Considering Off Shore?

What is "off shoring"?

The relocation of business processes from one country to another, including any business processes such as production, manufacturing, or services.

ISSUES: corrupt governments, lack of quality control, counterfeiting, fake labels, IP theft, unauthorized materials being used, loss of US jobs and profits, undesirable cultural norms...

Know before you go

The Economist, Jan 11th, 2007... "The problem with Made in China: China is choking on its success at attracting the world's factories...."

"China also has other risks, notably a lack of protection for intellectual property rights. Stories abound of foreign investors finding local companies churning out identical goods to their own, but under a different brand... Managers also worry about the rising value of the Chinese currency." (recent 4%, anticipated 5 % in 2008)

Gallup News Service, August 30, 2007... "American Consumers Showing Aversion to "Made in China" Label: Most say the are avoiding Chinese products, willing to pay more for U.S. products"

"... American consumers are deeply suspicious of Chinese-made goods following a string of recalls of potentially unsafe products ma

de in China... 72% of Americans are now paying more attention to which country produces the products they buy... 45% say they are following news about unsafe Chinese products ‘very closely'... an overall high level of attention."

News from U.S. Consumer Product Safety Commission, October 17, 2006... "Starbucks Announces Recall of 8-Cup Coffee Brewers Due to Possible Fire Hazard"
"Hazard: The coffee brewer has defective electrical wiring that can result in overheating, smoking, burning and melting, posing a possible fire hazard. Manufactured in: China"

News from U.S. Consumer Product Safety Commission, October 9, 2007...
"Starbucks Recalls Children's Plastic Cups Due to Choking and Laceration Hazards"
"Hazard: If the cup is dropped, the colorful face on the cup can break off and leave small parts or sharp exposed edges that can pose a choking or laceration hazard to young children. Manufactured in: China"

Inc. Magazine, June 2006...
"How to Stop Intellectual Property Theft in China: America's most innovative industries are being robbed every day on the floors of Chinese factories."
"... fears that America's weak efforts in taking on the world's intellectual property pirates will, over time, gut the
American economy. Globally, the trade in pirated and counterfeit goods rakes in more than $500 billion annually. Chinese factories are responsible for as much as 70% of the world production of bogus goods... The problem is this: China's extremely loose intellectual property regime has been a key element in the country's growth. From the perspective of a national leadership looking to increase the wealth, health, happiness, and global competitiveness of 1.3 billion mostly poor people, co-opting intellectual property looks like a nice fast track out of the Third World."

American Economic Alert, May, 2007...
"Chinese Counter-Attack After US Files WTO Cases on IP Theft and Illegal Subsidies"

"The U.S. copyright industries estimate that 85 percent to 93 percent of all copyrighted material sold in China is pirated. Not only are pirated products sold widely on China, but they are also exported to the United States and many third countries. IP theft is Big Business, which means it is rooted in the Communist hierarchy, enriching the very authorities who are supposed to enforce the laws against it... (an estimated) loss of $25 billion a year to American business from Chinese IP piracy and counterfeiting"

Does off shore really save money?

PricewaterhouseCoopers, 2004 Report...
A study on the effectiveness of off shoring financial functions on 127 European and United States companies;

  • Only 3% said they have saved a great deal
  • 44% said they have saved a moderate amount
  • 31% said they have saved only a little
  • 9% believe they are breaking even; and
  • 4% believe they are losing money

Much of the loss was attributed to poor planning and foresight.

What about Mexico?

Bernard Wasow, Development Economist, June 2005...
"Greasing Palms: Corruption in Mexico"
"It is no secret that law enforcement in Mexico is a ‘for-profit' business. Scenes of Mexican policemen taking bribes from tourists and locals alike are commonplace throughout the country."

Lee Iwan, November 2006
"Corruption, bribes, mordidas, tips - Doing Business in Mexico"

"Today corruption, bribery and tipping occur at all levels of Mexican society and at many different degrees. For one reason or another it has become part of daily life. Most of it involves small sums of money, and is thought of as tipping and not as a bribe.

In fact, to eliminate corruption in Mexico overnight is unrealistic and would probably result in chaos. As some Mexican observers have noted, "La mordida" is the grease that makes the system work."

Transparency International, Corruption Index
Do your homework. Resources such as the Transparency International, Corruption Index rates countries of the world.

http://www.icgg.org/downloads/CPI_2006.xls

Chicago Sun-Times, September 2006
"More defective goods with fake UL labels ship to U.S."

"In July, (a) company advised consumers it had not evaluated certain adapters, lighting fixtures and heavy-duty dryer and extension cords circulating in the United States and that all of the products bore counterfeit UL marks.

And in August, the U.S. Consumer Product Safety Commission recalled about 600,000 extension cords from China that the agency deemed a shock hazard because of undersize wire and substandard insulation. Those cords also bore counterfeit UL labels."

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