Untouchables in the WSJ

Foreign countries offer benefits for American industries to outsource. But there are still several firms that stay put in the United States. What factors influence the refusal of taking advantage of foreign attractive offerings?

According to Timothy Aeppel, US firms chose a domestic location that is close to the market and the people who will buy the product. The transportation of larger products is more cost efficient, while closeness to customers results in a quick adjustments to the market’s demand. Firms locate themselves in the area in which their products are needed.

In a way, US firms do outsource, only in their country. They prefer remote areas with low taxes and low land costs while still being significally accessible.

Domestic firms survive because they employ special types of workers not available anywhere else. These are high skilled workers who have either grown up producing or working with a specific product or have been trained to work more efficiently than any cheap labor abroad. Thus, the product has a high value in quality.

Americans realize this and trust the brand name. They will buy it instead of a foreign product if it relates to their health condition. The market is stable and because little risktaking is involved firms don’t have to search for cheaper land and labor to cut costs.

~ by anyaka86 on November 2, 2006.