The Mech Touch

A financial expert began to speak. "Entering the Bentheim market is a daunting venture that has broken many ambitious companies. We’re going to need to build up a warchest. Right now, your various assets are tied up in a perplexing manner. There are ways we can leverage this situation to raise a lot of funds."

The man put up a snazzy presentation that entailed issuing stock and piling up debt. All of it sounded great, but Ves wasn’t interested in a quick payout.

"I’m open to issuing a limited amount of stock, but I’m not a fan of complicating the ownership structure to this extent." Ves shook his head. "Let’s not put the cart before the horse. The LMC isn’t short on cash right now. Let me complete my design and figure out how much we have to spend on marketing before we address the need to raise more funds."

The financial expert probably had ties to the very same banks and investment companies willing to get involved. The board member would increase his effective control over the LMC if his buddies held a lot of its equity and debt.

Ves could tell that people had been eyeing some of the exclusive licenses he obtained from the Clifford Society. If he wanted to maintain his advantage, he had to keep the licenses to himself and only to himself.

"Our company is running far below its potential capacity." A woman spoke up next. She turned out to be product expert. "Many licenses are time-sensitive and it will take who-knows-long until you finish your next design. It’s best if we hire more mech designers and expand our catalog of designs."

"I don’t wish to dilute my brand with designs that don’t adhere to my design philosophy. I’m pursuing quality over quantity so I’m very exacting in the type of mechs I want to sell."

"Then setup a different brand. It’s not that difficult to draw a line between your own products and those designed by others. You can continue to pursue perfection while our other crop of mech designers can aim for mass market penetration."

"I’m not open to hiring other mech designers. I founded the LMC to provide a platform to develop and sell my own products. I don’t want to provide safe haven for a bunch of losers who can’t make it in the mech industry on their own."

Any external mech designer that the company brought on might be using it as a springboard for their own careers. They’d use the licenses and production facilities that Ves had tirelessly accumulated and hop off his train after they achieved commercial success.

Another possibility was that these external mech designers might take over the company’s direction. If they developed a lot of designs that collectively earned more, they could diminish the value of his own products.

"What will it take then for you to accept more mech designers?"

"They’ll have to work under me for a long period of time. Right now, the only possible candidate is Carlos Shaw."

"I see." The woman replied while looking down at her terminal. "According to the records, he’s an able but inexperienced fabricator who is unremarkable in many ways. You can find many competent mech designers off the streets of Bentheim that can do a better job than a former classmate of yours."

"The difference is that I don’t trust random bums off the streets even if they can design a bestseller. If they’re actually that good, they should have started their own company or find someone else that can sponsor their work. It’s not the LMC’s goal to promote other mech designers."

After this, a mech industry expert started to tout his connections to Bentheim. "The LMC may have put their roots in Cloudy Curtain, but limiting it to an agricultural planet will severely hobble its growth. Any mech business needs a presence in Bentheim. I can put you in touch with some of the regional powers that can facilitate a deal regarding the foundation of a second site."

Such a second site would likely become the main base of production for the LMC, effectively giving control of a major revenue source to the mech industry expert’s buddies.

"A second plant is not in consideration at the moment. Our current production facilities are already capable enough to meet a fair amount of demand. Since I’m in the business of selling premium mechs, I see no immediate need to expand our production capacity for the immediate future."

Ves parried a few more traps couched in helpful suggestions. Once the board members realized that he wouldn’t fall for their tricks, the conference meeting shifted into an awkward silence.

His grandfather Benjamin broke the silence by bringing up something that actually sounded constructive, a first for this meeting.

"At the moment, you’ve signed a contract with a Bentheim mech broker named Marcella Bollinger. I’ve read through the contract, and while it allows you and your company to outsource all of your sales and support to her, the compensation she demands is uncharacteristically high."

The other board members nodded in agreement. "The standard rate should be ten percent of gross profits. The contract you signed gives her a twenty percent cut."

All of the board members looked at Ves like he got taken advantage of. Which he did, but he needed the extra help.

"The contract is only valid for ten years. We can always renegotiate after the current term ends."

"We can do better." His grandfather added, surprising Ves. "Rather than see it as an exploitative relationship, consider the initial contract as an opening for deeper cooperation. Even if we build up our own marketing capabilities from scratch, we’ll never surpass Bollinger’s brokerage in terms of understanding the market and finding the best customers."

A few board members disagreed. "I know at least five great marketers who can be persuaded to head a marketing division in Bentheim."

Benjamin shook his head. "It’s not worth the effort. Consider the amount of money other mech manufacturers spend on their marketing. It can suck up to a billion credits a day. That’s only for the mass-market segment. The premium segments rely more on personal connections to make a sale, something which Bollinger is very adept at. Can we find someone as equally formidable as her in the Bentheim market?"

Someone with so many connections either joined larger organizations or ran their own businesses. Even a medium-sized mech manufacturer didn’t enter their eyes.

"What are you getting at, grandfather?"

"The contract can’t be breached without a penalty, but it can be renegotiated if both sides are willing to make adjustments. I think it won’t be unreasonable to make a demand to lower your mech broker’s cut in exchange for a longer partnership. You’ve grown significantly since you first entered into a deal with her. Your future prospects is worth too much to risk being ditched at the end of a short ten-year contract."

His words sounded persuasive, and some of the other board members expressed approval at the suggestion. On the other hand, the remaining board members thought that the LMC should wait out the nine remaining years and run their own marketing operation from then on.

"Marcella has been very helpful throughout my career and I don’t like to spoil that relationship." Ves decided after hearing out some arguments for both sides. "Even if my contract with Marcella ended, I had already been leaning towards renewing it with fairer terms. I guess we can try to push it forward."

It didn’t risk much to make the offer. As long as he did well with his first original model, Marcella would have a gold mine in her lap. Thus, her acceptance depended on her estimation of his future performance.

The discussion soon turned to overall strategy. "You’ve repeatedly made it clear that you are targeting the premium segment. However, there are only so many rich customers in the market. I think it’s prudent to evaluate whether it serves the company to offer a cheaper selection of models. Not immediately, but in the medium term."

"The Living Mech Corporation’s mission is to bring mechs to life. I can’t do that without a minimum standard of quality. I’m not interested in getting into a race to the bottom. Cheaper mechs means I’ll have to start cutting corners, which I really hate doing."

The LMC could establish a different brand to take care of that problem, but Ves had already ruled that possibility out. However, the board member suggested another approach.

"I’m not saying the company has to be responsible for the production of these cheaper designs. Your design capabilities are impressive for a young man of your age. I’m sure it won’t be a challenge for you to come up with some cheaper variants of your main designs. Once you finished your variants, you can license them out to other mech manufacturers, who will do the rest of the work on our behalf."

"You’re suggesting that we engage in outsourcing?"

In the mech industry, outsourcing meant that Ves would offer his designs up for licensing with a very specific set of terms. The companies that bought his licenses had to abide by a number of very strict restrictions and wouldn’t be allowed to modify his designs in any way. In exchange, Ves would waive the massive licensing fee, though he did take a larger share of per-unit revenue.

Mech manufacturers in possession of production hardware didn’t always have the money to pay for a standard license. Producing mechs on behalf of another company was considered a way to make ends meet by these sorts of companies.

"Even though Ves didn’t wish to cheapen his designs by developing severely hamstrung variants, he was open to the idea of offering up purpose-built designs. It would enable his work to penetrate the market and allow his reputation to spread beyond a narrow circle of wealthy customers.

Even if the licensees botched up the production, the LMC could terminate the license and find another manufacturer to do the work. The only issue was that his company earned far less profits than if it did everything in-house.

Then again, Ves had already shot down the possibility to produce any cheap models by themselves.

"The idea holds some promise, but only if the right manufacturers are interested in licensing my designs." He replied after careful contemplation. "Right now, we only offer the Marc Antony Mark II, which is an aging lastgen design that’s unsuitable to further cost-saving modifications. Let’s wait until I’ve developed my new design before considering the matter in earnest."

Ves started to understand the appeal of a board. Even if they had no actual decision-making power, they had a vested interest in the company’s success. The various experts lent their expertise to the various matters that the company faced.

Still, he didn’t delude himself that they worked for the greater good of the company. They only had their own interests at heart.

Overall, their knowledge and ability to think at a higher level made them useful sparring partners. Compared to the company’s officers, the directors turned up short in terms of depth, but they made up for it by taking the bigger picture into account.

"If I might suggest something." The mech industry expert spoke again. "Your search for a long-term supplier will not be successful. Even with a moderately successful design, the LMC will always be regarded as a non-entity. Even if you catch the attention of a supplier, it’s doubtful they’re willing to offer favorable terms."

"The CRO sounded much more optimistic when he informed me of the ongoing search for a supplier."

"Your CRO must be aiming to build a relationship with a distressed or desperate supplier. It’s not a good idea to source your materials from a troubled seller."

The expert provided many reasons why it might go wrong. The supplier might have almost tapped out its reserves. It might have engaged in illegal labor practices. It may even serve as a channel for pirates to dispose their ill-gotten gains.

"Considering the impending war, it’s actually best we don’t rely on any single source to supply our most critical exotic materials."

"Why is that?"

"Because exotics turn into strategic goods over the course of the war. The Vesians will try to occupy or destroy the Republic’s mining operations. They’ll also prey on the convoys delivering those materials to the hungry industries it feeds."

That sounded very troubling. "I don’t see why relying on the open market is any better."

"Because no matter how the war progresses, the open market will always continue to operate. Don’t forget that Bentheim is a port system and that it serves a regional nexus of trade. Some of that traffic will diminish, but not enough to starve the markets entirely out of resources. You won’t be dependent on the whims of the Vesians if you can accept the higher costs."

Someone else disagreed. "As long as the LMC insists on leaving out the exclusivity clause, it’s free to trade with any other party. I don’t see the need to suspend the search for a supplier."

"You can’t have your cake and eat it too! You won’t find a supplier who is willing to let the LMC retain the right to approach its competitors for business. The LMC isn’t producing enough mechs to force a compromise. They’d rather decline a partnership than be taken for fools."

The issue of suppliers had always given Ves a headache, and the directors just made it worse. He banged his fist against the table. "Enough! This is going nowhere. Let me tell you now that I plan to let the relations department continue to find a supplier and attempt to negotiate a mutually beneficial contract. We can convene the board again to discuss whether it’s worth it for us to sign it into the books."

Even though the discussion led to nothing substantial, it got Ves to think about what his company would do after the war broke out. He decided to raise the matter to the board.

"As you all know, the Bright Republic and the Vesia Kingdom will likely be embroiled in a serious conflict. I’ll likely be drafted by the Mech Corps, and so will some of my employees. How can we prepare the LMC so that it will continue to function during wartime?"

The directors made a number of useful suggestions, starting with his grandfather. "First up, the Republic provides a substantial amount of assistance to mech manufacturers affected by their wartime policies. If your administration is up to task, they should have already prepared the necessary paperwork."

"I’ll check up on that after the meeting."

"You should also check with the bank." The financial expert said. "In some cases, they’re obliged to freeze or even forgive parts of your debt in the event of war. Also, if the company is bleeding cash, it should be able to demand some compensation from the government, though they may demand some equity in return."

In truth, the government only offered a limited amount of support to failing mech manufacturers. It was content to let the weak ones close their doors while offering only a pittance to most medium mech manufacturers.

"The only way to receive better treatment is by contributing to the war effort." His grandfather added. "The Mech Corps has many needs. The LMC can best serve our fighting force by supplying them with high-quality replacement parts that are difficult to fabricate at military supply bases."

They formed a tentative plan around this suggestion. His grandfather even offered to pull some strings and lay down the groundwork for such collaboration.

At the end of the hours-long meeting, Ves left the conference room with a moderately satisfied expression. He patted Lucky’s head once he entered the lounge.

"You did good, buddy. The directors aren’t complete bastards."

His cat meowed lazily at him before turning around to resume his nap.