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Using a China Agent vs Going Direct

As companies weigh the pros and cons of working directly with a factory vs. dealing through an agent for their China sourcing needs there are many points to consider.

Top 10 Pros and Cons

1.  The scale or dollar volume purchased annually. (I published an article in M&A Magazine which argued it requires $40-$50MM in throughput for any ROI on a direct sourcing office.)

2.  The number of varying categories and SKUs being sourced.

3.  The complexity of products being sourced. Cotton socks are a lot less difficult to make and package than electromechanical items with sophisticated firmware and specialized components.

4.  Experience levels, competence and proficiency with the language of the country with whom they’re dealing.

5.  The  sheer number of factories the buyers/agents have worked with including access to the owners or very least factory bosses and relationships with those individuals; the length of time and history with those factories and dollars of business placed with them; the ability to get production bumped forward in the schedule;  the ability to receive favorable payment terms which impacts cash flow of any business.

6.  Competency with provincial government regulations and requirements. (How would a New Yorker fare in an Alabama factory or vice versa?)

7.  Ability to travel to/from factory within one day for urgent matters, product/packaging changes, and production oversight.

8.  Quality Control-Generally considered the most critical.  The standard process for measuring QC and the depth of practices such as random and in production sampling, testing equipment and facilities, reports, photos, and now video.

9.  Experience with logistics, freight terms and all export documentation and activities.

10.  Does the agent or factory (for direct) share your sense of urgency and same philosophies and principals?  Are they vested in the outcome and long term success of the business?

Diving into the China Pond

Diving into unknown waters

Many have asked me what it’s like doing business in China.  I’ve always said that if you are doing it by yourself it can be as dangerous as swimming with croccodiles.  I finally came across a photo that captured the essence of this concept.

What’s Next for Manufacturing in China?

What is something you can think of that can’t successfully be outsourced in China?

Think long and hard about this. Resist the temptation to veer toward intangibles or time sensitive services with obvious geographical barriers such as a haircut or plumbing repair. What product theoretically cannot be manufactured in China? How about a portrait? I have an acquaintance that has connected with amazingly talented artists who will take a family photo and reproduce a framed, hand painted, oil on canvas likeness taken from a photograph.

It will have the same level of detail and quality as those done by artists in the U.S. costing a minimum of $1200-$2500 just for the painting itself. This does not include the frame which can be another $350-$500. The exact quality portrait from China can be delivered to your doorsteps for $450 or about a quarter or less that which someone would expect to pay here. Why is this?

If you said labor cost you are only partly correct. There are many more factors that play into “the China price” for which Westerners have had an insatiable appetite since the Wal Mart effect took hold in the early nineties. Yet now writers, politicians and economists say the tide is turning. Many assert that currency fluctuation, labor shortages near China’s coastlines, and a rising middle class, are quickly narrowing the cost gap between China and the West. They might be forgetting one thing though according to Mike Bellamy, author of The Essential Guide to China Sourcing , “there is no Next China.”

Rising Labor Costs in China

 

rising labor costs china

In a Roya Wolverson interview published in Time, May 16, 2011, Pin Li, President of the Wanxiang America Corporation stated that “rising labor costs in China will only cause inflation and not necessarily jobs returning to the U.S.” He further explained that what this means is “instead of paying $1 for latex gloves the price may rise to $2 and will still represent the lowest cost available in the world.”

In other words, assuming material costs are consistent globally, even doubling or tripling the average monthly wage of Chinese factory employees still does not bring total cost of goods in line with U.S. workers.

In a recent conversation, Bellamy, Chairman of the Advisory Board for China Sourcing Information Center begins to make the “No Next China” case with the notion that China’s economy is still vastly lopsided in its dependence on exporting. The Chinese and its neveaux riche’ have created the world’s second largest economy that many predict will be bigger than the U.S. within the next decade. The only fuel to keep this burning is the demand for cheap(er) exports. A growing middle class also means bolstered domestic consumption, particularly as brands become more prevalent with Chinese consumers. But to sustain economic growth, exports have to remain a big chunk of the equation.

A Shift By Coastal Manufacturing Regions

The question may not be so much about “Made in China” as it is “What will be Made in China?” Sure there is great capacity and infrastructure in coastal regions but there may be a shift developing with the evolution of improved skill sets and wage increases. Dr. Eric Thun , lecturer in Chinese Business Studies at the University of Oxford China Center, says “pushing manufacturing into high value-added activity is very much what the government wants. This kind of cost pressure stimulates upgrading.”

Bellamy adds, “because China’s economy is still heavily export dependent at present, over the past years there have been concerns about the China government promoting the interior too fast at the expense of the coast. This could have major side effects on the much needed revenue stream gained by supplying product to overseas buyers. But, as April data demonstrates to policy makers, the development of the interior is not having a major impact on exports. “

The Role Of Appreciation In Chinese Currency To U.S. Job Creation

Since June, 2010 when currency truly began floating, the RMB has appreciated 6% against the US dollar. Depending on whom you talk to however, the RMB is still undervalued by as much as 25%. Add to this CPI inflation and productivity growth rates (Chinese worker productivity is growing faster than U.S.) and the RMB will continue to be undervalued for five years or more.

Pin Li argues that “currency can help but it also can hurt. Structural issues are more fundamental for the U.S. and China. This is more of a political question than any economist can even measure. Politically we have to pretend it’s an issue. But the reality is that jobs from China won’t come to the U.S. They’ll go to Mexico, Korea, and Indonesia. And that means the imports that came from China will now cost more which also doesn’t solve the deficit issue.”

Bellamy claims “we can expect that the US government will probably use the April export record to put pressure on China to allow their currency to appreciate. The China government has a plan in place for a slow but steady increase as opposed to a dramatic adjustment as desired by the US. Don’t expect China to change their plan just because of this April data and any related pressure from the USA.”

China as a Market

Li’s passive reference to the deficit is interesting and should not go unnoticed. While many grip about jobs, only a small percentage of Western companies have invested in growing market share in China.

In an October 6, 2010 Bloomberg Press report it was estimated that China market was valued at $150 billion in potential goods and services or a top ten global opportunity for U.S. companies. “U.S. companies have experienced tremendous commercial success in China’s market and the prospects for future growth are significant,” said Erin Ennis, vice president of the U.S.-China Business Council.

Beijing has a $145 billion trade surplus with the U.S., more than its deficit with the next seven- largest partners combined. But is this solely due to undervalued currency and cheap labor? Could it be more the apathetic or myopic strategies of only selling into North American and European markets and not breaking from traditional business models?

Pin Li makes a bold statement when he asserts, “Firms’ access to Chinese should be their more of a concern than an unbalanced currency.”

The Next 5 Years

China remains a factory to the world. Government subsidized infrastructure has ensured overcapacity of manufacturing availability. One needs to simply travel from town to town; cranes as far as the eye can see. Staggering development continues in all sectors such as transportation, industrial, housing, recreation, hospitals, shopping centers, and resorts. Innovation and branding are now woven into the next generation’s mindset with Beijing’s full support. There is no next China. Whether as adversary, trading partner, or ally the future will depend on setting priorities and building mutual trust.

David Alexander is President of BaySource Global www.baysourceglobal.com

US China Relations

 

US Ambassador Jon Huntsman’s speech at Tsinghua University reminds us about the positive aspects of US-China relations. An excerpt;

“So this year could be the most important in the history of our bilateral relationship. As an optimist, I believe the test will be how we take our relationship to a new level of cooperation and make real progress in resolving the pressing global issues that we face today.”

Steel Prices to Gain on Low Inventories, Costs, Baoshan Says Steelmakers will raise prices globally as they run down inventories and raw material costs gain, according to Baoshan Iron & Steel Co., China’s largest publicly traded mill.

“There’s momentum for prices to go up,” Yao Lili, an executive with the Shanghai-based company’s raw materials purchasing department, said in an interview in Hong Kong. “Inventories globally are generally quite low.”

Orders for Baoshan Steel, Posco and rivals are picking up as the global economic recovery accelerates, spurring a 55 percent gain in the costs of coal as steelmakers compete for supplies. Steel prices rose 9.1 percent in February int he U.S., and Chinese mills are charging 10 percent more since the start of this year.

“Demand growth from the home appliance makers may be stronger in 2010 than from automakers,” said Yao. “There’s a lot of potential from home appliance makers.”

Total vehicle sales in China jumped46 percent last year, fueled by the government’s stimulus spending and tax breaks. Sales may rise more than 10 percent this year, the Ministry of Commerce said Jan 29.

www.baysourceglobal.com

EXPO 2010 – Shanghai

Throughout the history of world expositions, the themes have always exemplified global progress, the contemporary spirit of each epoch and the challenges facing the world as it moves toward the future. The World Expo brings the whole world together to look into the future. Although the various world expos have taken their themes from an array of issues, including industry, information, civilization, science, technology, culture, art, education, transport, sports, ecology, environment and resources, what has always remained common is a spotlight on mankind, cities and nature. This is also the origin of the theme of World Expo 2010 Shanghai, China – “Better City, Better Life” – which points to two essential aspects of our future. This theme involves the relationship between people and cities, mankind and nature. World Expo 2010 Shanghai China will showcase the challenges facing human societies in this age of urbanization.

Copy of Shanghai Holiday 059

Greek philosopher Aristotle once said: People come to cities for life, and live there for a better one.” His wisdom best interprets the theme of World Expo 2010 Shanghai China. If we want to make our lives better, we first have to make our cities better. Cities represent the essence of human civilization. It is no coincidence that the equivalent of “civilization” in many Western languages has its origin in the Latin word “civitas,” which means “city.” The pursuit of World Expo 2010 Shanghai China for the ideal city of the future is embodied in the concept of the “city of harmony.” The notion of “harmony” is an old one in Chinese culture, advocating peaceful coexistence between mankind and nature, between body and soul, between individual and individual. The United Nations Human Settlements Program stated in its 1996 Istanbul Declaration: “Our cities must be places where human beings lead fulfilling lives in dignity, good health, safety, happiness and hope.” That underscores the ideas behind the theme of World Expo 2010 Shanghai China.

 

Duration: May 1 to Oct 31, 2010

Expected Visitors: 70 Million

Expected Participants: 200

www.baysourceglobal.com

New Product Development and The Adaptation Curve Part I

In our four part series New Product Development and the Adaptation Curve dedicated to new product developers, innovators and inventors, we explore the Top 8 considerations when developing a new product.  Whether a seasoned marketing professional or first timer, these 8 critical components include aspects related to product design, positioning, manufacturing, and distribution.

Product Development Costs 

Most inventors underestimate the cost for designing a manufacturing ready product.  Tools and molds can easily run into the five to six figure range and can dwarf first year profits.  Most any product requires both two dimensional (2D) and three dimensional (3D) engineering drawings that specify material requirements, accurate measurements and tolerances which are very minute, allowable thresholds or variances in gaps, thickness, or practical limits without significantly affecting function of a component.  These are the physical requirements of a product. There are also electromechanical tolerances which measure allowable ranges of energy output or resistance.

2D & 3D drawings are computer generated or Computer Aided Designs (CAD) are then used for creating the tooling for parts whether metal, plastic or other materials, even cut and sew projects.  The first commercial applications were in the automotive and aerospace industries.  Through the use of some of the most common software such as Solidworks and AutoCAD, two of the more widely used platforms, designers create the physical properties of a product.  Depending on the complexity of the part and the actual quantity of components this cost can range from the low to tens of thousands of dollars.

Distribution Channels

Some products are ideal for Big Box retail but unless you know how to navigate this space, most category managers are not going to take a chance with a single line item vendor.  Determining how to sell your product comes down to the “4-P’s” or Product, Promotion, Price and Placement.  Entire marketing strategies are built around this.  How you position your product will dictate your brand strategy.  From there it is necessary to determine price, sales tactics and a marketing campaign and budget.

Products are sold through single or multiple channels.  Often and most overlooked by new product developers is the benefit of working through wholesale/distributor channels.  These organizations have years of traction and relationships with retailers and can be the best avenues for introducing your product.  They have sales teams in place and assumedly the category expertise for not only implementing your programs but also helping positioning and building your brand.  Your distributor is your customer and investing the time to work with and support this resource will pay off tenfold.

Think about all the valued functions that are fulfilled by a strong distributor partner.  They have the infrastructure in place that includes:

  • Sales: category expertise and feedback
  • Warehousing; the ability to handle large single shipments
  • Customer service and support— activity based interface with multiple customers
  • Inventory reporting; purchasing and replenishment
  • Shipping and logistics

Read Part II of New Product Development

 

New Product Development and “The Adaptation Curve”

Nobody has an ugly baby.  The same goes for new product developers.  Whether an independent entrepreneur or seasoned marketing team, once a new product concept is developed and months, even years in some cases are invested, our babies become prettier every day.  The same unconditional love and support that builds as our children mature and develop transfers into the professional mindset of innovators.

Calling All Product Developers

Creating a viable and robust market for a new product takes enormous resource, planning and resolve.  The sheer capital to unveil and furthermore generate brand equity is often the most overlooked aspect of getting a product to market.  Take the Segway for instance.  This emission free, efficient mode of personal transportation has been around for over a decade.  With some quick, simple training even children can master riding this marvel.  Reaching top speeds of 12.5 mph it has a range of up to 24 miles on a single charge.  Still commercial acceptance has been scant.  Why wouldn’t every warehouse and airport have a fleet of them?

Recently two Swedish designers have developed an entirely new concept for biking safety in the form of the Hovding, an airbag which deploys vies-a- vie algorithmic intelligence protecting riders from head trauma in the event of a fall or crash.  This revolutionary “bike helmet” is worn around riders’ necks and actually becomes a stylized accessory.  At $520 prospects for commercial distribution of any scale in the next five years may be slim.  However according to Forbes writer Jeremy Bogaisky this startup has already taken in $13 million in venture capital.  He cites bicycle industry analyst Gary Coffrin who gives a great summation stating “The adaptation curve for such a unique product at this price point is not likely to be rapid.”

Taking the tech factor down a notch, in my own gym sits a clever form of a door stop called “James the Doorman.”  I would imagine the designers, Black+Bum had their “Eureka” design moment and the wheels started spinning.  Honestly I have never seen such a cool variety of a door stop and  without knowing much about how they developed this unique version of an age old application, I can’t comment on what lengths they went to in commercializing their product.  I do know that the one in my club is the only that I have ever seen.

Every week we hear from inventors and product developers who have put great thought into products which offer unique solutions to every day needs.  Often though there are many missing pieces to their overall strategies.  Below are the Top 8 Hurdles to Successful New Product Launches.  In the coming months, I will be writing a series which individually expands on each of these, why they are often overlooked and how they are important for taking new products to market.

1. Product Development Costs 

Most inventors underestimate the cost for designing a manufacturing ready product.  Tools and molds can easily run into the five to six figure range and can dwarf first year profits.  Developing engineering drawings—those that translate into production and material specifications  require time and money.

2. Distribution Channels

Some products are ideal for Big Box retail but unless you know how to navigate this space, most category managers are not going to take a chance with a single line item vendor.  It creates additional administrative work for the system, and most inventors don’t have the capital to market their products.  Specialty and on-line retailers generally are better proving grounds for a products’ acceptance but you still have to generate interest and traffic.  Oh, and did you get a UPC code yet?

3. Inventory Capital 

Minimum order requirements (MOQs) by factories usually cause a lump in the throat.  Even if you have the greatest gadget in the world, how do you plan on financing that first big order?

4. Educating the Masses 

How will you announce the arrival of your new product to the world?  Magazines?  PR campaign?  Put an ad in the paper?  Direct Response Television (DRTV) is a great but often expensive form of advertising and one of the best ways to demonstrate a new application or use as well as building brand equity.  It’s great to have a video on your web site but again, how will you drive viewers and a following?

5. Price vs. Value 

In the initial phase of your product’s life-cycle there will likely not be the scale (volume) to drive down production cost.  Unless you can convince consumers they should pay a premium retail price, break-even may be longer off than you expect.  Plus, buyers will tell you whether your SRP (Suggested Retail Price) is in line with their category. 

6. Regulatory and Testing Requirements 

With your product in the public domain, most retailers will require some sort of regulatory or product safety testing and compliance with groups such as the Consumer Product Safety Commission (CPSC), Underwriters Laboratories (UL) and others.  Depending on what industry you are in, your item may require testing and certification by default.  To you this means additional time, red tape and money.

7. Patent and Intellectual Property Protection 

This is perhaps the most critical and misunderstood area of product development.  In many cases developers could have saved themselves months of work simply by doing some basic research and analysis.  The United States Patent and Trademark Office site has become more navigable and efficient thanks to improvements in their search functions.  There are three ways to begin your inquiry using key words, designs or a combination to see if someone else has registered a similar product.  Even if they have you may be able to make some functional changes to distinguish yours but again, many underestimate the time and capital required to protect the investment of your innovation.

8. Aftermarket Sales and Support

Now that you’ve got a patent pending, finalized your business plan, raised early stage capital, have product on the warehouse shelf and are starting to generate traction don’t forget the basic administrative requirements.  If you hit the lotto and are selling to Wal Mart, using retail link is a requirement.  This entails sending a staff member for training and ultimately using their on line tool daily or weekly.  Is someone manning the phones for product questions and concerns?  How robust is your web site?  Oh, we haven’t even discussed how much this will cost to build.

While these hurdles aren’t surmountable, it is critical to factor in all the critical and time consuming elements of bringing a product to life.  Even this list is not comprehensive enough to account for the unexpected turns in the pathway to new product development.  If it were easy, everyone would be doing it.

Read Part 1: New Product Development and the Adaptation Curve

David Alexander is president of Baysource Global and has a decade of experience with new product development and contract manufacturing.

Playing Football in the Rain

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Growing up in Ohio, I was fortunate enough to play football on a pretty decent high school team. Our season began in the dog days of summer and ran into the first autumn frost. At some point during those four months a good solid downpour during a game was inevitable which meant a contest mired in mud and the need for a revised game plan.

Now the pessimistic coach might consider this to be a disadvantage to his chances of winning the game. But a more strategic and forward thinking leader would understand both teams faced quarterbacks with wet hands, blockers bogged down in soggy clumps of turf and receivers whose completion numbers were going to be anything but stellar. The conditions of the game while presenting new challenges, would be equitable for each participant. So in the end it would be a level headed strategist who understood and exploited his team’s strengths—advantages even we may not have known we had, who would be celebrating victory after four quarters of play.

In low cost country sourcing, I have heard grumblings for the past five years about jobs lost to China. Indeed, the groundwork laid by Kissinger and Nixon in the 70s to open up free trade with China could have been perceived as an overcast forecast for some players. However, just as we discovered, the right plans and execution meant we could be quite successful rather than assuming failure was looming.

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Global Impact

China is set to become the world’s second largest economy. Those Western companies, who have built the equity of their brands over the past several decades, should recognize the opportunities that exist in China and other parts of Asia for marketing their goods and services. The investments U.S. firms have made in intellectual property, trial and error and innovation are unmatched anywhere in the world. So why haven’t more companies embraced this vast market that exists?

Whether we are talking about cosmetics, heavy equipment, apparel, software, consumer goods, or electronics, there is an insatiable demand for Western products overseas. Even in today’s depressed economic times, the needs for world class technology to complete huge infrastructure projects provide rare market opportunities to international companies.

China’s rebound for the first 3 months of 2009 is considerable. Expectations for economic growth for the next quarter are at 12%, so economists generally expect 7 to 8% overall growth this year.

Why then, is China poised for a rebound when the rest of the global economy is experiencing its worst performance in decades?

According to reports out of China, retail sales have continued to increase strongly with the help of the government which has offered China’s 800 Million farmers VAT exemptions on big ticket purchases, namely electrical appliances. The resulting effect is a replacement of exports through domestic consumption without a loss for the state. Retail sales went up 15% this past March compared to the same time a year ago.

China announced its stimulus investment program last October and took extraordinary measures to make it happen. Just prior to year end, 2008, USD 58 Billion of pending projects were approved within one week. Because the Chinese save most in the world they created the largest bank in the world (in deposits) passing American and Japanese rivals JPMorgan and Mitsubishi-UFJ. China is now home to the top 3 banks, reflecting the confidence of investors in Chinese banks. In the first quarter of 2009 new loans accounted for more than all new loans in 2007.

Exports are picking up too. From a monthly all time high of USD 136 Billion in September 2008, exports fell every month to a low of USD 65 Billion in February (25% less the 2008 figure). But, in March they rebounded to 90 Billion.

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New Market Opportunities

China’s size and growth create enormous opportunity in 2009. As a growing consumer market, the number of millionaires has grown to 825,000, many younger than 40. According to an April 30 Wall Street Journal article, the $585 billion stimulus program has “quickly funneled money into everything from bridges to consumers’ pockets.” There are countless municipal projects which now need to be completed including high speed trains, power plants, telecommunication systems, hospitals and water treatment plants–all which will be built in second and third tier cities. Business processes outsourcing (BPO), and high-technologies have been singled out as fast investments on the coast. Hi-tech will continue to rebound driving demand for components – all which will be made in China. Imports have started to recover since the beginning of the year.

Heavy equipment sales have increased as is evidenced by the attendance of almost 200,000 visitors to the China International Machine Tools fair in April. Caterpillar Inc. CEO James Owens, according the WSJ article, says “the company’s excavator sales in China have returned to record levels in recent months.” He goes on to say that “China continues to start work much more quickly than the U.S.”

Lower Manufacturing Costs

According to a recent report by Supply Chain Digest, “between lower wage pressures and the fact that most Chinese factories operating at low levels of utilization, Western buyers are gaining more pricing clout than they have had in years. The Chinese government, for example, says the value of China’s exports fell 25.7 percent year-over-year in February, accelerating from a tough 17.5 percent decline in January.”

Estimates of Hong-Kong based manufacturers in China indicate that business activity is stabilizing 20-30% lower than before the crisis. Forced to reduce prices in an over-supplied environment, Chinese producers have no other choice but to become the most competitive, even against other Asian producers.

“Deflation [in China pricing] is here to stay,” believes William Fung, managing director at Li & Fung. “Buyers have more of an upper hand again.”

That’s because export volumes to the weak economies of the US, Europe and Japan show no signs of recovering soon. However, there are signs that China’s manufacturing sector is recovering on its own, without much help from export customers, as the country’s economic stimulus plan and focus on bolstering the internal economy start to pay off.

By February, the producer price index went down 4.5% year on year, to its November 2007 level. The trend accelerated in March with a 6% drop. The consumer prices naturally followed, resulting in an actual deflation (-1.6% in February and -1.2% in March).

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The World’s Second Largest Economy Emerges

According to Daniel Meckstroth, economist at the Manufacturers Alliance in Arlington, VA, “the hope is that China would become an engine of growth to drive the local economy.” China’s proactive response to the crisis has enabled it to be the first to bounce back. This flexibility will not only result in China becoming the world’s second largest economy, but will also let it take its rightful place atop the value chain. Therefore it will have to invest to improve and maintain its cost competitiveness, as both a viable market and as a manufacturing leader. Should the U.S., Europe and other trading partners be able to weather the current storm, China will play a major role in world economic recovery.

A Winning Season

Those U.S. companies who spend their time, energy and resources embracing this new China market rather than disparaging others who offshore low value added labor, will actually enjoy playing on the muddy playing field that our global economy has become. In the end, the sun will still rise in the East and set on the West. The soggy ground will firm up and those who respond to all elements of the season accordingly will record a win.

David Alexander is President of BaySource Global, a U.S. based manufacturing and project management firm with offices in Shenzhen and Shanghai. www.baysourceglobal.com

A Community of Opportunity

Last fall I visited a state of the art precision die cast factory in Southern China. By my estimate they do a turnover of ~USD$400MM. This facility had two very sophisticated machines that were designed and manufactured by the Japanese and could essentially be used for highly technical military products although they were simply utilizing these for their advanced automation in making automotive (carburetor) parts. After a long lunch, the owner took us to their R&D building where they had something they wanted us to see. It was…a turkey fryer. That’s right. They had devised a turkey fryer that uses 80% less oil than deep frying. Already they had complete prototypes for cooking French fries.

You may be wondering where this story is headed. I had to admit I was a bit taken back by this “top secret” invention they whetted our curiosity over during our meal. But in their thorough marketing analysis, they had deduced there was no similar Western device yet on the market. It just so happened to be November and thus the American Thanksgiving holiday was just around the corner. This factory had a business plan in place, knew their total market universe in the U.S. of those who deep fried turkeys vs. oven, and even recognized this was a stronger activity in the South. In fact, they had determined that their distribution channel likely needed to begin with HSN or QVC and migrate into traditional retail.

What they didn’t have is a contact in the U.S. to assist with the launch nor did they know anyone who could introduce them into this market. They explained they were missing a key intermediary who could introduce this new product to a leading cookware company, someone familiar with infomercials, or a firm that could handle direct sales and distribution. If so, they believed annualized sales could reach USD$50-100MM. Have you seen this product on the market yet?

Sure there are low value added jobs that have gone offshore. And by the way, we haven’t stopped manufacturing in Central and South America and Eastern Europe. But there is an interdependency between China and the U.S. that can’t be ignored. There is also a huge market in China for our goods and services. Take the story of Dais Analytic whose desalination and wastewater technology will add up to 1,000 jobs in Tampa, FL over the next five years. Just this week, Warren Buffet’s Berkshire unit purchased Burlington Northern Santa Fe which is a huge bet on increased trade with China. And as a growing consumer market, the number of millionaires in China is 825,000 and growing, many under 40 years of age.

If you take this story out of the realm of turkey fryers, the Chinese are innovating every day but will rely on marketing expertise here to be successful. Likewise, there are Western companies who require cutting edge innovation and new product development to maintain and gain market share. Possibly this could lead to Eastern entities establishing beachheads in the U.S. The typical hurdle rates that private equity and investment banking firms require to do deals may be cast aside by Chinese courtiers who seek a foothold in the U.S. to incorporate their intellectual property, low cost labor structure and “can-do” spirit with U.S. brands.

It is truly a global landscape yet we seem to be protectionist by default. If we start embracing opportunities as a global “community” vs. simply a global business landscape, we have the chance to merge our creativity and assets to serve one another.

David Alexander is President of BaySource Global, specializing in project management, supply chain and cross border opportunities with China. www.baysourceglobal.com

PriorityPass.com!

Down on China? Not so fast

1.3 billion people. Or at least that’s the most widely believed figure representing the population of China. There are many who believe the number is actually 1.5 billion and growing. China’s GDP is back to 10% and thanks to the 2009 stimulus package there are tens of thousands of infrastructure jobs in progress. So why aren’t more decision makers including China in their plans? One Tampa company did just that.

PriorityPass.com!

Dais Analytic got its start producing high-tech filter membranes to improve air quality and cut energy costs in homes and businesses. It has expanded to develop products for desalination, wastewater treatment and energy storage, among other things. Although it currently has only 18 employees plans have been inked to add 1,000 jobs over the next five years, thanks to a $200 million trade agreement with China. Born about 10 years ago from an idea for developing fuel cells at Rensselaer Polytechnic Institute in Troy, N.Y., Dais Analytic opened in Pasco County in 1998, lured by tax breaks and assistance. The company specializes in nanotechnology: crafting materials that work with matter on the atomic and molecular level.

Its first commercial product, called ConsERV, is used with heating, air-conditioning and ventilation systems. It uses a membrane with microscopic channels that allow molecules of water to pass through the filter.

Incoming and outgoing air pass through the membrane in separate channels, with the outgoing air helping to cool the incoming warm air. The humidity in the air is condensed to molecules, so it becomes vapor with no condensation. Using the membrane to bring fresh, filtered air into the home or business can save energy costs and reduce pollution, the company says.

BaySource Global assists companies in their offshore manufacturing strategies as well as working with U.S. companies who are looking to commercialize their lines within China.

www.baysourceglobal.com

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