ebookpocket.com Chapter 178 Market Expansion and Distribution Establishment
Chapter 178 Market Expansion and Distribution Establishment
In the early spring of 1984, the Yangtze River, having shed its winter coat, overflowed its banks with a warm, moist air. At the construction site of the new factory of the Chenqing Hardware Manufacturing Joint Venture, the roar of mixers and the sparks of steel welding intertwined to create the prelude to spring. In the factory manager's office, Lin Chen frowned in deep thought, staring at a yellowed map of the country. Beside the export order reports spread out on the table, the ink on Boss Chen's fax was still wet—due to the political turmoil in Southeast Asia, order volume would be reduced by 40% starting in March, the second reduction in three months.
"The risk of relying on a single customer has finally materialized." Su Qing walked in carrying two cups of hot tea, water droplets on the cups spreading out in tiny circles on the reports. "Last month's financial statements showed that foreign trade revenue accounted for as much as 70%. If Mr. Chen has another problem, our newly launched production line will have to shut down." She placed a crumpled piece of paper in front of Lin Chen. It was an inquiry from a Guangzhou distributor last week, who was willing to purchase in bulk at a price slightly lower than the foreign trade price, but the workshop director, who was eager to secure foreign trade orders, declined the offer.
Lin Chen pointed to Guangzhou and Shanghai on the map, where two conspicuous circles were drawn in red. "In the early days of the People's Republic, hardware factories relied on the 'front shop, back factory' distribution model to establish themselves. We can't put all our eggs in one basket—foreign trade. The domestic market is so big; we have to actively reach out." He picked up the inquiry letter; his handwriting, though messy, conveyed urgency. "Guangzhou is the hardware distribution center of South China, and Shanghai radiates to the industrial belt of East China. We must secure these two locations."
Su Qing had just put down her teacup when Lin Chen pulled her to the map. "Look," he said, "agriculture is developed in South China, agricultural machinery parts wear out quickly, and farmers value cost-effectiveness more. East China has a large number of state-owned machinery factories that have high precision requirements and are willing to pay for high-quality products. We need to adopt a differentiation strategy; we can't apply the same standard to everyone." He pulled out a thick market research notebook from his drawer. It contained data collected over the past six months from sending workers to visit more than ten provinces and cities. Each page recorded the hardware needs, price tolerance, and even preferred packaging styles in different regions.
Three days later, at the factory-wide meeting, the proposal to "explore the domestic market and establish distribution offices in the north and south" sparked controversy. Old Chen, who was in charge of foreign trade orders, was the first to stand up and object: "Factory Manager Lin, although foreign trade orders have shrunk, the payment is fast and the profits are stable. Domestic distributors are aggressive in pressing for lower prices and are also delaying payments. Why should we take this risk?" Whispers rippled through the workshop. Many veteran employees were used to producing according to foreign trade standards and were full of resistance to the "chaotic demands" of the domestic market.
Su Qing stepped to the front and unfolded two starkly contrasting cost accounting tables: "As you can see, although export orders have higher profit margins, transportation and tariffs combined account for 35% of the costs; domestic transportation costs are only 12%, so even if the unit price is 10% lower, the net profit is actually higher. Moreover, after Boss Chen reduced his orders, the new production line had a 40% idle rate, and developing the domestic market is perfect for absorbing the capacity." She paused, then held up a quotation from Shanghai No. 1 Machine Tool Factory, "This is an order from a key domestic machinery factory, with the same precision requirements as export orders, but the unit price is only 5% lower, and it requires a 30% prepayment."
The room quieted down, and Lin Chen seized the opportunity to announce the detailed plan: Su Qing would lead a team south to Guangzhou to oversee the South China distribution office; he himself would go to Shanghai to develop the East China market; Liu Guangtian would stay at the factory to adjust production specifications according to the needs of both regions, dividing them into two main series: "economy" and "precision." "I know everyone is worried about the risks," Lin Chen's gaze swept across the room, "but the spring breeze of reform and opening up is blowing across the country, and domestic industry is recovering. If we don't seize the market now, it will be difficult for us to enter once others have established themselves!"
A week later, Su Qing boarded a train heading south with two key business personnel. Before leaving, Lin Chen packed a set of improved wear-resistance testing equipment into her suitcase: "Farmers in South China believe in 'seeing is believing' the most. Take this with you and test it on-site to show them." Su Qing nodded. The suitcase also contained a "Comparison Table of Agricultural Machinery Parts Wear and Tear" that Lin Chen had stayed up all night to draw. It used simple language to compare the lifespan of Chen Qing's products with that of ordinary parts—this was specially prepared for illiterate farmers.
The South China Hardware Wholesale Market in Guangzhou was far more chaotic than imagined. As soon as they entered, vendors swarmed them, trying to sell inferior bearings at prices lower than Chen Qing's cost. Su Qing led her group to Mr. Wang, the distributor who had previously sent an inquiry, but he rolled his eyes and waved his hand: "Your goods are good, but too expensive. Farmers only look at the price when buying parts; who cares how long they'll last?" He pointed to the mountain of inferior plowshares piled up at the next stall, "Look at them, three for ten yuan, they can sell hundreds a day."
Undeterred, Su Qing set up a testing platform at the market entrance that very afternoon. She simultaneously mounted Chen Qing's economical plowshare and inferior products from the market on the testing rack to simulate the friction intensity during tilling. In less than half an hour, the inferior plowshare showed obvious curling, while Chen Qing's product remained intact. Farmers gradually gathered around, some questioning, "Is there something fishy about your equipment?" Su Qing immediately picked up Chen Qing's plowshare and handed it to an elderly farmer: "Sir, take this and try it in the field. If it breaks within three days, I'll give you a full refund plus shipping."
The turning point came on the third day. The old farmer who had tested the plow came with a dozen or so villagers, excitedly holding up the intact plow and saying, "This thing is really durable! My old plows would wear out two on my hard soil, but this one is still like new after three days!" Shopkeeper Wang, who had followed behind, immediately changed his attitude upon seeing the farmers surrounding the shop: "Manager Su, I was blind to your worth before. Shall we talk about becoming agents?"
Su Qing made an unexpected request: "Boss Wang, I'm willing to become an agent, but you have to agree to two conditions. First, all Chenqing products must be clearly priced, and you can't arbitrarily raise prices; second, you must set up after-sales service points, and if farmers have any problems with their products, you must respond within 48 hours." She took out a draft agency agreement, "We'll give you the most favorable agency price, but you also have to guarantee our brand reputation." Boss Wang hesitated for a moment, but seeing more and more farmers outside the door, he finally signed the agreement.
Meanwhile, Lin Chen in Shanghai also encountered different challenges. Li, the purchasing manager of Shanghai No. 1 Machine Tool Factory, held Chen Qing's precision bearings and repeatedly compared them to the test report: "Your precision does meet the standards, but state-owned factories have regulations requiring at least three years of domestic supply records. You've just entered the domestic market; we can't take the risk." Lin Chen was prepared. He presented a case study from six months ago, showing them equipment improvements he had made for Zhangcheng Agricultural Implements Factory, along with performance enhancement certificates from the factory: "Manager Li, although we haven't done large-scale supply of machine tool bearings before, our forging technology has been practically proven. You can try a small batch first. We promise a two-year warranty on all products, twice the industry standard."
To allay Li's concerns, Lin Chen and his technicians spent a full week in the machine tool factory's workshop. Based on the machine tool's operating parameters, they made subtle adjustments to the bearing's lubrication system and demonstrated installation and maintenance techniques on-site. After the trial bearing ran continuously for a month without any problems, Li finally relented: "Director Lin, I'll apply to the factory for a one-quarter trial order. If you perform well, we'll sign an annual contract."
Just as the market in both the north and south was beginning to show promise, an urgent message came from the factory: Liu Guangtian discovered while adjusting the production line that producing both economy and precision products required replacing some molds, resulting in production costs being 5% higher than expected. When Lin Chen received the call, he was negotiating cooperation with several machinery factories in Shanghai. He immediately told Su Qing to return to Zhangcheng first, while he stayed in Shanghai to continue pushing forward the negotiations.
When Su Qing returned to the factory, Liu Guangtian was frowning at the mold drawings. "Replacing the mold is not only time-consuming, but also increases wear and tear. It would be great if we could design an adjustable mold." Liu Guangtian's words enlightened Su Qing. She remembered Lin Chen's idea for improving the grinding machine and immediately called a meeting with the technical team: "Can we add adjustable positioning pins to the mold? We can adjust them according to the size of different products, so we don't have to replace the whole set."
The technical team worked through the night and designed an adjustable mold in three days. During trial production, the time to change product specifications was reduced from two hours to fifteen minutes, and the loss rate dropped from 5% to 1.2%. Su Qing sent the revised cost accounting sheet to Lin Chen. Looking at the reduced cost data on the report, Lin Chen immediately offered a more competitive price to the machinery factories in Shanghai. The three machinery factories that had been hesitant signed trial orders on the spot.
Guangzhou in May was already unbearably hot, and Su Qing's South China distribution center officially opened for business. On opening day, Boss Wang brought more than twenty township distributors to sign contracts. The most eye-catching feature was the "Farmer Feedback Form" hanging on the wall, densely filled with user reviews from farmers in different townships. A distributor from Zhanjiang said, "Now farmers all recognize the Chenqing brand, saying, 'Buying Chenqing parts only costs two yuan more, but they last for six months—it's worth it!'"
Good news also came from the Shanghai distribution center. After a month of trial use, Shanghai No. 1 Machine Tool Factory not only signed an annual supply contract but also recommended Chenqing to several surrounding machinery factories. Lin Chen set up a "Technical Service Center" sign at the Shanghai distribution center, specializing in providing equipment debugging and maintenance services for customers, which was still a novelty in the hardware industry at the time. One distributor exclaimed, "Chenqing not only sells products but also provides services. From now on, we'll work with Chenqing!"
At the end of June, Lin Chen and Su Qing met in Zhangcheng, bringing back the first quarterly report from the North and South distribution centers. The report showed that domestic sales had surged from 30% to 52%, with economy products from South China and precision products from East China each accounting for half of the total. Even more encouraging was that, due to the shorter domestic transportation cycle, payments were collected almost a month faster than in foreign trade, significantly improving the factory's cash flow efficiency.
At the factory-wide celebration, Old Chen raised his glass to Su Qing: "Manager Su, I was short-sighted before; I never imagined the domestic market had so much potential. From now on, I'll oversee the foreign trade orders, and you can take care of the logistical support for the domestic market!" The workers in the workshop were also elated. Liu Guangtian, holding the new production plan, said, "Both production lines are now running at full capacity. Our 'Chenqing Precision' brand has made a name for itself in both the north and south markets!"
Standing on the stage, Lin Chen looked at the jubilant crowd below and recalled the difficult days in the courtyard house after his rebirth, and the days and nights he spent persevering in the dilapidated factory during the early stages of his business. He raised his glass and said in a loud voice, "Fellow workers, expanding into the domestic market is only the first step! Next, we will set up distribution centers in Wuhan and Chengdu, so that Chenqing's products can reach all parts of the country!"
After the celebration party, Lin Chen and Su Qing walked side by side under the streetlights in the factory area. The streetlights cast long shadows of the two. On the construction site of the new factory, workers were installing new production line equipment overnight. "Do you think we'll have our own R&D center someday?" Su Qing gazed at the distant starry sky, her eyes full of anticipation. Lin Chen took her hand and pointed to the light shining in the direction of the office: "Yes, we will. Once our distribution network covers the whole country, the next step is to build an R&D center, so that our technology can truly lead the nation!"
Late at night in his office, Lin Chen circled Wuhan and Chengdu on a national map, marking the planned dates for setting up distribution offices next to them. Suddenly, the phone on his desk rang. It was Mr. Wang from Guangzhou, excitedly saying, "Director Lin, farmers in Southeast Asia have heard our products are good and are asking overseas Chinese to come and buy them! Why don't we also sell our domestic economy products to Southeast Asia through foreign trade channels?"
Lin Chen's eyes lit up. He picked up a pen and drew a large circle on the map, connecting the domestic distribution centers and the foreign trade ports. Moonlight streamed through the window, illuminating the four characters "Chenqing Hardware," and also illuminating the new journey of this small factory, which started in Zhangcheng, as it expanded nationwide and towards the world. He knew that the road to market expansion would not be smooth sailing, but as long as they adhered to their original aspirations of relying on technology and operating with integrity, and as long as these like-minded partners stayed together, there was no destination they could not reach.