Thursday, December 22, 2005

Should Sourcing cost jobs

The raging debate continues and here is our take.

Notwithstanding the restrictive nature of the world economy today, it is increasingly evident that the only two ways companies can grow is , by expanding their markets and remaining price competitive.

Any company which wants to grow out of its home market invariably has to enter markets which are comparatively unknown to its management workforce. Companies in US and Europe find that apart from this , the price levels of markets outside their countries and the strength of their own currencies make their prices look unfair and at times ridiculous.

The best strategy that can be adopted in these cases is what the smart companies are doing. The products that are sold into a underpriced market are manufactured out of the same markets. This means that while they remain competitive they also do not have to cut their own company and country's workforce. The geographical and labour cost advantages that is derived from these markets means that companies have the cushion to keep their own markets intact while expanding into newer markets.

One thing that should remain very clear is that even one job lost in your company because you tried to source out , will start the rot. Those who ignore these signals will have to pay for it,because all said and done even the cheapest of markets never remains so and when it does become pricey , you need to have your own strengths to fall back to.


At 1:06 PM, Anonymous Matthew W. Grant said...

Interesting point about US and European countries pricing looking "unfair and ridiculous" out of their own markets.

Hollywood faces this problem by selling the exact same product (a movie) at wildly different prices around the globe and even around the US. A movie in Boston may cost $11, while the same first run movie in a small Midwestern town may be $6 and that same movie released day-and-date could be $2 in a Latin American country.

I wonder how many other businesses could follow this model?


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