting up factories in China and using Chinese workers, the production costs of both parties should be about the same.

Moreover, in the manufacturing industry, the higher the output, the lower the cost. It would be good for Chinese microwave oven companies to have a production line of 100,000 or 200,000 units. LG Group is planning to build a microwave oven factory with an annual output of 2 million units.

At that time, it was definitely a top-tier company, so its production costs should be lower than those of other Chinese companies.

Koreans don't know that in this microwave oven price war, companies with high costs have been eliminated.

The militarized management of Puppy Electric maximizes production efficiency as much as possible while also significantly reducing production costs.

In addition, all parts of the puppy microwave oven are made in China, while some parts of the LG microwave oven still need to be shipped from South Korea to China, so there will be a gap of at least 20% in production costs between the two parties.

Of course, Koreans would not think that Chinese companies would be better than Korean companies in terms of production management, so someone immediately said: "The Chinese must have cut corners to make microwave ovens so cheap!"

"Yes, with such a cheap price, the products produced must be inferior products!" Someone immediately echoed.

"How can those cheap microwave ovens from China have the quality of those produced by the people of the Republic of Korea!"

It is indeed the most powerful country in the universe, and the directors immediately started bragging.

Listening to everyone's bragging, Director Goo really felt that the Republic of Korea was the best in the world. He smiled triumphantly, and then said: "The Chinese cut corners and produce inferior products. We can't control this, but our LG Group must

Ensure quality!”

"But in this case, we will be completely at a price disadvantage." One of the directors said.

A person next to him also said: "China has a population of one billion. This is a very huge market, but most Chinese people are very poor. What they value most is the price of the product. If our price does not have an advantage, what will happen?"

Losing the Chinese market.”

"What Director Park said makes sense. In recent years, we have surpassed Japanese brands such as Panasonic in the Chinese market because our products are cheaper than Japanese products," another person said.

Historically, LG microwave ovens have been beaten to the ground by Galanz and Midea in the Chinese market. However, at its peak, LG microwave ovens still held a market share of 9%, which was much better than Japanese and German brands.

This is not because the LG brand is more valuable than Panasonic, calendars, etc., nor is it because the quality of LG is better than Panasonic and Hitachi. It is mainly because the Chinese people at that time did not understand this brand. When they saw the two English letters, they thought it was European and American.

Brand. In the subconscious mind of ordinary people, European and American brands are better than Korean brands.

In addition, LG microwaves are priced cheaper than Japanese brands. Consumers who are superstitious about imported products feel that it is more cost-effective to buy European and American brands at a lower price, so they buy LG microwave ovens.

Just listen to Director Gu continue to say: "With the current trend, if Chinese microwave oven companies continue to engage in price wars, it may be difficult for us to retain the Chinese market. So the purpose of convening everyone today is to discuss what would happen if there were no Chinese market

If so, should we continue to build factories in China?"

Someone immediately responded: "Since there is no market, why should we build factories? Isn't that a waste of resources?"

"You can't say that. Even if we don't have a market in China, we can still use China's cheap labor for production and then sell the products to other countries." Another person retorted.

"You are right. China's production costs are much lower than ours in South Korea. Production in China can bring us more benefits, so I think we can continue to invest and build factories in China."

"Then have you considered the investment-return ratio? Building a factory in China can reduce production costs, but don't forget that our LG Group has to invest hundreds of millions of dollars in this project. If there is no Chinese market, we will have to

How many microwave ovens do you need to sell to earn back the US$100 million!"

"The US$100 million is just a cover to get the local government to give us more preferential policies. Our real investment amount is US$50 million."

"With 50 million U.S. dollars, we have to sell a lot of microwave ovens to make it back! If there is no market in China with a population of one billion, it is obviously not cost-effective for us to continue to invest and build factories in China. It is better to increase investment in Southeast Asia."

"But the market in Southeast Asia is not as big as China. All the countries in Southeast Asia combined may not be able to handle the production capacity of 2 million units!"

Everyone was arguing. Some people were in favor of continuing to build factories in China, while others were opposed and believed that the microwave oven factory should be built in Southeast Asian countries.

When everyone was done arguing, Director Goo finally coughed and asked everyone to quiet down.

Then Director Goo said, "What you all said makes sense. I have combined your opinions and come up with a plan. I think this Chinese microwave oven factory still needs to be built, but when will it be built and how big will it be?"

I think we need to re-study the scale, and by the way, discuss it again with the local government!”

Everyone immediately understood that Director Gu meant not only to reduce the scale of investment in China, but also to renegotiate the terms with Jinmen City in order to obtain more preferential policies.

Director Goo continued: "As for increasing investment in Southeast Asia, I think it is feasible. Since we cannot get the Chinese market, we can transfer part of the investment originally in China to Southeast Asia.

Southeast Asia does not have as large a population as China, but their economy has developed very rapidly in recent years, so the market is still very large. There are several countries in Southeast Asia, and their people's incomes exceed those of China.

We can establish microwave oven factories in the Philippines, Indonesia, Malaysia and Thailand respectively. The scale does not need to be too large, with an annual output of 300,000 to 400,000 units, which should be able to meet local demand."

Historically, when Galanz launched a price war, LG's microwave oven factory was almost completed. At that time, the LG Group was in a difficult situation and could only bite the bullet and operate the microwave oven factory in China.

However, now, Li Weidong launched a price war two years in advance. At this time, LG's microwave oven factory had not yet been built.

Faced with the price war that is coming in advance, LG’s Director Goo made a life-threatening decision to invest in Southeast Asia!

…

The leader in charge of investment promotion in Jinmen City is named Zhou Fulai.

It was Zhou Fulai who worked for the Jinmen Foreign Trade Bureau back then.

When Li Weidong was still in the transportation company, he once went to Jinmen Port to pick up a car and needed the signature of the leader of the Foreign Trade Bureau. The person he found at that time was Zhou Fulai.

It happened that Zhou Fulai was receiving a representative from Toyota Motor and needed a Japanese translator who was proficient in automotive terminology, so Li Weidong volunteered and took advantage of Toyota's brake defects to extort a large sum of money.

Later, when Li Weidong participated in the Canton Fair, his booth was cancelled. He also met Zhou Fulai, and then he connected with Wal-Mart and successfully sold car seat cushions.

It can be said that Zhou Fulai is Li Weidong's lucky star, and he lives up to his name.

At this time, Zhou Fulai was sitting at the dining table, with a sincere look on his face to persuade the LG representative to stay.

"Mr. Jin, if LG Group is not satisfied with the conditions we have offered, we can still negotiate. Why do we have to withdraw our capital?" Zhou Fulai's face was full of smiles.

"Director Zhou, our LG Group very much hopes to invest and build a factory in your country, and we are very optimistic about the city of Tianjin, but as a company, we want to make money! Now the price of microwave ovens in your country is very cheap, and we are setting up a factory in China.

It is no longer profitable, so I can only regret to inform you that the headquarters plans to cancel the plan to build the factory." Mr. Jin said.

"Mr. Jin, everything is easy to discuss!" Zhou Fulai continued to persuade him.

For Zhou Fulai, this is a huge investment worth 100 million US dollars, and he must keep this investment in Tianjin at all costs.

Seeing that Zhou Fulai had taken the bait, Mr. Jin couldn't help but feel happy in his heart. However, he had a troubled expression on his face and said, "Director Zhou, since you are so sincere, I will try again with the headquarters, but the original

Conditions are likely to change!"

"I understand, these are all negotiable!" Zhou Fulai quickly agreed.

Zhou Fulai also knew that renegotiation meant more compromises and more preferential policies for LG Group. But for the purpose of attracting investment worth US$100 million, Zhou Fulai could only do this.

After the dinner, Zhou Fulai arranged for someone to take Mr. Jin back to the hotel, and he took the car back home.

At this time, Zhou Fulai's heart was already filled with a depressed feeling.

What was originally a sure-shot investment deal was about to fail. The investment of 100 million US dollars had already grown wings and was about to fly away.

"You have nothing to do. Why lower the price? I almost drove away LG's factory!" Zhou Fulai muttered to himself.

Zhou Fulai couldn't help but feel resentful of Puppy Electric. From his perspective, if Puppy Electric hadn't launched a price war on microwave ovens, perhaps LG Group's first tranche of funds would have been in place.

Zhou Fulai lived in the urban area, and the car quickly took Zhou Fulai to his doorstep.

When Zhou Fulai walked into the house, his wife’s familiar voice sounded:

"I'm back! Oops, have you drank a lot of wine again? I'm going to heat up a glass of milk for you to relieve your hangover."

As his wife spoke, she walked into the kitchen, while Zhou Fulai leaned on the sofa and began to sober up.

A minute later, my wife came over with a cup of hot milk.

Zhou Fulai took the milk, felt the temperature coming from the milk cup, and then asked: "Have you already heated up the Niuran?"

"No, it's hot now!" the wife said.

"Why so fast?" Zhou Fulai asked.

"I just bought a microwave oven during the day to heat milk. It's very convenient!" the wife said.

"Microwave oven? That thing is quite expensive. There is no need to buy that thing. Can't you just use gas to heat milk?" Zhou Fulai said subconsciously.

The wife then said, "Haven't the price of microwave ovens been reduced recently? The microwave I bought only cost one thousand and fifteen dollars, and it's a puppy brand!"

"Did you buy the puppy brand?" Zhou Fulai had the urge to smash the microwave oven.

The wife said proudly, "Of course I buy the Puppy brand, it's a big brand, and it's also cheap!"

Zhou Fulai suddenly felt that the milk in his mouth became bitter.

…

Li Weidong has already received the news that LG Group's investment and establishment of a factory in Tianjin will need to be renegotiated.

"Renegotiate? It seems that LG has not given up yet!" Li Weidong thought to himself.

However, Li Weidong also knows that if we renegotiate now, we will have to talk about the Year of the Monkey and the Horse. It is estimated that before the Asian financial crisis, LG's microwave oven factory in Tianjin would not be built.

This means that before 2003, there was no need to worry about competition from LG's microwave ovens.

Due to the Asian financial crisis, South Korea will not recover until 2003. Before then, South Korea's chaebols will not expand their business.

"This price war has caused a large number of Chinese microwave oven companies to lose their jobs, and foreign brands have also been driven out of the Chinese market. Next, we must seize the market in third- and fourth-tier cities as soon as possible while other companies have not yet recovered!

"

In 1994, the market for microwave ovens was mainly in first- and second-tier cities. Most families in third- and fourth-tier cities could not afford microwave ovens.

However, the largest market for home appliances in China is not in first- and second-tier cities, but in third- and fourth-tier cities and vast rural areas. Therefore, it is necessary for Li Weidong to bring puppy microwave ovens to third- and fourth-tier cities as soon as possible.

While Li Weidong was thinking about his next strategy, the phone suddenly rang.

Li Weidong answered the phone, and Tang Hao's excited voice came from the receiver:

"Mr. Li, we have made the negative ion hair dryer you asked for!"

Hearing the news, Li Weidong couldn't help but feel happy.

After waiting for such a long time, the Home Appliances Research Institute finally released new products!

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