Offshoring and American Business

Offshoring continues to be a significant trend. With the United States' high cost of doing business due to issues such as the exchange rate, outrageous healthcare costs, among other factors, the trend to move jobs offshore continues in many industries. However, some may note that this is not always the case.

Recent examples include Hyundai's well publicized campaign that publicizes they are adding thousands of jobs in the U.S., with Nissan doing the same thing. Here's the reason, as I read in a journal article several months back (that I cannot recall). When manufacturing is capital (equipment) intensive and shipping is a factor, it is advantageous to stay local despite higher labor costs (cars are an example). On the flip side, if a process is labor intensive (shirts) and transportation costs are low, profit maximization reports will tell leaders to go abroad.

The auto industry is also an outlier because it has become so efficient. These foreign firms have the advantage of starting from scratch. Consequently, they can create more efficient factories that require less labor without union pressure. Detroit is obviously a bit more disadvantaged in this regard.

So, the story illustrates that manufacturing is not dead in the United States. Unfortunately, labor intensive industries are all too common. Consequently, the U.S. will likely continue to lose more than it gains. One can only hope issues such as high healthcare gets straightened out before even more work is lost.

The Video Games Wars: A Lesson in Industry Dynamics

When I was younger, I used to be a huge video game fan. I don't follow the industry nearly as closely as I used to, although I occasionally play sports games on a Xbox I was given a few years back. However, when it comes to business, the video game industry provides a really interesting model. As you've probably seen, Microsoft announced they'll be first to market with the new Xbox for the upcoming holiday season. Sony and Nintendo won't follow suit until 2006.

Traditionally, most industries have three major players (above 10% share). This case is certainly no different. Sony currently owns the lion's share of the market, with Microsoft and Nintendo trailing. Sony was in fact first to market, a factor that Microsoft blames for their distant second position in round one. So, the question becomes whether Microsoft will be able to gain share thanks to the first mover advantage.

I personally think they will make up much of the gap, creating a much closer race this time around. Microsoft swore they'd do whatever it takes to be first to market in round two, and they succeeded. Many children want something new for the holidays, not for the slower (and warmer) spring season. That'll be a significant help to Microsoft. Sony has been smart in keeping the system backwards compatible. This protects them as it adds extra incentive to purchase the new version of the system that plays the expansive library from the previous systems.

Nintendo should then remain on the fringes with its core audience of loyalists (due to their exclusive games) and younger players. As the market continues to mature, it'll be interesting to see if Nintendo gets driven out and becomes a third party producer like Sega. It may depend on whether they can maintain their strength in Japan.

As mentioned, markets tend to have three major players while growth is occurring. Sometimes, from there, the market can only sustain two players when maturity hits. Microsoft and Sony have big dollars. Especially when considering how core it is to Microsoft's strategy; they aren't overly concerned about taking early losses. This is a great industry case study in action. Only time will tell how it'll play out.

American Made Clothing, a Potential Niche?

The Christian Science Monitor has an interesting article on the rise of two American clothing companies. They are clearly selling the social aspects of their clothing being made by those who earn a fair wage in the United States. And, in the case of American Apparel, the clothing is fairly reasonable in price.

Now, these brands won't take the nation by storm. Survey after survey tells us people claim they'll pay more to buy American, but really won't. However, it is a noteworthy movement that could allow them to form a profitable niche if they stay within their means. It could also bolster some niche stores that want to get away from price competition on apparel.

Want to spread the word? Try these free PR services.

If you run a business, you know promotion can be costly. However, there are some free public relations services that can help you immensely. PR Leap and PR Web (and there are likely others) let you send out releases, and much like blogs, they distribute them to various feeds. If you are a local business, don't fear. They even let you choose the metro population. They edit and approve your releases and then distribute them.

While these aren't exactly of the calibar of a PR agency, they can be helpful if you are on a budget. These services, mixed with some personal effort in getting your news picked up, can go a long ways. They also let you upgrade to paid services if you'd like, although I can't speak to them. If you are looking for PR on a budget, I'd give services like these a shot. They'll get your name and link out a little bit. They certainly can't hurt.

Good Article on the Dollar

In my political rambling, I discussed the potential negative results that can come from the significant deficit. Strategy & Business has a good article on the topic titled "Are Dollar Reserves Still Safe." The article discusses the declining certainty that comes from the dollar. The article is worth a look, as it highlights the business aspects.