Third person view, after a long time.
“So then… What method do you have?”
The dinner filled with various aggressive words finally over.
Erika talks with Kota while drinking black tea prepared by Emily who was currently looking at Kota as if he was the swore enemy of her parents.
“To say it concretely, it would be difficult… Let see. First of all, let us start with management breakdown.”
Saying that he put the cup on the table and turn his eyes toward Erika.
“As a company… Well, it is similar to a country or territory… Anyway, there are two factors that causing the management is suffering…”
“Two? What is that?”
“It is just something roughly. External factor and internal factor, those two.”
“… That is… Well, I guess that is obvious…”
“The current cause of the territory suffering is because of internal factors. Despite having a land where agricultural corps are difficult to grown, the territory still uses agriculture as a major industry to support finance. There’s the saying that ‘the major industry is declining’, this is precisely such case I guess?”
“… Yes, that is right. Due to the sea breeze, it caused the harvest to fail. Ever since the dawn of this country’s history, Terra is chronically faced such problem.”
“… I’m sorry for making you say such difficult thing.”
“It is fine.”
“This might be a hard and rude question to answer but, why Erika-san choose to be the lord of this land? Since you’re the elder sister of a Queen, could you choose a ‘better’ place instead?”
“I guess so. But on the contrary, isn’t this kind of territory that no one wants should be the one given to the royalty?”
“… Which meant?”
“The custom of giving territory was usually carried out as a prize to someone who performs extraordinary deeds. As a prize, will you be happy to be given a territory where the corps could not grow well?”
“… I guess I will take it as a harassment instead.”
“For me who was just a tool for political marriage, there was no territory that could be given in the first place. If that the case then, why not giving the unprofitable Terra… Well, that is Lotte strategy I guess?”
Inside Kota’s head, Lotte looked like a gentleman. But one should never guess someone by the appearance, which turns out, he was quite the sly man.
“… In the first place, since I didn’t notice his personality is also a proof that he is quite the sly man indeed.”
“Did you say something?”
“No. Nothing really. My mind just got derailed a bit, let us return to the main subject. First, we have confirmed that this Terra is a land that corps could not grow.”
“Right. Even when I tried to grow crops that could grow on such land, the result is…”
“Not much is it?”
“I manage to grow them… But, I was unable to sell much of it.”
‘… I see.”
Kota himself had no agricultural knowledge, but this problem itself was well understood… He had experience dealing with it.
“… Such typical failure huh?”
“… What do you mean?”
“When major deficits occur, management often takes about three actions. One was fixed cost reduction.”
“Fixed cost reduction?”
“Reducing rent, returning land, afterward maybe decreasing association?”
Personal expenses, real estate rental fees, entertainment expenses occupy a considerable weight among the many fixed costs items that were hard to reduce. It was something that cannot be restructured easily, and since the management was in a dangerous situation, they need to quit renting, nothing can be done normally. Not to mention there was also fiscal year agreement when it comes to that… But for entertainment expenses…
“… To some extent, we still need association.”
“I understand. After all, you’re a noble.”
“… So then? What about the other two?”
“Another one is an action of extending sales of the main product itself. Increase the productivity and sell more goods, or add value to the product itself to increase the price of the product.”
The former was thin profit business, while the latter was called value-added commercial law. But,
“… isn’t that method what I did?”
Maybe because he felt his throat dry after talking too much, he took his cup and drink the black tea again.
“What Erika-sama doing was only moving to the adjacent industry.”
“Yes. If we brought up crops which we didn’t bring up until now… Even if we manage to increase product, the profession was still the same, agriculture, which meant just like you just move to the neighborhood.”
Saying so, he sighed.
“… And many, failed when it comes to moving to the adjacent industry.”
“Is that so?”
Adjacent industry, just as the name implies, it was an industry that associate with the main business. For example construction industry. They had a close relationship with real estate industry, which made them ‘adjacent industries’.
“But… Won’t it easier to move to adjacent industry?”
“Many managers think so, and it seems to be a custom, whenever there is a chance to hold new additional business, one should open an adjacent business. After all, it is just something ‘next door’. It is easier to understand the trend of the new industry than opening a new business that had a very different industry with the main business.”
“But then… Why most of them fail?”
“Adjacent industries are certainly easy to advance. However, on the other hand, the management often thought ‘it’s easy since we know well this industry, just another variation.’ Moreover, since it is an adjacent industry of the main business, then the manager might overconfident and think they would success easily, and rush it.”
Maybe because she can relate, Erika’s eyes swim around.
Which was true, since she thought “Well it would be good if we just grow some crops that could be grown on soil exposed to the sea breeze” and mass produce them.
“Grasping the market is the basic of basic when doing business. If you make things that cannot be sold then it was no different than making a garbage.”
“… I understand.”
“One more point. There are many executives and companies that have successfully advanced to the adjacent industries indeed, but they didn’t do such a thing during the so-called ‘valley’ period. They only do it when their business at its peak, thus they could cover the initial deficits that might occur. In the first place, you’re trying to move into the adjacent industry because you want to increase your profit further, people who are performing that mostly are a billionaire already.”
“… I guess you’re right.”
A bitter expression floats on Erika’s face. She put her cup on the table with an elegant gesture, then turn her eyes toward Kota.
“Well then… What kind of measure is there then?”
Receiving such gaze as expected, Kota shrugged his shoulders.
“It won’t come out that easily you know?”
Hearing that reply, she slumped, not befitting her status as a princess. Before long she gazed at Kota with a reproachful gaze.
“… Geez, you.”
“Just now, you’re only listening to me after all. Even if the pawn come up with an idea now, you should not go that way.”
“Well… That’s true, but…”
Erika still showed an unsatisfying face.
“Anyway, at least today we have some discovery. There is a will to improve the management, there are several unnecessary assets, and it also possible to restructures assets…”
He took one breath.
“After this… Let us quit agriculture entirely…”
“W-Wait! It is my mistake to not saying it properly! What I meant is I won’t let us spend more money on agriculture! It does not mean that we will stop agriculture completely! Besides, there are things that could be learned from failures too.”
“I-Is that so?”
“Of course! It is best to experience failure than doing nothing.” <TLN: He didn’t realize that he stabbed her twice by saying this? She failed and didn’t do anything to fix it… So hilarious.>
“You… Do you have a grudge against me or something?”
“No No No, there’s no way is there? O-Oh please, don’t joke like that…”
“… Your real intention and attitude are different.”
“… Well, I’m touched by the person who ‘real intention’ is to improve. *Uhum*, that’s not it…”
“… What is that…”
“Policy, I guess?”
Saying so, he gulped the black tea once again. He drinks it until the cup was empty.
“… Although I might be rude, if you really wanted to improve seriously, I will speak openly. Whether you’re a royalty, a noble, or even the greatest person in this territory… That all does not matter at all. So if you think it is uncomfortable, you better give up asking me for an advice.”
Now then, your reply?
“O ho, bring it on…”
Erika gazed at Kota with defiant gaze without yielding.
“I will say this first just in case, and I won’t pull back this words of mine. You may scold me as much as you want for all of my mistakes. On the other hand, I want you to do your best. I will not say that you should succeed without failing. But, always be sure to do your best by all means…”
“… As you wish, my princess.”
Just like a knight’s oath.
Erika nodded pleasingly toward Kota who bowed his head.
Economic Knowledge (2)
Fixed Cost Reduction.
Reducing fixed cost is difficult and frustrating. Just because sales were diminishing, it didn’t mean that one could reduce expense quickly!
Theoretically, a company would definitely make a profit if the fixed costs were zero and the variable costs rate didn’t exceed 100%. In other words, if you can continue your business with outsourcing while living like a NEET all the time, you will become a billionaire! which is impossible.