The relationship the U.S. has had with foreign-based manufacturing is an ongoing one – “Made in China” tags have become downright ubiquitous, and goods made in the U.S. are almost considered specialty items. The recent economic downturn has done a fair bit to ensure this trend doesn’t change any time soon. In fact, if anything, the global manufacturing market seems to be expanding.
Retailers have traditionally turned to outsourcing to factories in foreign countries as a cost-effective way to save money on parts and labor. In the wake of the Great Recession that hit in 2008, many companies have been more creative in seeking out additional markets to explore for their manufacturing needs, and this may have a significant impact on how corporate executives approach the management of such operations.
Perhaps not surprisingly, Daily Finance reported that Americans are not indifferent to all those “made in China” labels, but would actually much rather buy goods that were manufactured domestically. In fact, data indicated that 46 percent of Americans would actually be willing to pay more for homegrown goods, not just for economic reasons but also because they tend to be associated with higher quality.
However, the reality is that these attitudes aren’t reflected in manufacturers’ ledgers. Especially since 2008 when the economy hit a massive speed bump, many U.S.-based companies simply have not found it worth it to pay the premiums on U.S. labor. The Congressional Research Service published a report stating that as of 2010, the U.S. had been overtaken by China as the largest manufacturing hub in the world. The country’s factory activity dropped significantly, from 30 percent of overall global output in 2002 to 17 percent in 2012. And as Breitbart reported, American consumers have started spending more money, though companies have not yet returned to domestic manufacturing – resulting in even more of an influx of imports from China and Japan, specifically.
Where are companies making things?
To offset the costs of domestic labor, U.S. companies have long been opening up plants across borders in order to outsource their production. Auto manufacturers Daimler and Nissan recently announced plans to amalgamate their production in a new plant in Mexico. Navistar, a manufacturer of trucks and engines, has its manufacturing efforts scattered all around the globe, from China to South Africa to Jordan, according to its official site.
Recently, a new market has started expanding in a big way. Africa, a continent typically regarded as an agricultural and service-industry supported market, has beefed up its manufacturing in a big way. According to The Economist, manufacturing industries now comprise 10 to 14 percent of the continent’s gross domestic product, making it the region’s largest growing sector.
This could have major implications for a lot of U.S.-based companies. While executives are used to doing business in Chinese, Japanese and Mexican markets, this growth in the Ethiopian manufacturing sector presents new challenges, and not just international tax concerns. CEOs should be concerned with investing in a good chief diversity officer as much as a good accountant, as brand new markets and relationships mean that partnerships could be won or lost on good business communication skills.
Part of the preparations for moving into these new markets should involve cultural and linguistic education alongside economic analysis. Especially considering that transplanting employees to new international offices comes with its own problems such as increased worker stress, these new markets offer hiring managers the opportunity to tap previously unknown potential of new places. A large part of facilitating these relationships will rely on cultural and ethnic empathy, and corporate language training will find a new home in the everyday operations of many multinational companies.