Job Change—competition from Chinese products

As business in the Gulf started to prosper, the Chinese onslaught started to squeeze the profits. For them, profit was not the motive; perhaps ‘acceptance’ by international buyers was more important; besides, they did not have any system of wage controls or labour obligations. This is the third part of the series describing the travails faced when setting up an international business in the seventies

There was one final lot of pipes that had to be disposed quickly so that the consignment is cleared, and the dues for the Bank of Baroda settled. It was a good lot containing a good range of highly demanded pipes, which would sell as hot cakes. So, I decided that I offer it to a friend and called Rakesh Dewan, whom I knew well in Beirut, and whose father MS Dewan was one of the pioneers in marketing Indian goods in the Middle East.

Rakesh received me well, but, as he had a large stock in house, he declined, but suggested that I offer the consignment to Ajay, his erstwhile partner, whom I recall having met in Dubai, rather briefly, a couple of visits earlier. Promptly I called on him and made the offer. We had a chat over a cup of coffee, prepared by Shankar, who had worked with Amitabh Bachchan, in his early days in the film world.  It was not long before Ajay gave me a cheque and requested that I have it encashed before issuing a delivery order. It was an impressive move, considering the general practice was to obtain the purchase order, have the goods collected, and let the seller run up and down for his money!

The following day, in the afternoon, Mr Lobo called to confirm that, indeed, cheque had been cleared and he had authorised delivery for the following day.  Promptly, when I called to thank Ajay, his able deputy Prem Dayal Sinha advised that Ajay had l left for Agra on an urgent work and would be back in a day or two, when he would surely return my call.

Yes, Ajay did call back, and invited me to have dinner at his Al Shaab residence, and talk over future plans. It was a pleasant evening and he was trying to find out my future plans. I had a couple of offers from my own clients to join them, as a working partner earlier, but I had not made up my mind, as I did not know them well enough. But Ajay wanted me to seriously consider his offer to take over and run his company, and treat it as my own.

Couple of days later, after great deliberations at home, I accepted the offer to join him, and for the next six years, it was nothing but work, work and more work. 

His family had couple of foundries and Kajeco was owned and operated by his brother Vijay, who manufactured top quality manholes covers and other CI materials. He was also a prominent exporter. As I sat browsing through the catalogues, I was invited to Ajay’s office to meet Lala Kedernath Agarwal, his father. For a moment I was surprised beyond belief... to see senior Agarwal standing in front of me...

My mind raced back to Beirut and to my office at 505, Piccadeli Centre, on Rue Hamra, in the year 1972 or so.

Normally, when I had a visitor, my office door was closed or at least ajar. And I had kept one visitors’ chair in my office so that there is no interruption in our discussions. But, this tall, well built gentleman simply pushed his way in and announced “I am Kedernath”. Both of us were taken a back, but I managed to say, sir, welcome to the office, but I would appreciate if you can wait for a while, until I am able to supply this exporter’s requirement?  “But I am the chairman of the Cast Iron Panel and did not your office inform you?” Sorry, not so far, but still, I would like to complete the work with this gentleman before I can assist you. Rozine, had just come behind him, and stood helplessly. Reluctantly, Mr Kedernath went back to sit in the visitor’s chair, which was visible from my office.

He joined me a few minutes later when the visitor left, being picked by Mustafa to take him to meet his client, with whom Rozine had set the appointment. We always tried to assist exporters on a first come first served basis.

Just then, Ashok Khattar walked in, apologizing for the delay and walking in without an appointment or intimation; he had brought Mr Kedernath, whom then he officially introduced, as Lala Kedernath Agarwal of Kajeco Industries, BC Iron Foundry, etc.

All that he wanted was to know all the importers of cast iron products in the area and definitely wanted to inspect the OK Foundries in Beirut. In the discussions that followed, it became clear that they had gone to OK Foundries, up in the mountain and were not allowed to enter the premises by the security. Lala was upset, but was determined to see the foundries, which were his most powerful dislodgeable competitors in the Gulf region, particularly, Saudi Arabia. It did not take long for me take them back to meet Ohannes Kassardjian, the owner, who was happy to meet me, and extend his courtesy to his fellow manufacturer from India. 

Here I was standing before the formidable Lala with Ajay, his son! He ordered his son to leave us alone for a few minutes; spoke to me in an extremely nice fashion, and asked me to help and make Ajay a successful businessman in the country. “We shall fully support you and stand by you”.  Lala had spent a few days in Kuwait, stopped for the night in Dubai, before catching his flight to Delhi.

In the next few years, I had several meetings with him, though, it was with Vijay my dealings were and our work went on without a hitch.

The first step we took was to take a trip to Saudi Arabia to meet out important and major consumers, but the obtaining the visa was not easy; one had to get an ‘invitation’ from the Saudi buyer (who acted more as a guarantor), and hopefully get the visa from the consulate.  Ajay had already received invitation, and asked if I can get one from one of my contacts?  I had a suitable letter of introduction, from a member of the royal family, arranged through a friend of mine and armed with that letter I went to the consulate, which had a serpentine queue of visa seekers. They were mostly truck drivers seeking entry and exit permits and were regulars. This letter was several months old, and the consulate always insisted on fresh letters in the current month of application.  I had to take a chance.

My application was accepted, and receipt issued, but the clerk asked me to wait for a few minutes. An hour later, I was ushered into the office of the Consul General, who simply asked: “what is your relation with the prince?” As politely as I could, I declined saying it was something that I would not like to answer. “Do you know where you are now?”  "Yes, I am aware, I am on Saudi Territory; but I am also aware of my responsibilities, as I have worked in a government of India organization. Sir, please accept the letter of introduction and issue me the visa; if not, kindly decline, and return my passport with the letter”. I stood for a moment or two; he did not reply, and I excused myself, and walked out.

I felt upset and angry; and that, the very first attempt to get a visa on my own had backfired.  Returning home, I shot a detailed message to my friend Mohammed explaining the situation and mentioning that I was looking forward to meet him on a visit very soon. One or two hours later, I received a call from the consulate to come and collect the passport.  When I did, it contained the visa!

Our trip lasted for some ten days and on the whole successful.  We spent more time in Riyadh, where Kajeco had assisted a foundry established by engineer Abdullah; it had a number of trained staff from the Agra foundries, and they were supplementing their requirements from Indian sources, principally from Kajeco. I knew Abdullah well from my earlier visits to Amman and we got off well, right from the start. We returned to Dubai, with great number of orders, and couple of days later, I was on my way to visit Agra, for the second time in my life. From then on, a visit to Agra was mandatory after every visit to Saudi Arabia, which was generally on a quarterly basis i.e. effect shipments and go in for new orders.

There were no cinemas for entertainment; only in-house movies on the TV and long hours.  Naturally alcohol was strictly prohibited but the attraction was the scope for business, and long working hours.  Riyadh was not an open society and if you had no friends and visiting on business, your room TV was your sole entertainment. 

With construction activity on an unprecedented scale, merchants received us well, and despite the huge profits they were making, would do their best to squeeze every cent off our prices. Our products commanded respect and quality conscious buyers gladly paid a small premium; we added, rather slowly, other items to our inventory, and we had expansion plans in our minds of opening offices in London and Hong Kong.

Yes, we started feeling the Chinese onslaught in the market that was cheaper than us in some items. We realized that Chinese sold their goods at times cheaper than the cost of raw materials at international prices. For them, profit was not the motive; perhaps ‘acceptance’ by international buyers was more important; besides, they did not have any system of wage controls or labour obligations. What could we do to fight this uneconomical menace?

We simply supplemented our stocks with their cheaper items, as the market demanded and accepted these; concentrated on high-quality and superior items meeting international standards demanded by exacting and quality conscious contractors by making them in our own foundries. We could afford to buy in bulk and ensured priority shipments so that we had the advantage.

At this stage visiting Hong Kong to know more about the Chinese operations became imperative. I had visited Taiwan earlier, but getting a visa to China was not going to be easy. With the help of our Chinese contacts we were contemplating our moves. I decided that it was best that we establish a representative office in Hong Kong, but yet could not make up our mind, considering the financial commitments.  I returned back, with dreams of a breakthrough in the Far East. 

(AK Ramdas has worked with export organisations, initially in India. His international career took him to places like Beirut, Kuwait and Dubai at a time when these were small trading outposts. From being the advisor to exporters, he took over the mantle of a trader, travelled far and wide, and switched over to setting up garment factories and then worked in the US. He can be contacted at [email protected])

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    COMMENTS

    Ratanlal Purohit

    9 years ago

    YES SURE KRITHI
    I TOO WOULD LOVE HIS NOVELS. HE WRITES LIKE A BEST SELLER NOVELIST AS I SAID EARLIER
    REGARDS
    Ratanlal Purohit

    Krithi

    9 years ago

    Mr. A K Ramdas writing style is just brilliant which captures even a layman to get hooked on to his articles / features.

    Look forward to reading more of his features

    Regards,

    Krithi

    Ratanlal Purohit

    9 years ago

    AK Ramdas writtes like best seller Novelists.
    I was at a loss to find the substance in his details.
    His message could have been contained in a SMS.

    "Chinese competition is tough. They dump the goods in the market to wipe out the competition and then rule."
    But it is a short term strategy. A good purchaser never leaves his trusted supplier totally. A well developed Single sourcing on sustainable basis goes a long way in the Supply chain. As a production networking with our Japanese counterparts they outsourced us 20% only at an discount of 20%. A good permanent relation is never disrupted suddenly to ensure RELIABILITY.
    SQUEEZES ARE TEMPORARY. IT IS SURVIVAL OF THE FITTEST. Ofcourse state run business is different ball game.
    Ratanlal Purohit

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