The Dilemma: Should You Stay or Should You Go?By Andrew J. Birol, President, Birol Growth Consulting, Inc.
Ah, it's an election year. Already political ads are popping up on television, the pundits parse every comment by President Bush and Democratic Senators Kerry and Edwards, and public attention is turning toward our nation's path for the next four years. In the wake of Enron, Martha, and the so-called "jobless recovery" you can bet that business behavior and trade tactics will be central issues of the November campaign. You also can be sure that emotions will flare whenever a company even thinks about outsourcing.
No one wants his or her patriotism attacked, but outsourcing products and relocating back offices are a reality in today's business climate. The "C" word--for China and other Far East producers--has become an especially charged term. Nearly every client of mine is discussing this issue, and many are making hard decisions. Regardless of where your passions lie, you do have a business to run. For the sake of your organization, do you:
- Stay home and boycott those who go?
- Outsource to cut costs and still deliver value?
- Refocus on your business and further innovate?
Let's examine your three options:
When to stay home and boycott those who go: You should hunker down and boast about being “Made in the USA” when you are sure that:
- Your customers, particularly government buyers, demand local content or suppliers.
- Your total cost of provisioning and fulfillment is too low to permit importers to beat your actual price.
- Your customers demand and will pay for fast turnaround and delivery that foreign suppliers cannot match.
After visiting several trade shows (most painfully the Automotive Aftermarket Products Show), I believe that “Made in America” is no longer on American buyers' minds. If domestic auto parts manufacturers won't “Buy American” when they are “Making American,” who will? Unless your customers insist on “Made in the USA,” don't try to sell what they won't buy. If you go out of business waving the flag, you aren't doing our country any favors.
When to cut costs and still deliver value: While some will call you a “Benedict Arnold," you know it's time to go East when:
- Your customers like your quality but not your prices.
- Becoming the low-cost producer is imperative and Far East labor rates will get you there.
- Your domestic production or service adds no extra value.
As distasteful as it feels to turn your back on domestic production or back office workers, consider this: every product or service that you sell here, even if it is made abroad, puts money in the pockets of American distributors, retailers, financiers, and servicers. If your brand and ability to provide quality assurance is valued by your customers, you and your business may benefit by going East.
When to refocus on your business and further innovate: For some businesses, it's already too late to go East. If your company is adding no value to your customers (besides lowest price), then going East will not help. Either close your business or recognize it is time to enhance or recreate your firm's Best and Highest Use®. You are in this situation when:
- You cannot make your products for the prices that your customers will pay for them.
- Your customers roll their eyes when you describe the value of your added service, quality, or delivery.
- Even the junior buyer in your customer's purchasing department won’t respond to your faxed or emailed quote.
Yes, some American workers are suffering through this transitional period. But the U.S. will continue to lead as long as it continues to innovate. While capitalism and the free markets will be harsh on those who can't or don't advance, America's long track record of dominating “forward” industries sets a great example for all of us to follow, whether our business is in technology, product development, medicine, software, communications, distribution, retail, or entertainment.
As the Chinese increase their standard of living, their costs will rise. We Americans must retain our unique and superior ability to innovate--which is, after all, our national Best and Highest Use. Regardless of the kind of business you are running, this should be your China policy.
Articles by Birol Growth Consulting are © copyrighted and all rights are reserved. However, articles may be reprinted with prior written consent if attribution is included as follows:
© Copyrighted by Andrew J. Birol, President of Birol Growth Consulting, who helps owners grow their businesses by growing their Best and Highest Use ®. Andy can be reached at (412) 973-2080 , by email at email@example.com, or on the web at www.andybirol.com.