First of all, when buying a set from Lego you are mostly paying for the actual design of the set and the license for the franchise if it is based on a certain movie or video game. The actual cost of producing the plastic is negligible.

Secondly, those alternative manufacturers do exists and they offer vastly lower prices for the same or better quality. They evidently make money with it.

For example the German company Bluebrixx designs sets and then buys the bricks from Chinese producers like xingbao as a white label solution. Cobi, a polish company, on the other hand even manages to produce in the EU while Lego produces in China and Vietnam and they are still making a profit and have vastly superior quality compared to Lego.