Story of a Big Player from Gangnam

Gun-Ho couldn’t send the second investment funds to Zhongfang (Chinese side) now. If he did, they would let him have a few additional bus lines, but he would lose his bargaining power. The Chinese partners would let him make money about the same amount as he would have earned from a bank interest if he saved that fund with a bank, but he wouldn’t be able to expect to make a fortune. If the Chinese partners wouldn’t even guarantee Gun-Ho making a minimum amount of return on his investment, it could cause some sort of diplomatic problems between the two countries. Also, they would make themselves look bad in the international business community.

Gun-Ho said to Jae-Sik Moon, “I understand the Chinese partners’ position in this matter in insisting that they wouldn’t transfer the land ownership to the joint venture’s name. They are worried that if they let the joint venture own the land, we might take out a loan from a bank using the land as collateral.”

“You think so?”

“If we obtain our investment money from a Chinese bank, it would be pointless having a Korean company as their business partner.”

“What if we keep firmly holding our position not sending the investment money without the land ownership transfer?”

“They will keep trying for a while, but eventually, they will get their necessary funds by taking out a loan from a bank themselves. They can do that because the land is probably still owned by Antang City’s transportation company.”

“If that’s true, they can take out a loan now. Why don’t they do that when they keep saying that they need money?”

“A piece of land that is permitted to be used for a terminal in China cannot be sold to an individual, unlike Korea. That type of land is supposed to serve public interest, so it can’t be transferred freely. So, a bank is not willing to lend money using that sort of land if the land is vacant.”

“Then what do they have to do?”

“If a terminal building is completed up to the third or fourth floor, then they are in business. It would be possible for them to take out a loan using the incomplete building, based on the land price and the construction expenses that they spent so far. That’s because a bank knows that the building will be completed soon, and once it is fully constructed, it will generate income in no time.”

“I see.”

“That’s why I asked the question about taking out a loan using an incomplete building, to the branch manager of the Industrial and Commercial Bank of China last time we met with him.”

“That means that the Chinese partners can take out a loan and finish the terminal building construction without our funds, huh? What if they try to exclude us from running the terminal business?”

“We have invested 3 million dollars so far when we sent our first investment funds. If they ask us to take our hands off the terminal business, they will have to refund that 3 million dollars to us. But, they don’t have that kind of money, do they?”

“Yeah. They used it all in constructing the terminal building.”

“Therefore, even though they could successfully cut off our partnership in the terminal business, they would let us continue our intercity bus service business. However, if they get any additional bus routes from now on, they won’t give it to us, but Antang City’s transportation company will take them all.”

“By refusing to give them the second investment funds, are we breaching the joint venture contract?”

“We have a reasonable explanation for it. It’s not just us who are at fault, but the Chinese partners broke their promise when they refused to transfer the ownership of the land to the joint venture’s name. Our Chinese partners probably realized by now that they wouldn’t be able to get more funds from us. They will probably handle the terminal construction on their own by taking out a loan from a bank, and let us keep the intercity bus business with a few bus routes until the duration of the joint venture expires which is 20 years.”

“I think I understand the situation now.”

“With the small bus business, they will allow us to recover our initial investment funds—3 billion won—and an additional amount about the same as the bank interest that we would have earned if we put the same amount in a bank. It will be more than enough to pay for your salary for 20 years, so you don’t have to worry about your job. We won’t hit a jackpot, but we will make money.”

“Hmm.”

“That’s why Professor Jien Wang at Zhejiang University once said that a terminal project won’t let you make a fortune, but it would certainly be a Cash Cow business where you can have a steady flow of income as if milking a cow.”

“Scholars like Professor Jien Wang seem to accurately apprehend the business substance even though they have never run a business before.”

“They do, of course. That’s why they are often invited to give a lecture for an MBA program and also participate in various programs led by the government for economic policies and financial advice.”

“That’s amazing.”

“By the way, how is GH Food’s business doing?”

“I expected to hit a jackpot once I open a KFC and a Korean style deep-fried chicken restaurant that also serves beer. But, they seem to be Cash Cow businesses as well.”

“That’s a success then.”

“We are making in the range of 30,000 Yuan and 35,000 Yuan per day. It generates less than 200 million won on a monthly basis.”

“Don’t get greedy. If we make that much with a restaurant business, then it’s a success. How about the e-commerce business?”

“After we pay my brother-in-law’s wage, we make about 6 million won per month.”

“I see.”

“We pay 10,000 Yuan to my wife’s brother for his monthly wage, and we pay 2 million won to the person in Korea who is handling the shipping.”

“10,000 Yuan sounds too small.”

“My wife takes 15,000 Yuan for her monthly pay; we can’t pay him with more than what my wife gets paid.”

“Did you say that your brother-in-law is living with you in the condo in Huaxi Huayuan?”

“He was, in the beginning, but he moved out to a small two-bedroom apartment. He said he feels more comfortable living in a separate place.”

“The company should pay for his apartment rent.”

“Will it be okay? I’m not sure if we can do that.”

“Let’s talk more later about what we are going to do with your brother-in-law.”

“We hired a local person for accounting work. My wife is not very familiar with the tax system in China, so we thought it would be better to have a local person who is, in the office.”

“Good.”

After getting off the phone with Jae-Sik Moon, Gun-Ho started reading a newspaper. After a while, he received a call from President Song who had visited H Group per their request earlier.

“I just came back after meeting with the people at H Group’s purchasing department.”

“How did it go?”

“They found some bubbles on the surface of our products.”

“Bubbles? Does it mean that our products are defective?”

“They are not visible to the naked eye. You need a magnifier or some other devices to see them. Usually, that’s not even an issue at all, but they are being very particular.”

“Did we figure out what caused the bubbles?”

“According to our chief research officer who was in the meeting with me, the bubbles are formed because of the temperature. If we lower the temperature a little bit, the bubbles won’t be formed, but instead, it will raise the product’s hardness. We told them about it.”

“What did they say?”

“They prefer to have a product with a little bit higher hardness than having bubbles. So, they want us to remove the bubbles. So, we will make a sample product without bubbles tomorrow and will bring it to them by the day after tomorrow.”

“So, we will not know for sure whether they will place a large volume of product order until they see the corrected sample, won’t we?”

“That’s correct, sir. But, we have good news.”

“Good news?”