…In the 1990s, my company manufactured dashboards for passenger vehicles. Browsing car spares at a marketplace, I once stumbled upon a seller who had on offer assembled dashboards complete with a full set of instruments, including the wiring for all requisite connections to other car parts. Then I wondered how many elements there are in a dashboard anyway? The answer was just over a hundred. The next step was to get quotes for all those component parts individually. (That was the time when vendors sold spares in the open, literally in a field, laying out their merchandise straight on the ground or on small tables; quite similar to what one sees at flea markets today). When I added up all the prices, the grand total came to 400 rubles, no higher, whereas a complete dashboard sold at 800 rubles. I procured all the components, assembled a dashboard at home, and sold it having doubled my capital. It would appear to be an ultimate success story. However, I came to realize that everybody was doing just the same: that marketplace had four other crews. So I decided to use the principles of supply chain management and barter economy, or take a “holistic approach”, as they might call it today.

      I found out that dashboard clocks were supplied from Minsk (1,300 km), speed meters came from Vladimir (200 km), and so forth. In short, all the components had to be shipped from other cities, as there was no local production in Nizhny Novgorod. Having asked around at various factories, I saw I could “trim the fat” off the dashboard cost down to 200 rubles. Then, at the marketplace, I offered vendors who carried speed meters to swap two meters for one clock; I was getting those clocks by going to Minsk myself. I arranged with other sellers to exchange plastic parts that I was buying in a town near Nizhny Novgorod for rubber parts, which some sold by weight, not by piece. My partners were able to expand their product range with no additional investment, and I was able to drive the dashboard cost down.

      At a cost of 100 rubles, I started selling the dashboards for 400 rubles at new sales outlets that bore no relation to me at all.

      This made all four of my competitors cease assembly operations. I understood that they would need two to three months to regroup and resume dashboard production. I decided to go with the four-hundred-ruble offer for a bit longer and, at the same time, to limit the supply to one or two units per day, forcing sellers to take pre-orders and create lines, what people today might call “generating deferred demand”… After one month, I started raising the price by 100 rubles every week. Even at a 1,200-ruble quote, I was getting a few months’ worth of pre-orders.

      My competitors never saw what was coming though. They were simply happy that dashboards were selling for RUB 1,200, resumed their make-shift assembly operations, and set similar prices. Today these recollections cannot but make me smile. After a while, I played out the very same formula again, and the competition allowed me, again, to establish a temporary monopoly for a couple of months. The profits that an entrepreneur makes within this short period can be several times higher than regular profits of one or even two years.

      I am always in control of production costs at my workshops. This applies to each and every item, be it a small component, like a run-flat tire insert that we sell to a partner, or a complete armored vehicle. And I always try to work out the costs of my potential competitors.

      …I once got involved into a tender with a competitor. At that time, my company already had own production facilities and manufactured bulletproof glass, used laser cutting systems for armor plates, produced thousands of other components and parts; our competitor, on the other hand, was basically buying components and assembling armored vehicles.

      It was quite easy to calculate that his cars, which would be competing against our armored vehicle, cost RUB 2.8 million each to produce. Unfortunately, the bids in that tender were not evaluated on product quality, brand history, or prior successful contracts. It was all about the price. And it all came down to two principal objectives: not to sell below our usual price,