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MANUFACTURING OFFSHORE IS BAD BUSINESS

Constantinos Markides and Norman Berg, noting in 1988 the growing trend of American manufacturing companies to shift production operations out of the United States, contended that such a strategy is not only not the only alternative to the problems motivating such action, but that in many instances offshore production represents the worst of the alternative strategies.1 Markides and Berg stated that, for many manufacturing companies, an offshore production strategy is adopted as a "quickfix" remedy to a set of problems. The authors held further that the "quickfix" approach is characteristic of the approach to strategy of all too many contemporary American manufacturing managers; an approach that seldom attains longterm solutions to problems.

A primary problem cited by the authors with respect to an offshore manufacturing strategy is that any gains attained through the implementation of such a strategy are almost invariably shortterm in character. Thus, if the primary motive for adopting an offshore manufacturing strategy is to lower wage costs, and wage reductions are the primary goal of most firms relocating production operations to points outside of the United States, any gains attained will be lost as the introduction of the manufacturing operation into a lowwage economy will soon cause wages levels in that economy to begin to rise. In time,

1Constantinos C. Markides and Norman Berg, "Manufacturing Offshore is Bad Business," Harvard Business Review, 66 (SeptemberOctober 1988): 113114, 116120.

therefore, the manufacturer will be required to look for another lowwage economy, and move production operations once again. Additionally, as American workers are typically more productive than are workers in lowwage economies, the wage reductions attained through an offshore production strategy tend to be overstated.

In seeking lower wage levels through the implementation o...