Return to 88: Starting from Marrying My Sister-in-law

Produce a little prodigy learning machine.

Lu Yang has calculated that the main expensive thing is the chip. This thing is not available in China, so it has to be imported from a Taiwanese company called United Microelectronics Corporation. The MOS chips produced by this company are cheaper and more practical than those produced by European and American manufacturers, costing only US$25 per chip.

Is it expensive?

Really expensive.

But there is no way. If you don’t buy, you can’t produce on a large scale.

Someone may say it.

Such a big country can't afford to supply chips to a small factory like yours?
That's really it.

There are indeed chip factories in China, but they lack stability and low yield rate, lack large-scale supply capabilities, and...

I won’t talk about three.

The above 2 points are enough.

Lu Yang now has Little Genius and Little Prodigy under his name, and he has also partnered with Duan Yongping on BBK.

This means that I now have three electronics factories under my name.

These three electronics factories all need a large supply of chips. In this case, if the three of them negotiate the price together, they will have some bargaining power.

At that time, not only Hualian Electronics was selected as a chip company, but also several chip companies in Japan, Europe and the United States were all within the scope of consideration. Lu Yang chose Hualian Electronics after careful consideration. He sent several groups of people to negotiate and finally reached an agreement. The three electronics factories all purchased chips at a price of US$21 per chip, indicating that they would advance and retreat together.

There is only one thing.

The other party asked to sign a bet agreement.

Xiaotiancai, Xiaoshengtong and BBK, the three companies together need to produce 1000 million chips per year.

Take enough of this number.

That's the price of a chip at $21 per piece.

If you can’t get enough, then we will still follow the original supply price, it must be exactly that amount, not a penny less.

of course.

There are actually loopholes here.

If Xiaotiancai, Xiaoshengtong and BBK Electronics Factory combined cannot get 1000 million chips, they can discuss privately and make up for the shortfall.

But what if the gap is too big?
A chip that costs US$21 is over 130 yuan when converted into RMB. If there are a few thousand chips missing, it is not a big deal. We can just make up for it by a few hundred thousand and treat it as the extra chips stored in the warehouse.

But what if the three electronics factories combined are still short of hundreds of thousands or even millions of chips?

Then there is no way to make up for it.

It would cost hundreds of millions of chips to get them and then store them in the warehouse.

If sales still fail to exceed 1000 million copies in the second year, the same thing will happen again.

So what should we do?
There is no other way. With this calculation, it is better to buy the chip directly at the price of US$25 per piece.

Do things within your ability; at least this way you won’t overwork yourself.

In return, the profit will be less.

Therefore, the other company is actually very smart. Regardless of whether the three companies can get enough 1000 million chips together, they will not lose money in the end. It is a sure profit.

What might be done?
We can only blame our own lack of capabilities. Currently, there is no way in China to mass-produce chips for electronic devices like this.

We can only hope that this situation of being controlled by others can be changed in the future.

After talking about chips, let’s talk about other things, such as motherboards, capacitors, resistors, plastic casings, keyboard buttons, and power cords. All of these things combined are actually less than 1/3 of the cost of the chip.

Except for chips, the rest of the components can be produced domestically, and once the scale is increased, the price is guaranteed to be incredibly cheap.

After doing some additional calculations and adding labor costs, Lu Yang gave a cost price of between 180 yuan and 185 yuan.

As for why there is an additional cost range of 5 yuan.

First of all, please note that some parts may occasionally have temporary price adjustments.

Let me give you an example.

The plastic particles used to produce the most commonly used keyboard shells and plastic buttons actually fluctuate in price every few weeks.

The second thing to consider is the yield rate of the workshop products.

The workers are highly skilled.

Or if the management can be rigorous enough, then the yield rate will naturally be high. Once the yield rate is high, there will be less waste, and the cost will naturally be reduced a little.

vice versa.

Last year, the first generation of Xiaotiancai learning machine was launched on the market, and Lu Yang priced it at 398 yuan per unit.

A few months later, a "friendly competitor" launched the BBK learning machine, priced at 368 yuan per unit.

It took away a lot of sales from Xiao Tiancai.

So Lu Yang instructed Xiaotiancai to launch the second generation of Xiaotiancai learning machine in a timely manner. It was better than the first generation, with richer content, clearer pictures, and cheaper price, only 368 units were needed.

Yes, both parties reached an agreement.

You finish your performance and then I come on stage, competing with each other offline, spitting at each other and launching various promotional activities.

Unfortunately, because it was only the first year of learning machines, the market was built up little by little from a desert, and it took time for the people to accept it. Even though both parties advertised on CCTV and major provincial TV stations, the sales of learning machines last year did not exceed 100 million units when added up for the whole year.

Among them, Xiaotiancai took the lead, with annual sales of 67 units, which can be regarded as reaping the benefits. BBK, with annual sales of 31 units, can only be regarded as drinking the soup.

Someone might say it.

Is this called drinking soup?
Don’t you see how much profit you make from each unit? It’s almost 200 yuan per unit. Calculate it for 31 units, 200×31, that would be over 6000 million, right?
OMG!

He must have gotten rich, right?
Actually, not really.

Because the biggest expense is missed here, which is the investment cost of both online and offline promotion.

To sum it up in one sentence.

Advertising is free?

Lu Yang had done some calculations and had also received the annual report sent by BBK to its major shareholders.

Last year, Xiao Tiancai spent more than 5000 million on advertising and promotion.

BBK's profit was a little less, but it also exceeded 3000 million, which means that if the net profit of 6000 million is reduced by half, there will still be about 3000 million left. Then part of the 3000 million will be used to give bonuses to employees with outstanding performance as encouragement, otherwise no one will be willing to work actively in the coming year. And of course, the management team cannot be missing. Since the company has made money, the management team must also receive a year-end bonus.

The rest belongs to the shareholders.

Lu Yang's shares in BBK are not high. Although he is the second largest individual shareholder, his share is actually just 28%.

In Duan Yongping's words, a sum of money will have to be left over for expenses in the first quarter of next year, so all the profits cannot be distributed just like that.

Of course, in order to express his gratitude to all the major shareholders for their strong support, and for respecting and trusting him, now that this investment has made money and everyone is looking forward to it, he can't be a stingy person and not spend a penny.

So, we still have to give points, but not all of them, just 60%.

Let's say that.

Lu Yang, the second largest individual shareholder of BBK, received less than 500 million in dividends last year.

Of course, BBK still has a promising future, and this year's dividends will definitely be higher than last year's.

But this was just a casual move made by Lu Yang.

The Xiaotiancai Electronics Factory, which truly belongs to Lu Yang himself, brought Lu Yang a net profit of nearly 7000 million last year.

Note that this is the net profit after deducting all costs including production costs, promotion costs, labor costs, etc.

The last step is to pay taxes. After paying taxes, all the remaining money belongs to Lu Yang himself.

Oh, by the way, I forgot to mention that Xiao Tiancai Company is located in the Economic Development Zone of Baoqing City. It was agreed at the beginning that if Lu Yang returns to invest, he will be exempt from taxes for three years.

In other words, the 7000 million can be directly deposited into Lu Yang’s personal account.

This year has passed, and if the market had continued to be as hot as last year, with further sales expansion, and with the addition of a new "Little Prodigy" learning machine launched this year, it is conservatively estimated that Lu Yang's annual revenue from learning machines would not be less than 200 million.

Unfortunately, after the new year, before the Little Prodigy learning machine was launched on the market, the Little Overlord that had been forgotten in the corner finally made its debut.

Launched its own new generation of Subor game learning machine.

Relying on the fact that it is a well-established and well-known domestic machine manufacturer.

After several years of development, it has already gained a group of loyal fans. As soon as it was launched on the market, it directly competed with Xiaotiancai and BBK.

In the words of Mr. Chen, he is fighting against traitors, and traitors will never die a good death.

You are so arrogant!

Of course, they have the confidence to speak so arrogantly. Even in last year, the most difficult year for them, BBK's annual revenue exceeded 200 million yuan, which is basically on par with Lu Yang's Little Talent Electronics Factory.

In addition, he had made a lot of money in the past few years, so he was very confident and he went straight to the battle with a bayonet.

You sell it for 398, you sell it for 368, then I’ll just sell it for 328.

That’s right, the first generation of Subor Game Learning Machine launched by Subor after the New Year this year is priced like this, only 328 yuan per unit.

The same product is 40 yuan less than that of other competitors.

In response.

Lu Yang had no choice but to accept the challenge.

So with just a little effort, at the same time, on the same day, Xiaotiancai and BBK announced simultaneously that the market price of their products would be reduced by 50 yuan per unit.

That’s right, the price has now reached 308 yuan per unit.

Mr. Chen from Xiaobawang took a look and said, "Damn it, you guys are in the same group. I don't want to play with you anymore. Okay, if you all sell for 308, then I will also sell for 308."

The rumor was also spread secretly.

Don't lower the prices. The market is so big and there's no need to worry about sales. We are all here to make money, so don't hurt the relationship.

This behavior is tantamount to surrender.

Of course, making money is not a bad thing.

During this period, Lu Yang communicated with Duan Yongping several times. Duan Yongping said on the phone that since his old employer had already given in, it would be inappropriate for him to continue to fight against the old employer, so why not just leave it at that for now?
Considering that the market is not yet saturated, the products produced have no trouble selling. Continuing to lower the price at this time may not necessarily do anything to the opponent, but will reduce one's own profit. In this case, then okay, let's call a truce for the time being.

This incident was even reported in newspapers at the time, and many commentators wrote articles in the newspapers specifically commenting on this three-way price war for learning machines.

He always mentioned the settlement of the century, which was a victory for the market, and praised Mr. Chen of Xiaobawang for being able to put aside prejudices and showing the spirit of a big brother in the business world.

Look at this flattery, I wonder if he got paid for it?
only……

No one expected it.

The market was changing rapidly. Less than a month had passed when Lu Yang secretly made a move.

First, CCTV’s 7:30 prime time slot suddenly launched an advertisement for the Little Prodigy Learning Machine endorsed by the Four Heavenly Kings.

Soon after, the movie "Super School Overlord" starring Stephen Chow and the Four Heavenly Kings was released simultaneously in Hong Kong and the Mainland (pirated), and the advertisements were directly integrated into the movie.

It doesn't stop there.

Lu Yang had one last shot. He used the offline channels of Xiao Tiancai, a company from the same headquarters, to directly market the first generation of Xiao Shentong learning machines across the country.

At the same time, it was announced that the price would not be 398, 368, or 328, but only 298.

At the same time, it was announced that when you buy a learning machine, in addition to the matching game controller, you will also receive a free learning card, a Wubi input method tutorial, an original smart pinyin input method tutorial, and a series of other learning materials that parents can use to help their children succeed.

A series of combined punches directly stunned the competitors.

30 units were sold that month, and the number rose to 45 units in the second month. After three months, direct sales exceeded 110 million units, which is amazing. If this continues, it can be predicted that the annual sales will not be less than 450 million units.

How much money can this earn? How many jobs can it provide to the local area? How much tax revenue can it provide? How much GDP can it contribute?

Let me put it this way, ever since the little prodigy became famous, Lu Yang has received at least more than 10 waves of inspections from district and city leaders over the past three months.

Of course, there were friendly competitors who wanted to stop us during this period.

For example, Mr. Chen, the boss of Little Overlord, started to speak out in front of the media right from the beginning.

The behavior of Xiao Shentong Company is already destroying the ecology of the learning machine market, which will result in no one making money and is a case of bad money driving out good money. We call on all companies in the industry to come together to sanction this extremely bad behavior.

Unfortunately, this was pure nonsense and no one paid any attention to him.

What an old fox.

Soon he uncovered the truth. He peeled off the masks behind the little prodigy layer by layer. When he learned that the real major shareholder behind the company and the boss of the little genius were actually the same person, and even BBK had shares in this person, he immediately spat out a mouthful of blood.

Damn it, it turns out I’m the one who’s surrounded. I don’t accept it.

Mr. Chen, who felt fooled, immediately held a press conference and announced to the public that in response to the unfair competition from competitors, Subor learning machines would adjust their external retail prices in the near future.

In the next month, from 298 to 288, to 278, 268, and 258.

It's already obvious that it's a business war.

Until it dropped to 258, no one could lower the price anymore. Any further reduction would mean losing money.

But in order to defeat the opponent, everyone is still gritting their teeth. 258 is still not the limit, 248, 238, 228...

Lu Yang is in a better situation, as he has three companies under his name that trade together, giving him a certain bargaining power. The chips he gets are four US dollars cheaper each, which when converted into RMB, can bring him an extra profit of nearly 27 RMB per unit.

But obviously Xiaobawang was not so lucky. He could not get the bargaining power, and with the extra cost of 27 yuan, when a price war broke out, the first one to fail was his company.

Half a year later, it quietly launched the third generation of Subor learning machine, optimizing it in all aspects, including the price, and without hesitation raised the price back to 258.

This way at least you can recover some blood.

no doubt.

This wave of actions is equivalent to announcing the failure of the price war.

At this point, the game learning machine market has returned to being divided into three parts: Little Tiancai, Little Prodigy, and BBK. The original old-fashioned red and white machine manufacturer, Subor, was the first to be eliminated.

They can only eat the scraps left after the market is divided among these three companies.

That day, Lu Yang suddenly received a call from Xiao Jun.

On the phone, the guy shouted for help!
"Help me, buddy. You are the only one who can save me this time."

Lu Yang raised his wrist and looked at the time. It was exactly June 1993, 6.

(End of this chapter)