Manufacturing In the past few decades, China has grown to become a major economic power. Much has changed for the country since the government decided to allow international trade and embrace the global market. These days, China is a giant, not only in terms of manufacturing but also purchasing power.
Why would anyone want to move their manufacturing operations to the other side of the world in an ancient country and culture ruled by a Communist government? Here is one of many possible scenarios. A company with manufacturing operations in the United States continues to experience skyrocketing operating costs.
High labor costs brought about by previous multiyear aggressive bargaining unit agreements. Demand and pricing of increasing numbers of customers now located in Asia as a result of long delivery times and shipping costs.
The firm may have had to make significant investment in inventory and warehouse costs in Asia to try to improve their delivery times. So what should you do? What criteria will impact your decision? Where do you start? China is 12 to 13 hours ahead of the Eastern Time Zone there is only one time zone in China and no daylight savingsit has a very ancients and different history, language, culture and on top of that it is a communist country.
But what is next? What are the steps? What might it cost? What resources will be required? Is this something you should consider?
Proximity to your customers. Locate your operations in China is to be close to your market. Existing Customer Interest You may have existing customers encouraging you or perhaps even demanding that you establish operations there.
Delivery of your product may be an issue for your Asian customers. They anticipate they will see lower pricing and faster delivery once you are manufacturing in China.
After you have established operations in China you can invite your Asian customers to your facility, which will have a positive impact on your sales as they recognize that you in fact do have a physical presence and are actually manufacturing your product in China.
Attract new customers With an operation in China you can also more readily identify and invite potential new customers that would never have been able to visit your operations in the United States let alone even learn of their existence!
Having an actual manufacturing facility in China enables you to make inroads with new customers that we would not have been able to realize otherwise. This in combination with hiring Chinese sales and application engineers will enable you to go beyond the use of distributors.
Market Size Where else can you find a potential market the size of the population of China? Operational Costs This is one of the main factors that are typically publicized when a discussion of manufacturing in China is the topic.
However, there are many cost elements that add up to your total manufacturing costs. Labor — If you are in a highly labor intensive industry you have the opportunity to significantly reduce these costs as compared to the United States.
Salaries for technical and management personnel are significantly lower and labor rates for hourly type positions are almost negligible to your bottom line. Raw Materials and Supplies— You may have an opportunity to reduce material costs but that will depend on your specific raw material requirements.
You cannot anticipate savings on commodity type materials like nickel and copper whose costs are determined globally. One of the biggest challenges, however, is locating and then qualifying a reliable supplier.
You will need to research your equipment sources thoroughly before proceeding. For example, you need to be aware that compaction equipment will have a different purpose to access equipment. Taxes -Taxation in China is complicated and it may not be a true justification for you.
There are numerous options for foreign companies to invest in China and methods they can use to report taxable income is beyond the scope of this book.
You should hire an established accounting firm with Asian experience to determine what is best for you. The emission requirements for air, water, solid waste and noise bear some similarity to the regulatory requirements in the United States but there are some major differences including the fact that you are regulated by the density and flow rate of emissions per stack at a given stack height.
There is an extensive report that must be filled out each year.
There is likely considerable trepidation from top management taking such a large step from a position of comfort in manufacturing in the United States and knowing what it takes to be successful to moving operations to the other side of the world where the language, culture and government is so different.
Utility and Process Gas Costs A. We are talking possible two to three times the cost you pay for power in the United States. Process gases- Process gases like nitrogen and hydrogen are also higher in cost in China than in the United States.
Since there is electricity involved in their respective processes the added costs for power likely more than out-weighed any labor savings.
Land You cannot purchase land outright in China.Burberry will open its first store in India in October. The store will be located in the Taj Mahal Hotel, Mumbai. Burberry China In Greater China (Hong Kong and mainland China), Burberry continues to experience growth across the retail and wholesale channels.
This is fuelled by demand from mainland consumers. What are the biggest disadvantages to living in China? The world is constantly shifting economically and politically. Perhaps you’ve been considering taking the plunge and starting your adventures overseas.
Joint Ventures in China: Advantages and Disadvantages China’s strict commercial laws dictate that western Corporations wishing to do business in China may have to partner with a Chinese entity upon arrival. (And please don't give me the "What about Burberry? What about Louis Vittuon?" because those companies have spent hundreds of millions of dollars in marketing to help boost the brand as a luxury product.
And you won't.) So, the point is, the lower cost of manufacturing in China is an enormous "pro" as to why you should manufacture there. 2. increased. In addition, there is a great share of the „China elite‟, which consists of the upper middle-class and the very wealthy.
Due to China‟s enormous market of billion people and the growth of wealthier households, the country has become the largest market for luxury. With economic turmoil overseas and controversy in the election rhetoric, China is in the cross hairs. But it is still a good place to do business, under the right circumstances.