industrial overlord

Chapter 532 Price Reduction
In this group of people in the conference room, no one was younger than Lin Zhenhua in terms of age, nor was Lin Zhenhua in the forefront in terms of rank.But after going through so many things, everyone has regarded Lin Zhenhua as the backbone, and they are willing to listen to his thoughts on the development of the entire industry.Gu Jiahua had already admired Lin Zhenhua's hard work when he was in the Ministry of Petroleum, and now he has become friends with him in the machine tool industry, so he is naturally more willing to let him have more ideas.

"Xiao Lin, you said that we should hurry up and expand the scale. This idea of ​​becoming stronger and bigger was a bit new a few years ago, but now it is an old-fashioned cliché. Which leader does not bring a sentence when he speaks. I think, It is an inevitable requirement to become stronger and bigger, but how to become stronger and bigger is the most critical." Gu Jiahua said to Lin Zhenhua with a smile.

Lin Zhenhua knew that Gu Jiahua was trying to provoke him, but he had originally planned to bring everyone together to discuss the matter on this occasion, so Gu Jiahua had given him a ladder.

"Let me give you an example." Lin Zhenhua said, his eyes swept around the conference room, and finally fell on Bao Guangming.He looked at Bao Guangming with a smile, and asked, "Director Bao, let me inquire, what is the current annual output of the shearing machines produced by Su Duan, and how much is the ex-factory price of one machine?"

Bao Guangming was taken aback for a moment, wondering what Lin Zhenhua meant by this question.Although the data Lin Zhenhua asked was considered a commercial secret in name, everyone was in the same circle, and this kind of secret couldn't be kept from anyone, but people usually don't talk about these things casually.Now, upon hearing Lin Zhenhua's direct question, Bao Guangming replied openly:
"The sales of our shearing machines have been increasing in the past two years. We sold 85 sets last year. The models of each shearing machine are different, and the ex-factory prices are also different. The average level is about 18."

Lin Zhenhua asked again: "If you are asked to lower the price again, how much can you lower?"

Bao Guangming counted with his fingers and said, "The material cost of a shearing machine is probably less than 8 yuan, which cannot be reduced. Others, such as water and electricity costs, man-hour costs, and management costs, can probably be amortized." If the pressure is around 7, the ex-factory price of such a device is probably 15."

"If your annual sales volume is not 85 units, but 200 units, or 400 units, can your ex-factory price be lowered?" Lin Zhenhua continued to ask.

"200 units! That must be no problem. I can make a profit when I press down to 13 units." Bao Guangming replied.

This is the problem of the so-called scale effect. The cost of small batch production and mass production must be different.After the production volume is large, special tooling can be used, and the mold does not need to be changed back and forth. Moreover, after the purchase volume of some accessories increases, there is room for the unit price to decrease.It is normal for the entire production cost to drop by [-] to [-] when all these things are added up.

During the questioning and answering between Lin Zhenhua and Bao Guangming, the bosses of other companies also began to secretly calculate the cost of their products. They found that if the sales volume of their products can be doubled or tripled, then the production cost A drop of more than 10% is a no-brainer.Conversely, if the cost of production falls, and then the ex-factory price falls, then it seems that the sales volume of the product does have room to increase.Could it be that Lin Zhenhua had this idea?
Sure enough, after Lin Zhenhua asked Bao Guangming, he turned his head and said to everyone: "I asked Director Bao about the situation just now, and everyone has heard it. I think the situation of every company is similar. If we can increase the sales volume Expansion can effectively reduce costs, and thus our competitiveness will become stronger. Mr. Gu said just now that the words "strengthen and expand" have been overused by everyone. I think these four words should be Separately speaking, in our machine tool industry, we must first become bigger before we can become stronger."

Gu Jiahua said: "Xiao Lin, what I heard from you is that you suggest that everyone lower the current sales price significantly in order to seize the market, and then use the advantage of scale to reduce costs and make up for the shortfall. Is that right?"

Lin Zhenhua said: "Exactly. I did a rough calculation. The products of most enterprises in our entire machine tool industry still have a lot of room for price reduction. If the cost reduction brought about by the scale effect is included, some of the products can be compressed. For the price increase in the circulation link, it should not be a problem for us to reduce the entire sales price by 30%.”

"30% off!"

As soon as Lin Zhenhua's words came out, everyone in the room was shocked.With so many companies, none of them dare to say that their profits can reach more than 30%. If the sales price of products is reduced by 30% in one go, wouldn't everyone turn from profit to loss directly?Of course, another situation that Lin Zhenhua said is also true. If the price falls, the market share of each company will definitely increase, and the production cost will also decrease at that time.But even so, a 30% price cut is not worth the candle.

For example, if you originally produced 100 machine tools, the profit may be 100 million; now that the price has been reduced by 30%, the sales volume has increased to 200, but the profit may have dropped to only 20.Obviously you can easily earn 100 million, but now you do more work, but you earn less money. What is the plan?
"Mr. Lin, isn't the price reduction you mentioned a little too big?" Meng Zhenya asked timidly, "Customers are actually quite satisfied with our current price, so there is no need for us to lower the price on our own initiative. "

"Yes, yes, Mr. Lin, I also don't think it is necessary to make such a big deal." Bao Guangming echoed, "Our factory has been losing money for the past few years, and finally with the help of Hanhua, it has turned around. The workers in the factory are counting on the factory to earn more and give everyone more bonuses. If the price cut is too large, we may not be able to bear the loss."

This is also for Lin Zhenhua. If it were someone else who proposed a 30% price reduction to everyone, I am afraid that everyone would have left in a hurry.If you are easy to talk, you will think that you are inexperienced, and you will make blind moves; if you are not easy to talk, then you will directly suspect that you came here on purpose to cause trouble for everyone.However, the person in front of him is Lin Zhenhua who has been kind to everyone, and everyone really doesn't like to speak ill to each other.

Before he spoke, Lin Zhenhua expected everyone's reaction like this. He smiled slightly and said: "Everyone, I know that everyone is living a good life now, and I have a little idea of ​​peace and security. But everyone, don't forget, in fact, people around us There are also a group of powerful enemies. Think about it, if machine tool companies in Japan, South Korea, and our Taiwan start to cut prices, what should we do?"

"No way? They don't have much room for price reduction," Meng Zhenya said.

Imported machine tools and domestic machine tools have been fighting for several years, and the cards between them are relatively clear.Imported machine tools have some advantages in terms of quality and performance, but they are disadvantaged in terms of price.The quality of domestic machine tools is unsatisfactory, mainly because of the low price to win the favor of users.

It is not that those foreign machine tool companies have not thought about adopting a low-price strategy, but multinational companies have troubles with multinational companies. There are some hard frames in terms of wage standards and profit margins, and it is not easy to break through.In addition, their high technology did not fall from the sky, but was supported by a large amount of research and development funds, which were allocated to the sales price of machine tools.So Meng Zhenya said that there is not much room for price reduction of imported machine tools, which is justified.

"What about the exchange rate?" Lin Zhenhua asked, "If the yen and Korean won depreciate, will the prices of their machine tools drop?"

Meng Zhenya said: "Boss Lin, you are worrying too much, right? If we have to consider these things, then we should not compete with them at all."

Lin Zhenhua said angrily and funnyly: "Lao Meng, can you care about current affairs? Since the Asian financial crisis, Japan and the Korean won have begun to depreciate. This is not something to worry about. I ask everyone to cut prices by 30%." The preparations also take this into consideration.”

"I heard that our country is also affected by the Asian financial crisis, right? Yen and Korean won have devalued, so should our renminbi also be devalued? At that time, if everyone depreciates together, won't they offset each other?" Bao Guangming said Well, he is a little better than Meng Zhenya. He usually at least reads economic newspapers and knows about the financial crisis. "

Lin Zhenhua shook his head and said: "We can't be lucky. What if the RMB does not depreciate? According to my analysis, the possibility of the RMB not depreciating is relatively high. After all, we are a big country. At this time, the stable currency value is very important."

Lin Zhenhua is not engaged in economics, so he can't say what is the point of stabilizing the currency value. However, in his impression, China promised not to depreciate the value of the renminbi during the Asian financial crisis.When the currencies of Southeast Asian countries depreciated sharply, the renminbi insisted not to depreciate, which enabled Southeast Asian countries to increase their exports to China, thereby gaining trade income to improve their currency conditions. This is China’s extension to the crisis-affected Southeast Asian countries A helping hand.

On the other hand, the economic conditions of Japan and South Korea were still passable at that time, but these two countries devalued their currencies one after another out of the consideration of protecting themselves, and they were obviously unwilling to share the worries of Southeast Asian countries.These two completely different performances have allowed Southeast Asian countries to recognize who is a reliable partner, thus building trust in China.In the future, the renminbi will gradually enter Southeast Asian countries and become a hard currency circulating in the local people, and even become the reserve currency of some countries. This is the result of China's promise not to depreciate.

"For us, the financial crisis is both an opportunity and a challenge. If we deal with it properly, we can do our best to completely defeat the Japanese, Korean and Taiwanese companies that threaten us. But in turn, if we are not prepared, there are also risks. They may be caught off guard and lose a great opportunity." Lin Zhenhua solemnly reminded.

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(End of this chapter)