There are very long and very deep relationships and friendships, some decades, between western and Chinese / Hong Kong companies.
Hasbro is making a bet on manufacturing in India and they aren't the only one. So is Foxconn, who more than likely makes your smart phone and General Motors who, you may recall, makes cars. That is according to an article in The New York Times by Keith Bradsher. The article, "India’s Manufacturing Sector Courts the World, but Pitfalls Remains," opens with this compelling statement:
[Hasbro] still sources expensive, complex toys like the electronic FurReal Friends from China, Hasbro has contracts for production in Turkey, Indonesia, Vietnam and Mexico. It has moved most aggressively into India, where Hasbro buys from several sizable factories, and another is planned."
But why are Hasbro and these other companies moving production to alternative countries after decades of turning out toys, cars, phones and textiles at inflation shattering prices? And more importantly, why India and why now?
The first thing to understand is that moving manufacturing out of China is not an easy decision. China offers an outstanding infrastructure, savvy, veteran management teams and efficient systems. I think, more importantly, there are very long and very deep relationships and friendships, some decades, between western and Chinese / Hong Kong companies.
Secondly, moving out of China is not a new idea. Toy and other industries have been manufacturing in Viet Nam for years. To make my point, here is a quote from an article, "Corporate America’s China plus one strategy," written January 31, 2008 about the notion that manufacturers should have at least one factory located in a country other than China: "As China is getting wealthier, and its population older, it is getting more expensive to manufacture there. Wages are rising and so are the prices of commodities…"
That description could largely describe the current conditions in China. What's changed since 2008? I will have some thoughts on that in my next posting.