The Other Side of Outsourcing

We hear lots of complaints about American jobs lost to workers in China and India. I recently had occasion to see a silver lining to this otherwise dark cloud. I was looking for an opportunity for one of my clients to manufacture a product in China. He had been told that his comfort liners for bicycle helmets had to be made in China because that was where all of the bicycle helmet manufacturers were now located. So I arranged a meeting for my client with a local Chinese Export/Import dealer. What I learned at that meeting was an eye-opener.

The dealer said that he couldn’t help my client for two reasons. The first was that he had a different mission, exporting high value American made goods to China. We often think of the Chinese market as a 1.2 billion low income customers for inexpensive products, but that is an incomplete and incorrect view.

The dealer pointed out that the new world of commerce has created high income Chinese who want to buy products perceived by them as high value, and to those Chinese those high value goods are American (and European). The exporter was busily arranging to export Zweigle’s hot dogs to China.

I said, "Who in China has ever heard of Zweigle’s white hots?" and he replied, "You would be surprised how many Chinese either attended or know someone who attended the University of Rochester." I guess they developed the taste for Zweigle’s at local picnics. Maybe there is also a market for Buffalo chicken wings?

The other thing he told me was to forget trying to convince Chinese bicycle helmet manufacturers to buy American helmet liners. "These Chinese factories," he said, "are just captive satellites of the American parent companies. They make what they are told and compete to be able to supply at the lowest possible price because the American companies play one of them off against the other. The American companies that told your client that they had no power over the manufacturing of their helmets were lying to your client."

All in all it was a very interesting and surprising conversation.

Richard Blazey is managing member of Business Metamorphosis LLC, an innovation services company focused on intellectual asset management and technology startup businesses and located in Rochester, New York.