Thursday, February 21, 2008

Good will write-down

Carl Pope lays out with eye-opening clarity one dire result of globalization on the future of American business.

The problem is not China. The problem is a business model in which companies outsource manufacturing under short-term, low-cost contracts to the firm that will follow their design standards most cheaply. All that is really Fisher-Price about Dora the Explorer is the design--the product itself is made in a factory over which the company has almost no control. It doesn't manage the working conditions, environmental standards, or safety practices. As a result, it no longer controls the product itself.
The race-to-the-bottom business model, where relationships are brief and uncommitted, is suicide in the long term. Once brand value is depreciated by inevitable product safety scandals, why would a domestic company be any more trustworthy than a foreign one?

Bleeding your brand is just another form of living off your assets. What will we do when everything is gone? Sell our souls? Fat lot they'll bring.

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