dstig1
Super Member
- Joined
- Apr 7, 2010
- Messages
- 5,016
- Location
- W Wisc
- Tractor
- Kubota L5240 HSTC, JD X738 Mower, (Kubota L3130 HST - sold)
A big driver for localizing production is to reduce costs and expand your market share. You have no idea how much more expensive it is to import something than it is to make it locally. But until the volumes become large enough to make the investment worthwhile, a company will bite the bullet and import.
An effect that this has is that only more expensive stuff tends to be imported as the import costs are less of a bite in higher dollar items. A good example are the Euro luxury car makers. BMW/Mercedes sell a lot more models in Europe than they do here, and they are a lot cheaper there...because they make them there. They are also not considered as high end there as they are in the US for the same reason. We only see the expensive models. They do not bring over the low cost models as the import costs would make them too uncompetitive.
Now someone will rightfully say "What about all that cheap low-end Chinese junk that gets imported?" Absolutely a good point - it still costs a fortune to import it. Does that give you an idea just how cheap China is?
There are also a lot of currency risk issues that go away when you make something where you sell it. If the currency exchange rates change between the country you make something in and the country you sell it in, it can have huge effects on the bottom line (positive or negative). Building locally removes/reduces that a lot.
If you have a good solid market in another country, and especially if it is growing, then it is a very smart move to start making products there. But it is not easy to start that up - halfway around the world in a place with different language and culture and customs. Starting up operations in a new country is not for the timid.
An effect that this has is that only more expensive stuff tends to be imported as the import costs are less of a bite in higher dollar items. A good example are the Euro luxury car makers. BMW/Mercedes sell a lot more models in Europe than they do here, and they are a lot cheaper there...because they make them there. They are also not considered as high end there as they are in the US for the same reason. We only see the expensive models. They do not bring over the low cost models as the import costs would make them too uncompetitive.
Now someone will rightfully say "What about all that cheap low-end Chinese junk that gets imported?" Absolutely a good point - it still costs a fortune to import it. Does that give you an idea just how cheap China is?
There are also a lot of currency risk issues that go away when you make something where you sell it. If the currency exchange rates change between the country you make something in and the country you sell it in, it can have huge effects on the bottom line (positive or negative). Building locally removes/reduces that a lot.
If you have a good solid market in another country, and especially if it is growing, then it is a very smart move to start making products there. But it is not easy to start that up - halfway around the world in a place with different language and culture and customs. Starting up operations in a new country is not for the timid.
