HP: Protectionism won't save Europe's jobs

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Cost versus Value....

Here is what I have against outsourcing, and John I don't think you can argue with this one! Let's say I make chocolates. I make damn good ones too. I package those chocolates in a box. I have some very well trained people working in my factory. Well, the company has had a hard time selling chocolates. It's a recession and all. My revenue is hurting a little bit. This guy comes to me and says, 'Hey, I can make those chocolates much cheaper, you seem to paying your factory people an awful lot of money' He's right my salary is one of my highest variable costs. Well, I will outsource to this guy to make the chocolate. I fire my staff, except for the people making boxes to put the candies in, they are cheap unskilled workers. Hey, short term my bottom line got better! The investors are happy! Do you see where I am going yet? Well, down the road I start to have some problems. First, the outsourcer costs start to climb, not much but a little bit. Then the quality starts to lag. Because of this my chocolate sales start to suffer. I can't change the outsourcing model, because all of my skilled employees are gone. I know! We will make better boxes, I still control that (of course I might have outsourced that too). Well, it may be a better box, but the chocolates still suck. I have now lost control of the very thing that made me successful. Good chocolates. Worse yet, suddenly knock offs of my chocolate are appearing on other markets, taking away from my revenue. I protest to the outsourceer, but he is in a different market with different laws pertaining to trade secrets and the like. The investors are not happy. Stock takes a dive. But hey, I still have my box manufacturing that I can sell to the knock-offs. Problem with that is, the margins are not what making chocolates were. John, can you draw comparisons between what some US companies are doing (HP, SUN, etc) and this little story?

Posted by: wploger   Posted on: 01/23/04 You are currently: a Guest | Members login | Terms of Use

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