Chapter 1177 Joint Venture
Unlike other states with more open economies like the Reinald Republic, the Ylvaine Protectorate made it really difficult for foreign companies to do business.
Selling ten to fifty mechs a year did not arouse too much scrutiny, but beyond that more severe trade barriers kicked in. Higher tariffs, extra fees, longer inspections, stricter quality requirements, quotas and more all served to stop foreign companies from taking over the Ylvainan mech market.
And those were just the legal trade barriers. Ves learned from his earlier tour throughout Krent that the Ylvainan attitude towards mechs constituted an unofficial trade barrier. The local culture favored a specific visual style that most foreign mechs lacked.
If Ves wanted to design a mech that appealed to the Ylvainan mech market, then he needed to adapt his mech designs to local customs.
Perhaps a time would come when the Ylvainans would be okay with piloting mechs with standard, non-religious visual themes. Ves estimated that it would take decades to get to that point.
Right now, the market was just about to open up. Most Ylvainan mech pilots never touched a foreign mech design before. Those who piloted imported machines consisted of only a small proportion of mech pilots in the state.
Therefore, not only did it make a lot of sense to adapt to local customs, but also operate through a local subsidiary. As the joint venture would be set up in the Protectorate, it was for all intents and purposes a local company.
Through this legal construction, it was a lot easier for the Office of Strategic Mech Management to grant the company some important exemptions. The idea was that the joint venture imported the LMC's mechs from the Bright Republic and sold it to Ylvainan consumers under their brand name.
Ves began to look beyond this instance. There were many states like the Ylvaine Protectorate that restricted their economies. While it was a hassle to do business in those places, the reduced competition meant that as long as the LMC got in, it could make a handsome profit.
The need to establish subsidiaries and joint ventures owned by local partners would only increase in the future. While those daughter companies funneled a substantial share of earnings back to their local partners, the share of earnings received by the LMC would still be worth it as long as sales surpassed a certain volume.
The LMC might see a need to set up more joint ventures like the one that Calabast proposed. If that was the case, then Ves wanted to adopt a standardized approach to doing business in this fashion.
The most important burden for Ves was the need for local adaptation. The Ylvainans loved to make their mechs look like giant holy warriors of the Ylvainan Faith, and none of his existing mechs matched these aesthetic requirements.
If the LMC wanted to sell the Blackbeak, Crystal Lord and the new Aurora Titan models in the Protectorate mech market, then the company needed to change their outward appearances!
Having studied the Ylvainan visual style, Ves possessed the confidence to emulate their works at the very least. It wouldn't take more than a week to restyle his existing mech designs. It wouldn't take much effort from him to do so for just three mech models.
Yet what about the future?
What if the LMC conducted business in a dozen states like the Ylvaine Protectorate? What if the LMC's mech catalog ballooned to twenty mech models? The amount of time Ves needed to spend on adapting all of his mech designs to the local customs of each difficult state would be immense!
One of the most important lessons that several Seniors imparted to Ves was that a mech designer's time was valuable. They should spend the bulk of their time designing new core mech designs.
While there may be a need to design variants or adapt an existing mech design to local customs, it didn't require the attention of someone as overqualified as Ves!
It was massively overkill for Ves to spend days or weeks of his precious time to adapt a mech design. Rather than do the work himself, why not delegate the responsibility to a locally-born mech designer?
They didn't need to be too skilled. They just needed to be immersed in the local culture and skilled in the changes that needed to be made
The proposal that Calabast put forward led Ves to consider all of these matters. If he wanted to use this approach to enter difficult foreign markets, then he needed to do it right the first time. As long as the joint venture was a success, the LMC could adopt the same model in other restricted markets.
The main issue was the matter of control. Owning a joint venture with a local partner meant that the LMC needed to share power with someone else. It would be fine if they both agreed on a single direction, but what if their opinions differed?
The second complication was that the joint venture needed to retain a local mech designer who could be trusted. It would not be good if the subsidiary hired a local mech designer and trained him or her at great expense only for them to resign a few years later.
All of these matters concerned Ves greatly, but he knew he didn't have to manage all of these issues alone. Ves had already prepared the LMC for these kinds of occasions.
Therefore, as soon as Calabast handed over a data pad containing all of the necessary contracts and other paperwork, Ves simply handed it over to Gavin once he returned to the guest compound.
"What's this?" Gavin asked.
"It's a set of documents for setting up a joint venture between the LMC and the Curin Development Holding Company. The CDHC is wholly owned by Madame Cecily, so the joint venture we plan to erect in the Protectorate is owned by me and her. The purpose of the joint venture is to serve as a channel for the LMC to export mechs to the Protectorate."
Ves took the time to explain all of the reasoning behind the move.
The only snag was that Gavin became a bit puzzled by how easily Ves agreed to Madame Cecily's proposal. How could Ves explain to him that Calabast wasn't a woman who accepted 'no' for an answer?
"Fifty percent is a bit much if you ask me. Considering all of the work you're doing, Madame Cecily is earning a disproportionate amount of money while not doing nearly as much. Also, isn't it a conflict of interest for the Director of Strategic Mech Management to profit off her own policy decisions?"
Ves smirked. "This isn't the Bright Republic, Benny. The Curin Dynasty has a tight grip on the economy and they can do whatever they want as long as they don't encroach on the interests of the other leading dynasties too much. What Madame Cecily is doing is not exactly proper but not unheard of for the Curins. Some of the money she stands to earn will be funneled back to the Curin Dynasty, so they don't have much of an interest to set the matter straight."
"I'll send these files to the LMC so the lawyers and other experts can sink their teeth in them." Gavin asked as he skimmed through the documents. "It doesn't mention a company name. How will you name the joint venture?"
"Let's keep it simple. Just name it the Living Mech Ylvaine Corporation or something." Ves shrugged.
"You're the boss."
Ves could leave the bureaucracy and administration of the joint venture to the LMC. The only matter that he couldn't delegate was the design aspect. He needed to find a suitable Ylvainan mech designer to helm the LMYC and instruct them in how to adapt his mech designs under his supervision.
He would be meeting some of the local mech designers soon enough. Hopefully, Ves found at least one of them to be acceptable enough to become a representative of the LMC.
Starting a subsidiary in the Protectorate that was owned by both a local and a foreign company could not be accomplished in a short amount of time. Calabast already warned Ves that it might take more than a month due to all of the approvals she needed to obtain from various different authorities.
The only other event of note to Ves was that Leland returned to the compound late at night. The spy requested a private meeting with Ves to discuss his findings.
Leland deployed his own signal jammer, forestalling Ves from telling the spy that Lucky had already blocked the listening devices built into the walls.
"I've been snooping around in Krent on my own." Leland said. "I was probably followed for a good while, but I've been observing how the Ylvainans are really like outside of the prosperous parts of the city."
"I take it you did more than that during your solo exploration." Ves remarked with an expression that told Leland that he didn't buy into his story this time.
"Heh." Leland shrugged with a smile. "Alright. I did more than study the locals. I also picked up some information from some of our informers on the planet."
"Flashlight has informers on Kesseling VIII?"
"Everyone has eyes and ears everywhere. Just because the Protectorate likes to close their borders most of the time doesn't mean it's impossible to infiltrate their society. The Bright Republic is very interested in keeping tabs on the Ylvainans."
"So have you gathered any useful intel?"
"Most of it isn't relevant to you." Leland stated. "I can tell you a couple of things, though. From what I gather, there's trouble brewing in the Ylvainan mech industry. The traditionalist mech designers and the Poxco Dynasty are both banding together to resist the entry of foreign mech designers like you. They've heard of your arrival and they are cooking up several plans to make you fail."
"Do you know anything more solid than that?"
"Not for now." Leland shook his head. "All of the decisions are being made at the higher levels. It's impossible to listen in on those discussions." Leland shook his head. "I can make some guesses, though. A good way to discredit you is to challenge you to a design duel and have your work compete against the work of a traditionalist mech designer of the same rank."
"I see. I can see how that can be challenging."
The key phrase here was a mech designer of the same rank. De facto Journeymen like Ves were so rare that the Protectorate likely didn't have any in its entire history!
Therefore, to present a legitimate design duel challenge, the traditionalists needed to present an Apprentice or Journeyman Mech Designer.
Sending in a Senior to challenge Ves was outright bullying and would never be taken seriously.
Sending in an Apprentice was seeking death. While Ves was merely a newly-minted Journeyman, it still meant he had fully matured in his ability to design mechs!
The only other choice would be to send out a fellow Journeyman to issue a challenge. On the surface, one Journeyman challenging another Journeyman should be a fair competition.
Ves didn't think it would be so simple.
If they were willing to be a little shameless, the traditionalists would probably send in an older and more experienced Journeyman with at least half a century of design experience under his belt!
On the surface, the design duel would still be between two mech designers of the same rank. If Ves refused such a challenge, the traditionalists would do their best to mock him for his cowardice and make it immensely more difficult for the LMC to find its footing in the Protectorate mech market!
"Thank you for the heads up, Leland." Ves nodded in appreciation. "I'm not afraid of an uphill challenge. Now that I know what's up, I can prepare ahead of time."
"That's not the extent of the measures the opposition plan to employ against you. I've heard rumors that there is something worse in store. While I haven't been able to verify this intel, there's a possibility that the Ylvaine Dynasty might make a move on you!"
"What?!" Ves looked up at that. "Hasn't the Ylvaine Dynasty been exterminated? I thought that Prophet Ylvaine's descendants were all dead!"