On the night of June 25, 1998, Su Yiwen, chairman of Shanghai Marquis Audio Manufacturing Co., Ltd., returned from his business trip in Canada. Accompanied by two associates, he flew from Toronto to Shanghai Hongqiao International Airport. As soon as they cleared customs, they were swiftly picked up by company subordinates waiting in the hall. Two luxurious cars quickly departed from the airport.
Marquis Audio, initially a street-run private enterprise specializing in speaker production, had grown over decades into China's leading home theater audio company. Its main products included speakers, audio systems, and AV amplifiers, with assets of 210 million yuan. Marquis held 27% of the home theater audio market and also had a significant presence in the Hi-Fi audio market. The key difference between Marquis and Lusheng companies was that Marquis targeted mainstream family entertainment audio, while Lusheng catered to audiophiles with high-fidelity audio systems. Marquis' large-scale, market-efficient products were unmatched by Lusheng, while Lusheng's elite, aristocratic image was beyond Marquis' reach.
Su Yiwen, in his 40s, was tall and slim, slightly balding, with a square face and sharp features. He wore a white shirt with a meticulously tied tie and gold-rimmed glasses, exuding a scholarly demeanor. Behind the glasses, his sharp, intelligent, and calm eyes revealed a serene but commanding presence.
The two cars drove into the Marquis company compound, stopping in front of the main building. The building was quiet, with only a few offices still lit. The group proceeded to the third-floor conference room, where department heads were already assembled. They all stood to greet the chairman, who motioned for them to sit.
General Manager Fu Ziqing began, "Chairman, you've just landed and are hosting this meeting late at night, highlighting its importance. The Greystone incident has been widely discussed, and Lusheng has officially sued Greystone. Today's meeting aims to assess the potential impact of this lawsuit on Marquis and to develop corresponding strategies."
Su Yiwen said, "I've read the email report from the Market Research Department. Minister Liu, please provide a briefing."
The Market Research Department, in reality, served as the company's intelligence agency.
Minister Liu Jiaming stood and spoke, "Our department believes this is not a simple commercial dispute and is not irrelevant to Marquis. The Greystone incident can be interpreted as the beginning of an audio price war, causing consumers to hold off on purchases. In fact, Marquis' sales have already been affected. Our concern is that if Greystone's actions are strategic and planned, and they successfully attack Lusheng, their combined strengths could threaten Marquis. This isn't about whether we want to get involved; we'll be drawn in regardless."
As soon as Liu finished, the room fell silent. Most attendees remained quiet, their eyes revealing skepticism: alarmist talk. After all, Greystone was a small company with only a million yuan in assets, hardly capable of causing significant upheaval. Marquis mainly produced AV audio systems, only dabbling in Hi-Fi. Moreover, Lusheng had rejected Greystone's settlement offer, making a favorable lawsuit outcome almost certain. The Greystone incident seemed more like a minor market blip, not a real threat to Marquis.
The general manager said, "We all remember Yayi Audio, which started with cassette players in the early 1980s. It grew from 300,000 yuan to 200 million in ten years but took only three years to go bankrupt. A competent manager should detect potential crises early, preemptively defusing them before they pose a threat, and turning them into opportunities. Underestimating the enemy and being slow to react is a merchant's grave. Whoever violates this gets buried."
Su Yiwen glanced at Liu, signaling him to continue.
Liu said, "Lusheng selling 1,000 sets to Greystone might seem like exploiting the latter's naivety, making it appear like a simple clearance sale. However, given the principle of 'the person determines the deed,' a look at the key figure behind the Greystone incident makes the truth clear. We know the mastermind is Ding Yuanying. We've investigated through various channels: he holds a master's degree in economics from Berlin University, worked at H.N.S. International Financial Investment Company in Berlin, Tongda Securities in Beijing, and was an economic strategy researcher for the World Economic Weekly in Berlin. In June 1994, he founded a private equity fund, reportedly managing over 200 million yuan and withdrawing at least 200 million from the stock market in under a year. Known for being reclusive and not well-known, those who do know him regard him as a genius. Can we still say the Greystone incident is just a simple clearance sale?"
General Manager Fu added, "Greystone is attacking Lusheng with a capital disparity of 1 to 50. If they succeed, a combined Greystone-Lusheng would have a capital ratio with Marquis of 1 to 4. Why wouldn't they dare attack Marquis then?"
Su Yiwen asked, "Which is more threatening to Marquis: Lusheng or Greystone winning the lawsuit?"
Sales Minister Xu Jiayu said, "Greystone winning would be more threatening because if Lusheng wins, things return to normal. If Greystone wins, they demonstrate a lower-cost production method. Price is key, and the market follows this rule. Marquis' products are all made in Shanghai, with higher overall costs than Guangdong, and even higher compared to Greystone."
Planning Minister Wang Zhenguang agreed, "I support Minister Xu's view."
Su Yiwen looked at the other officials.
They all concurred, "We agree."
Su Yiwen said, "We hope Lusheng's lawsuit is just a false alarm and this is merely a fierce battle in the Hi-Fi field, but this doesn't stop us from preparing and creating opportunities. Therefore, I propose that Marquis, on behalf of the board, officially offer to acquire Greystone for 6.5 million yuan and publicly announce this to the media."
The exorbitant figure of 6.5 million stunned everyone.
Wang blurted out, "Why?"
Su Yiwen asked, "Which 'why' do you mean?"
Wang clarified, "Why acquire Greystone? Why 6.5 million?"
Su Yiwen explained, "Acquiring Greystone is a precautionary measure and a chance to create opportunities. Offering 2 million would be taking advantage of their plight; 4 million, a flirtation. Lusheng's 6 million yuan compensation claim implies Greystone has that potential. Adding 500,000 yuan to this amount distinguishes us from the disputed amount."
Finance Minister Huang Qiuming said, "Lusheng's 6 million claim is tactical; it's fictitious. If Lusheng loses, their actual loss exceeds 6 million; if they win, it's less. We don't know if Greystone can win. Blindly acquiring them might transfer the defendant status to Marquis, making us face the lawsuit."
Su Yiwen said, "Without approaching and understanding Greystone, how do you know its value or the likelihood of winning? Have you approached them, seen clearly, negotiated?"
The group realized the significance.
General Manager Fu explained, "As the leader in China's audio industry, Marquis should display its stature and poise. If Greystone's speaker costs are reasonable and if Lusheng is pushed out, even if we truly buy Greystone for 6.5 million, our conservative estimate suggests a dual advantage with Lusheng's flagship and Greystone's speakers, significantly advancing into the Hi-Fi market. Lowering the entry threshold while catering to audiophiles' pursuit of individuality could generate at least 140 million in market benefits. This is the Matthew effect: to those who have, more will be given; to those who have not, even what they have will be taken away."
Xu Jiayu said, "Reality within fiction, fiction within reality—excellent! But won't Ding Yuanying see through it?"
Su Yiwen said calmly, "So it's just a greeting, a gesture of goodwill. Since Greystone's victory is more detrimental to Marquis, we must make a gesture to avoid future conflicts. This move must be swift, released before they exchange evidence and firm up their positions. Delay will render it worthless."
The expressions of those present reflected admiration and understanding.