One month after the factory began operations, Argyle & Co. Foods had completely transformed the desolate Nolan Steel Mill. Twenty new, steam-powered copper pots stood in the expanded workshop, majestic and silent. The factory's fifty production workers operated with rhythmic efficiency, the roar of machines and the rich aroma of stewed beef blending into a powerful industrial symphony.
In the office, Catherine placed the monthly financial statement on Felix's desk, her fingers trembling slightly with excitement. "Sir, this is our financial report for the first full month."
Felix picked up the report. The figures recorded the astonishing pulse of the burgeoning enterprise:
Total sales: $9,320
Raw materials and production costs: $3,815
Salaries and operating expenses: $1,344
Strategic investment (capital injection): $3,000
Catherine pointed to the double-underlined figure at the bottom. "After deducting all costs and that important strategic investment, our company achieved a net profit of… $1,161 in its first month."
The number might seem modest, but both understood its true meaning: the company, having completed all major fixed asset investments and strategic layouts, was already profitable. If the $3,000 capital investment in Bill's company were excluded, the true net operational profit for the month was a staggering $4,161. The money printing press was running at full throttle.
"Very good. This proves our foundation is solid." Felix announced a surprise bonus for all staff, $2 for the factory workers, and $5 for the office and security teams, a reward that immediately sparked cheers throughout the premises.
Just as they celebrated, Mr. Gable rushed in, his face etched with worry. He placed a crude, unfamiliar can on Felix's desk with a thud. "Felix, look at this. Something's happened."
Felix examined the can. It was an almost identical shape and size to his "Standard Red Label," but the printing was crude, featuring a garish, grinning chef's head, and the text read "Croft's Delicious Stew." The seal, a shoddy imitation of Felix's mechanical seaming, had visible gaps.
"Who made this?"
"A tinsmith named Silas Croft," Gable fumed. "He used to run a soldering shop, and your lead-free cans put him out of business. Now he's set up a workshop and is imitating your product!"
"Imitation is a compliment that successful people inevitably receive," Felix remarked calmly. "What is his quality like?"
"Like dishwater!" Gable scoffed. "I tasted it—the meat is dry and tough, the broth bland. But, Felix, he has one fatal weapon: price."
Felix finished the thought for him: "He sells his for twenty-five cents."
"Exactly!" Gable slapped his thigh. "Your 'Standard Red Label' retails for fifty cents. He's half the price! The poor in the Bowery District can't tell the difference in quality; they only look at what's cheaper. My sales have noticeably dropped."
Catherine's brow furrowed. "A price war. This is the lowest, yet most effective, form of business competition. If we don't respond, he will erode the market we established like woodworms."
Everyone looked to Felix, awaiting his decision. After a long moment, he finally spoke, a perplexing smile touching his lips. "The appearance of Mr. Croft may not necessarily be a bad thing. He has given us an excellent opportunity to truly elevate our product to a 'brand.'"
Felix walked to the blackboard and drew a heavy 'X' over "lowering prices."
"We absolutely cannot lower prices. Price is our dignity and the bottom line of our quality. We are not fighting him on quality, and we will absolutely not compete with him on price. We are fighting a war called 'perception.'"
He issued his first command to shift the battlefield:
Brand Visual Identity: "Catherine, design a unique brand visual identity for 'Argyle & Co. Foods.' Starting today, all products, Red or Gold Label, must have these logos printed on every surface of the can. Print a sentence on the label: 'The one and only, Argyle.' And below it: 'Please look for the genuine trademark to beware of harmful counterfeit products.'"
Market Education: "Take two hundred dollars and place advertisements in all mainstream newspapers for a week. The content must not boast about taste. Instead, it must 'educate' the market like a science popularization article. Tell all New York residents how harmful traditional lead-soldered cans are to their health, and how important a clean factory is for food safety. We won't mention any competitor; we will only set the standard for 'health' and 'safety.'"
Channel Consolidation: Felix instructed Gable to unite all retailers. "The company will provide free promotional posters detailing how to distinguish genuine Argyle cans from fakes. I will give you an additional sales discount, on the condition that you must display these posters prominently."
A three-dimensional strategy composed of brand identity, market perception, and channel consolidation was laid out.
"This Mr. Croft thinks we are just in the business of selling stewed beef," Felix summarized. "He's wrong. We are in the business of selling trust."
Mr. Gable cheered, but Catherine was the first to spot the flaw. She pointed to the Bowery District on the map. "Sir, your strategy will consolidate our position in the mid-to-high-end market. But I analyzed Mr. Gable's sales data—the Red Label sales dropped by fifteen percent. These are customers who are absolute believers in price. By refusing to lower prices, we are, by default, handing this portion of the market to Croft. That market is enough for him to survive, even thrive. This isn't right."
Her words chilled the room. Gable agreed: "Croft is like a rat in the gutter; he won't die easily. In the long run, he'll be a menace."
Felix's smile remained. "You've seen the second, deeper layer of the problem, Catherine. We cannot give him any room to survive. We must eradicate him completely."
He drew a second battle line on the blackboard. "The three points I mentioned are our overt, frontal battlefield. Now, I will tell you how we will fight our flank battle."
"We cannot lower the price of the Red Label. That is our face. But who said we only have one brand?"
Seeing their immediate understanding, Felix nodded and wrote a new name on the board: Iron Man Stew.
"This brand will be completely new, with no connection to 'Argyle.' Its name must be simple and vulgar. The label will be printed on the cheapest paper, with just a silhouette of a worker swinging a hammer. Its taste doesn't need to be excellent. Bill has a large backlog of pork and chicken scraps; let's use them, add more potatoes and onions—just enough to fill a stomach."
A playful, sinister curve appeared on his mouth.
"And its price, our Iron Man Stew, will retail for twenty-four cents."
Twenty-four cents. Only one cent cheaper than Croft's. Catherine gasped, instantly grasping the horror of the plan.
"Croft's workshop is small, inefficient, and his raw material costs are higher than ours. I've calculated that at twenty-five cents, his net profit is barely two cents per can. He is using that meager profit to survive."
"And us? With our efficient production lines and nearly zero-cost scraps provided by Metropolitan Meat United Company, if we sell for twenty-four cents, each can still yields at least two or three cents of profit. We're not losing money, are we?"
"Now, when Croft discovers a competitor, one cent cheaper and slightly better tasting, on the shelves, what will he do?"
"He can only lower his price!" Gable exclaimed.
"Exactly! He'll drop to twenty-three cents, or even lower!" Felix laughed. "And our 'Iron Man' will play along with him. He lowers by one cent, we lower by one cent. Wherever he drops, we follow. The ultimate result is that he will fall into a death spiral of losing money on every can sold. He is fighting our money-printing machine with his own blood. How long can he last?"
The office fell into a dead silence. This was a dimensionality reduction strike, an annihilation battle designed to completely crush the opponent.
Felix issued his final orders:
Catherine: Secretly manage the production and promotion of Iron Man Stew. No one else in the company is to know the relationship.
Jones: Adjust one production line specifically for its production.
Mr. Gable: "You are the best supporting actor. I need you to 'casually' reveal a piece of news to Mr. Croft. Say that a new hothead has come to town, doesn't understand the rules, and is snatching market share by losing money. Make him feel that you are a victim on the same front. Let him unleash all his anger on the 'hothead' we created."
A trap for Croft was subtly laid by Felix. The poor tinsmith was still gloating over having captured a portion of the low-end market, completely unaware of the industrial behemoth that had just sharpened its claws.