Risk Factors in China Sourcing
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It is natural for companies to consider China sourcing or setting shop in China for obvious reasons such as becoming competitive in the market, staying afloat in recession ridden market and so on. Risk factors increase with more and more companies opting China sourcing.
-Risk #1 in China Sourcing – Renewed Competition
As industries flock to China either to for production or outsourcing, they will be invariably competing with one another as well as with dominant local and government promoted companies in the niche. Those companies that sought to beat their domestic competition by China sourcing will gradually find themselves competing with either the China manufacturers or with all those companies which have begun sourcing from China. This is a pretty similar scenario to the one that prompted China sourcing option.
-Risk # 2 in China Sourcing – Question of Legal Protection
Many companies that ventured into China sourcing have done so with a 'flock mentality' without calculating the risks involved and as a result miserably failed without even being able to retrieve their investment, thanks to undesirable government interference and lack of legal protection. The complexities of legal processes, tricky rules of business, and difficulties in understanding regulations apart from quenching flare-ups and differences with China sourcing partners have time and again taken heavy toll.
-Risk # 3 – Is The Cost of China Sourcing Really Low?
In China sourcing, American businesses have to anticipate many common hurdles, at least initially. The usual ones are unusually longer lead times and order quantities which pushes businesses strapped for cash to carry unnecessary inventory and incur connected costs. Another major question with China sourcing is that of establishing the quality. Having an on-site quality inspector may be a good idea for China sourcing strategy but not without adding to a new cost component. Nevertheless, this goes on to avoid the potential incidental costs of returning goods.
-Risk # 4 – Contradictions and opportunities for China sourcing
Despite its status as the 4th largest economy, China sourcing succeeds due to China's ability to offer cheaper labor cost than Mexico which is why China can't be ignored. But the Chinese national government has given up all powers to impose economic agenda and rule at the grass roots level and this authority is disposed with the local and provincial governments which is the root cause creation of many a hurdle for China sourcing.
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