Chapter 53
Chapter 53
“I mean, we need to decide on the proportion of profits in advance. What we’re concerned about is the sales company taking more profits than the manufacturing factory. I know you won’t deceive us, so I think I can trust you to take care of the sales business for our factory here once we decide on the profits proportion. In return for that, let me give you the exclusive sales rights in Korea,” said Na.
Hearing what he said, Hyunwoo felt that Na had been preparing for a sales operation in Korea. When Hyunwoo introduced Sangyun to Na, Na must have proposed the sales branch idea to Hyunwoo, thinking the right moment had come at last.
In fact, that didn’t matter to Hyunwoo. His goal was to open a sales market for N&C products, not to take away money through sales profits. Also, he thought that the opening of a sales company could give his lethargic father some vigor in life when he took on a role there.
“Okay, then. Please make a draft on the sales operation here and send it to me. After I review it, let me sign it and send it back to you.”
“What do you want to call the new company?”
He came across one without hesitation.
“I think N&C Korea seems to be a good name.”
“I think so too. Actually, I have a draft contract prepared already. I’ve been thinking it over for several days. Let me email it to you a little later. If you like it, we can adjust the details before finalizing it.”
Most of the contract clauses were okay to Hyunwoo.
What he noticed above all was the clause about the division of profits.
In other words, the sales company should not take more profits than the manufacturing company, according to the clause. That clause could also mean that even the sales company could take at least 30% of the profits.
If Hyunwoo negotiated on the unit price well, he could make big profits.
The period of the contract was five years, and it could be extended automatically without mutual objection.
Though he reviewed it closely several times, Hyunwoo liked the contract anyway.
“Okay, let’s go ahead. I’m going to designate my father as the president of this sales company. I’ll talk to him and let you know.”
“That’s a very good idea. Just let me know.”
After the call, Hyunwoo moved to the main bedroom.
Seated in a chair, his father was watching a soap opera with his mother.
“What’s up?”
“I’ve got something to tell you.”
Only then did his mother, who had lost herself in the TV drama, turn her head to him.
“Won’t you go back into business?”
“Business?”
Astonished by his son’s suggestion, he opened his eyes wider, and his mother was startled, too.
Hyunwoo told him about all the details of the sales company he was going to set up.
The more they listened to him, the more they were surprised because he had never told them he had invested in a factory in Vietnam, and the amount of the investment was as much as 300 million won.
His father, who had once started a big business, seemed to feel somewhat burdensome to hear the amount of the investment.
“Don’t you think that it’s too risky? What if the factory goes bankrupt?”
“You don’t have to worry about that. I already went there and confirmed the factory. Since they made a contract with Aurum, it has been stable.”
Hyunwoo explained it in detail.
Jang Duyoung, his father, once owned a big business. Though his business didn’t go well, he had done a lot of research on management for his business.
The more he listened to his son’s explanation, his nervousness began to dissipate. Instead, his trust in the success of son’s business began to grow.
“So, all I have to do is find a local dealer and then introduce him to you, right? You don’t need any investment money, either, right?”
“Yes, daddy. This is just a paperwork business.”
“And you’re taking 30~40% of the profits?”
Hyunwoo nodded his head. His father’s eyes were already sparkling because he felt that there was no risk at all when he took into account all the factors. He liked the fact that Hyunwoo was a stockholder of N&C, above all. There was no chance that he would see his profits ripped off by a fake manufacturing cost.
“What am I supposed to do now? As you know, I can’t move around for the sales.”
“All you have to do is register the business with the authorities.”
“What about sales? Are you going to work as a salesman? Why don’t you hire a smart salesman?”
His father was already more enthusiastic about the new business than his son.
Obviously, he was convinced in its success.
“I don’t think we’re making enough profits to hire a salesman. I’m not going to go out as a salesman in the field, and there will be a few calls, of course.”
“Do you have any particular idea in mind?”
“Well, I’m going to make the best use of the internet.”
“Is it enough?”
“I’d like to give it a try anyway. I think I can make it.”
His father nodded his head.
“Okay, then. I’ll stop by the tax office with your mother tomorrow.”
***
Mr. Na sent Hyunwoo an estimate cost of the castor to be supplied to Myungsung Inc. Sanggyun, an alumnus of Hyunwoo, was an employee with that company.
Hyunwoo emailed it to him and called him, saying,
“I wanted to make a proposal paper to you, but I really can’t do it without knowing the unit price of the Chinese part. Tell your material department about the unit cost and feel out if they can make a joint proposal on this.”
“Got it. Thanks.”
In the meantime, Jang Duyoung, Hyunwoo’s father, was done registering the business with the tax office. Hyunwoo immediately got down to work seriously. First, he opened an internet cafe on the portal site. If he posts a detailed introduction of N&C, the visitors could understand what the company was doing without him going to the trouble of explaining it by himself. On the main screen of the internet cafe, he put out this comment:
Hyunwoo displayed on its main screen a list of the products N&C produced in Vietnam. He also showed the proper sales prices that took into account the manufacturing cost, shipping, and the profit. The sales price was set in proportion to the number of the orders. As N&C had sent him a list of the products and their unit prices, all he had to do was post them on the internet cafe.
In the meantime, Hyunwoo got a call from Sangyun. His voice was not bright.
“Well, our material department doesn’t like it. They say it’s more expensive than the Chinese part.”
“It could be because N&C products focus more on the quality than on the price. By the way, is the price difference big enough? Did you confirm it?”
“Yea, I confirmed it barely. I see the price difference is rather big. The Vietnamese part is 7% more expensive than the Chinese part.”
The moment Hyunwoo heard it, he felt he could persuade Sangyun.
“That’s not expensive at all. It is much cheaper.”
“Cheaper? How come?”
“Looks like your material department doesn’t know about the FTA. The HS code of castors is 8302.20-0000. You have to pay an 8% import duty if you buy castors from China. However, if you import the parts from Vietnam, the import duty is 0% under the FTA between Korea and ASEAN members. In other words, there is already an 8% difference import duties alone.”
“Oh, I didn’t know that.”
“And you have to think about the quality of the products. Chinese parts have a defective rate. If I were the president, I would buy parts that were a little bit more expensive to lower ratio of defectives.”
“You’re right. Can I talk to the material department about this again?”
“Just make your own proposal. Why do you want to share your credit with them when you already found out the unit price of the Chinese part? They also already rejected your proposal anyway.”
“Can you make a draft proposal then? I just don’t know anything about it.”
“Got it. Let me make one and email it to you.”
Hyunwoo immediately drafted a proposal for his friend. He had a relevant proposal form that Aurum had prepared before.
Myungsung Inc. was importing castors worth about $60,000 from China every year. When Hyunwoo calculated the cost saving by taking into account the import unit price and the import duty, he found out that about $6000 would be saved every year.
If he received the samples and tested them, he would realize that the actual cost savings would be much more than the estimate.
Hyunwoon sent the completed draft proposal to Sangyun, and he would have to take care of the rest.
Forgetting about the Myungsung project, Hyuwnoo moved on to the next stage of the N&C Korea project. It was a media promotion campaign. As Aurum had already spread press releases about N&C, Hyunwoo thought the promotion would be enough.
Then, he did research on how many companies were using industrial castors for their products and made promotion pamphlets in the name of N&C Korea before mailing them to the relevant companies. That was all the promotion campaign Hyunwoo did.
After visiting a post office to mail them, Hyunwoo mumbled with a nervous expression,
“Will they ever contact me?”
***
“Manager, I’ve found it.”
“Let me take a look at it.”
At Hong Donggi’s shouting, the purchasing team’s manager, Jung Sangsu, quickly came to him. Hong’s computer monitor was showing an internet cafe called N&C Korea.
Hong pointed one of his fingers at a specific part of the screen.
“It has opened for only two days. That’s why I couldn’t find the site.”
“I see.”
In excitement, Jung looked at the N&C site.
Blue Inc. was a company that made travel bags, and it was where Jung and Hong worked. The company was undergoing financial difficulties because its Chinese counterparts were about to overtake them in terms of quality and price. Also, the company set this year as the first year for innovation in the unit price and quality improvement. If it failed to bring about innovation, it had a plan to move its factory to China.
As a result, the purchasing team had a fire under it, hellbent on surfing the internet sites and sending its staff to the raw material factories everyday to find cheaper and better quality parts.
And then, the article about Aurum drew their attention. Though the furniture and traveller’s bags seemed to be separate products, they had one thing in common, namely, using the castors on the bottom.
Checking the article, they found out that Aurum’s original supplier of castors was in Taiwan, just like Blue. Aurum management tried to check out China and Southeast Asia’s parts, but they could not change the supplier because of their poor quality and the high ratio of defects. In doing so, they happened to find N&C in Vietnam and finally succeeded in achieving the two goals of quality and price.
Manager Jung Sangsu with Blue instructed his staff to find out about N&C, but they could not find it anywhere. So, they were about to contact Aurum about it when they found the internet cafe on the types of castors produced by N&C in Vietnam and the unit prices. The list of castors showed them that there were some similar to the castors that Blue needed.
Jung checked out the unit price and opened his eyes wide.
“Oh, 30 cent per piece! Isn’t that same part that we import from Taiwan at 31 cents per piece?”
“Yes, only 1 cent difference.”
Hong made a disappointing expression. He thought that the unit price would be cheaper because it was produced in Vietnam, but the difference was not that big.
But manager Jung thought differently. Hong didn’t take into account an important factor.
Actually, it was described here and there on the internet cafe website.
And that was the strength of the Vietnamese product.