Under Iwata Satoru's suspicious gaze, Boss Jia completed the first half of the contract with Nintendo.
First of all, Boss Jia's Daqian had signed a contract to produce five million units of the N64 within three months. If they could not complete the task, they would have to pay a penalty of 100 USD for each N64.
Technically, the penalty was reasonable and not too high.
In order to help the Daqian produce, Nintendo had to fully support the Daqian's production. For example, they had to provide a full set of blueprints, parts that only Nintendo had, and the ordering channels for the various parts. They also had to hire twenty first-rate production engineers to assist them.
At the same time, Nintendo had to help the Daqian purchase more than 100 pieces of professional equipment. These equipment could not be bought even if they had the money. They had to ask Nintendo to get them.
All in all, Nintendo had to provide as much help as possible to the Daqian. Boss Jia believed that Nintendo would definitely do it. After all, they were the ones that needed the N64 urgently. They would not disrupt the Daqian's production.
"Iwata-kun, the contract details are very complete. We have no objections. I just don't know how much Iwata is willing to pay!" After discussing the details of the contract, only the most important issue was the price.
Boss Jia asked casually.
"Well …" Iwata Satoru hesitated. Nintendo had its own production factory. The production of the console had always been done by Nintendo.
Although about 60% of the parts were purchased from suppliers, there was no doubt that these consoles were produced by Nintendo themselves.
Therefore, Nintendo had never had the experience of being an OEM. Naturally, they did not know how much to quote.
Therefore, Iwata Satoru started calculating the cost of producing each N64. The cost was 152.75 USD.
The price of the N64 was 199 USD. Therefore, each N64 had a profit of 46 USD. It seemed like a good deal.
However, this was just an illusion. The price that the N64 was sold to the distributors was not this price. After all, the distributors also needed to make money. Therefore, the actual factory price was 169 USD.
On the surface, there seemed to be a profit of 16 USD. However, if the consumption tax, value-added tax, customs duties, and other taxes were included, then the 16 USD profit would be almost completely used up. Nintendo even had to subsidize the price of each machine by nearly 10 USD.
It could be said that every time Nintendo sold a machine, they would lose money.
In fact, Nintendo could have set the price higher, but the price of PS was 199 USD. If Nintendo set a higher price, then it would not be competitive in terms of price.
Therefore, Nintendo could only lower the price to 199 USD to compete with PS.
Of course, there was no need to think that Nintendo was a fool for doing this. This was because the profits in this industry were never in the gaming console. Almost all gaming consoles were sold at a loss since ancient times.
After all, the real profits of the console industry came from the games themselves.
Every time the N64 sold a game, Nintendo would receive a profit of about 10 USD. That meant that as long as they sold a game, they would be able to recoup the cost of the N64.
After that, every additional game sold would be a net profit for Nintendo. Obviously, the players would not buy only one game for each console. Therefore, as long as the console was sold, Nintendo would be able to make a lot of money.
Ahem, back to the topic. When it came to the price, Satoru Iwata began to ponder. With Nintendo's technology and equipment, as well as their extreme cost reduction strategy, the cost of each machine would be close to 153 USD. This price would be difficult for the Daqian to achieve.
Obviously, the Daqian would not accept a losing deal.
Should I give him 160 USD?
Satoru Iwata muttered in his heart. However, if he did that, the cost of the N64 would increase by another 7 USD. If Yamauchi knew about this, he would probably beat him to death.
However, even the purchase price of 160 USD was probably too low. If this order was given to other companies, they would probably offer a price of more than 200 USD. After all, not everyone could reduce the cost to the extreme like Nintendo.
However, if the price was 153 USD, the Daqian would definitely not accept it. Sigh, how should I give them a price?! This is too difficult for me!
Satoru Iwata thought about it for a while. In the end, he decided to quote according to his own production cost. If the Daqian felt that the price was too low, he would negotiate.
"We can buy each console at 152 USD!" Satoru Iwata finally said.
"That's too low!" When Boss Jia heard this, he immediately wailed, "Iwata-kun, you know that Da Qian is producing game consoles for you from scratch. We have to spend money to buy new equipment. Your price of 152 USD is too low. We can't make any money at all. Not only will we lose money, but we will also lose money!"
"As expected, they are not willing …" Satoru Iwata sighed. He also felt that his price was too high. Therefore, he gritted his teeth and risked being scolded by Yamauchi. "155 USD then. This is the highest price I can offer. Otherwise, I really … Sigh, Mr. Jia, to be honest with you, 152 USD is Nintendo's production cost. The price I am offering you is higher than our production cost. We are already being very sincere!"
"I see …" Boss Jia pursed his lips. He seemed to be deep in thought. Finally, he said, "Okay, we can barely accept this price. However, Nintendo must promise us that after the five million USD order is completed, they must continue to order the N64. Moreover, the order cannot be less than half of the total N64 sales."
"Otherwise, the equipment I bought for the production of the N64 would all be left as air!" Boss Jia sighed.
"This …" Satoru Iwata hesitated for a while. Then, he said, "If that's the case, the price will have to be reset to 152 USD. Moreover, the order price will have to be recalculated every six months. After all, the price of electronic components in the international market is constantly falling. The production cost will continue to fall as well. Our purchase price will have to change accordingly.
"Okay, I can promise you that!" Boss Jia thought for a full ten minutes before he finally agreed to Satoru Iwata's request. However, Satoru Iwata still needed to ask Yamauchi for permission.
Satoru Iwata thought that Yamauchi would be furious when he saw that the purchase price was higher than his production cost.
However, he did not expect Yamauchi to agree so calmly. Yamauchi also understood that time was the most important cost. He did not want to waste time, so he agreed so readily.
Therefore, the next day, both parties signed the contract happily. After that, Boss Jia left Nintendo in a hurry. He said that he was going to arrange for the purchase of equipment and raw materials. He also had to negotiate with some suppliers and try to lower the price as much as possible.
However, what Satoru Iwata did not know was that after Boss Jia left Nintendo, he sat in his car and ordered his secretary to send the production plan that he had prepared long ago to all the companies under the Daqian Group.
In the end, these companies would send the finished products to Star Machinery, and Star Machinery would be responsible for the final production and assembly.
With the development of these companies, everyone was crying piteously for food. Many companies had no meat to eat. As their big boss, Boss Jia had to be responsible for finding food for them.
"Chairman, the calculation of our production cost is out!" A few days later, the secretary handed Boss Jia a report that was calculated to five decimal points. Boss Jia lowered his head and glanced at it. The final total production cost was "98.3254 USD".
"It's still too high!" Boss Jia sighed, then shook his head and said, "Tell the companies that they have to find a way to lower the production cost by 10 USD. After all, all the chips are given to everyone by the main company at cost price. They can't play tricks with me. I think there's at least 15 USD in this price. You can't be too greedy. Don't think that you can bully me just because I'm the boss!"
You've already exceeded your reading limit for today. If you want to read more, please log in.
Login
Select text and click 'Report' to let us know about any bad translation.
