Sail across the sea

Chapter 337 Talk to Them

"Dai Lin, have you ever learned about the production costs of the Chinese?"

Robison continued to ask questions to Dalin.

Dai Lin shook his head: "The other party did not provide this information. ... I mean, our sales staff is not suitable to ask the other party about this aspect."

"Yeah." Robison responded, then turned to the technical director Markman and asked, "Markman, according to your estimate, how low can the Chinese keep costs when using the two-step fermentation method?"

Markman adjusted his gold-rimmed glasses and said hesitantly, "I'm not sure about the level of Chinese equipment. If we switch to the two-step fermentation method at Lowe's, we can reduce production costs by about 15%, which means it will reach $6 per kilogram. If it's Chinese equipment, I think... it should be higher."

Ellingwood said: "If that's the case, then I estimate that the Chinese production cost will not be less than $7 per kilogram, and this is still taking into account the factor of their relatively low labor costs. We have learned that China's chemical equipment level is more than 20 years behind ours, and the loss of raw materials and energy consumption are much higher than ours. In addition, their product quality will be much lower than ours, and they will not be competitive in the market at all."

Dai Lin corrected him: "According to the information we have received, the quality of the vitamin C samples submitted by the Chinese to the Americans has basically reached the level of Lowe's."

"If that's the case, then their production costs should be even higher, and it wouldn't be surprising to reach $7.5," Ellingwood asserted.

He said this, but it was not a free judgment. In recent years, China and the West have had a lot of technical cooperation. Ellingwood occasionally communicated with some colleagues who had been to China, and these colleagues conveyed this information to him. Chinese chemical companies have backward equipment, lack of management experience, and their production costs are generally higher than those of Western companies.

"If that's the case, then wouldn't they be losing money if they sell it in the U.S. market at $8?" Robison said with a frown.

What we discussed earlier was production costs. Product pricing cannot just be calculated based on production costs, but also includes financial costs, management costs, marketing costs, etc. If the production costs of Chinese companies alone reach $7.5, plus other costs, it will definitely exceed $8. Selling at $8 is a complete loss-making business.

"This is easy to understand." Ellinwood began to show off his knowledge again, "The Chinese government is very short of hard currency, so it will subsidize products that can be exported in exchange for hard currency.

"The raw material for producing vitamin C is corn, which China can provide itself, and the export of vitamin C is exchanged for US dollars, which is the hard currency needed by the Chinese government. So even if it means losing money, they are willing to do it."

"The Chinese are really crazy because of poverty!" Robison muttered.

"I think we could probably sue the Chinese in court for dumping," Ellingwood suggested.

Dai Lin questioned: "What evidence do we have? Besides, they sell their products to the United States. Are we going to sue them in the United States?"

Robison hesitated for a moment, then shook his head and said, "This plan is not feasible. It will damage the reputation of Lowe's."

Isn't it true? The mighty Lloyd's Group was dismantled by a Chinese company that is as small as an ant, and had to seek legal support to suppress its opponent. It is really too embarrassing to tell others about it.

As for the cost of Chinese production of vitamin C, everyone is just guessing, there is no real evidence. The Chinese have adopted a new process, which can effectively reduce production costs, which Lowe's cannot deny.

The most important thing is that Lowe's knew in advance that this process could reduce production costs, but instead of using it, it spent money to buy out the technology license, preventing other peers from using it. Once this situation spread, it would be difficult for Lowe's to explain to customers.

"Dai Lin, contact Ogel immediately and ask him to go to China again to learn about the situation of the vitamin factory." Robison ordered. "And then?" Dai Lin asked.

"Let Ogle talk to them."

"What to talk about?"

"Of course, ask them to stop this stupid dumping. Let Ogle tell them that this is not good for everyone."

"But……"

Dai Lin didn't know what to say.

Boss, Ellinwood has just said that the Chinese are after foreign exchange, and they don't care even if they lose money. Moreover, they have adopted new technology, so it may be profitable to sell at $8. If you send someone to tell them that they can't sell it this way, will they listen to you?
Ellinwood said: "Mr. Robison, I think that in order to make the other party give up this suicidal dumping behavior, we may be able to agree to some conditions, so that the other party will be more receptive."

"What conditions do you think the other party will put forward?" Robison asked.

Ellinwood spread his hands and said, "I don't know either. I have never met a Chinese person in my life. Who knows what the Chinese are thinking?"

Nonsense, I don’t know either!

Robison muttered to himself.

He knew that it would cost him some price to make his competitors give up their low-price market grabbing. If his negotiating opponent was Ray's or Imperial Pharmaceuticals, he would definitely think of some terms for the deal, such as promising to maintain a tacit agreement on prices in other markets or exchanging some patented technologies.

The reason why oligopoly can be formed is that the oligarchs in a monopoly position will compromise with each other and maintain a price alliance in order to harvest leeks together.

But Canghua Vitamin Factory is a Chinese company. Not only do they not understand the Chinese, but the entire Lloyd's Group lacks experience in dealing with the Chinese.

Even as a pharmaceutical market, China is insignificant to Lowe's. The Chinese can produce cheap drugs themselves, so there is no need to purchase them from Lowe's. The Chinese cannot afford expensive drugs.

In such an almost invisible country, a vitamin factory suddenly appeared and snatched away Lowe's business, forcing Lowe's to negotiate with them. How did Robison know how to negotiate?
This was the reason why he was vague when he gave Dai Lin the order just now.

He originally wanted to push the problem to Dai Lin, but Dai Lin didn't want to take the blame and insisted on forcing him to explain himself clearly. He really couldn't want a subordinate like him.

Of course, Robison couldn't say it out loud. He pretended to be silent for a moment and said to Dai Lin:

"How about this, you ask Ogier to go to China first, contact the other party, listen to what they want, and then we will make a decision."

(End of this chapter)