Migrating operations to china
To go or not to go
If you work for a manufacturing or retail company and have not yet moved operations beyond domestic borders, someone in your company has probably asked the inevitable question: should we source from (or even go into) china?
There are a great many reasons why the appeal of china as an operating and sourcing destination has been steadily growing. Firstly, as more foreign companies move to china, their high-quality production values become a challenge to local companies. In order to survive, local companies are driven to compete not only on price but also on quality and service. Secondly, as the Chinese consumer market grows big enough to support major industries on the domestic market, domestic and international companies are establishing their presence in hitherto unexplored product lines and supply chains. For example, retailers and product assemblers are joining component markets in China, making diversification an advantageous way to grow and expand. Lastly, the Chinese government seems to have convinced the business community that it is serious about building an investment-friendly framework for foreign companies to enter China. Transparent licensing and registration laws, China’s strenuous efforts to be recognized as a market economy, and the Chinese government’s embrace of private entrepreneurs offer some comfort to chose who are thinking about taking the plunge.
Draw factors
The answer to whether your company should move into China depends in part on your company’s products. Most analysts note that China excels at sourcing components or goods made on templates, such as furniture, toys, and consumer electronics and appliances. However it also depends on the level of China exposure your company is looking for. For companies entering China only for procurement, cost advantage is still the primary draw but companies considering permanent stakes may find better product quality and manufacturing flexibility, as well as growing domestic demand, to be more important. Depending on these factors, the below outlines what sourcing from china can offer your company.
Lower labour costs
According to a Boston Consulting Group report, the average hourly pay (including benefits) or production workers in China is approximately 20 times less than in developed Western countries. As a result, countries such as the US need to be as their Chinese counterparts to remain competitive.
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