When Should You Start a Factory in China?

Dan Harris effectively asked, “Why bother to start a factory in China to replace your supplier?”  See his Post here.

His answer is:  “Of course not.”  That needs a little explanation.

I agree that if you just want to take a supplier in house and that is your whole vision for China, then do not come.

If you cannot find a supplier to partner with you and climb the one piece process ladder as your market and customers require that, you may need to do it yourself, and it will be a lot of trouble.

If you have a potential market here as well, then we may have a whole new story.

Spemd a few dollars to due a market study. Consider what you might do in a country that has at least 80 million American standard middle class customers. Everything we do in America, they want to do in the next generation.

Do not just replace or buy your supplier, so you can be in China.

Look at your company overall strategy, and see if China and Asia are part of that or are a distraction.

Come to replace your supplier AND sell AND start a small R&D center tapping Chinese engineering talent at a good price.

Do a market study first. There are several cost effective ways to take this on.

Most companies have found that they need to re-engineer their product for China. Many have found that they need to build market presence from zero and do not know how.  The cost in time and cash to get where you want to be must be calculated.

Finally, the market study may prove that selling from the US is better than selling from within China. It may prove you could have a cost effective stand alone R&D center.  Further, the market study would show what it would take to sell effectively to China from Bloomington or wherever you are. Those would be valuable indeed.

Other thoughts?

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Posted in: China, Decision Making, Leadership, Market Entry

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