June 14th, 2005

If You Can't Beat 'em, Join 'em

Reedsburg, WI, June 14th, 2005- Like an ocean freighter brimming with containers and steaming full-speed ahead, nothing's going to slow down the momentum and direction of China any time soon.  With 23percent of the world's population and an annual economy increase of 9.5percent, it's clear that China's consumption is massive and growing. 

China's global presence and manufacturing capabilities are expanding and a parade of U.S. manufacturers are packing up and marching east.  So my manufacturing friends, a challenging situation is upon us.  It seems we're all involved with China whether we like it or not.  Very likely, many of your customers are formulating strategies involving China at this very moment.  Perhaps they are looking for lower manufacturing costs or perhaps market growth, or maybe both.  Whatever their reason, if your customers are even glancing in the direction of China at all, odds are they will be shifting some manufacturing there soon if they have not already done so.  We all know the chilling outcome - with their manufacturing relocation, comes loss of domestic business.

The word "crisis," when written in Chinese is composed of two characters; one means danger, the other opportunity.  Instead of fighting the shift of manufacturing to Asia, consider embracing it as we did.  Two years ago, we formed a WOFE (Wholly Owned Foreign Enterprise) in China.  Since then, we have opened three factories there.  Ultimately our customers win because they are afforded the ability to continue using a single source even if they have multiple manufacturing locations.

It isn't easy.  Establishing your business in China won't work unless you relentlessly invest time and money into talent and infrastructure.  You will also need to be determined to put a great deal of resources into continuously cultivating your operation in China.

Sometimes, a more effective strategy for entrance into China is to team up with fellow manufacturers.  American manufacturers can all help one another capture the great opportunities China offers.  Partnering has been part of our strategy right from the start.  Along with the factory infrastructure we created, we also entered into two joint ventures with U.S. companies that were looking for expansion into China.  Partnering with manufacturers in complementary industries is an option to be looked at seriously.  Each company will be provided an opportunity to broaden markets and increase capabilities both in the U.S. and offshore.

One thing is for sure - if you are a manufacturer and cannot establish a successful operation in or a connection with China you risk losing customers.  By accepting China as the world's factory we are all able to remain competitive suppliers domestically.

-- Joe Hennessy, Vice President Global Marketing Group, Hankscraft Inc.

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