“The Speed and Flexibility is Breathtaking” –But in a Good Way? March 29, 2012
Posted by Jeff Fuchs in manufacturing, workforce.Tags: manufacturing, outsourcing, workforce
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Mark Graban’s Lean Blog post about how iPhones, iPods, and other electronic devices are being produced in China under horrible conditions to workers. 12-hour shifts and 8,000 Chinese workers can produce 10,000 iPhones per day. Chinese workers live at factories in small rooms with bunk beds that reach as many as fifteen high. When Apple prepares to launch a new product, 12-hour shifts become 16-hour shifts. Employees regularly become injured, and/or die on the production lines. And Apple doesn’t do as much as it should to stop such abuse.
Check out Mark’s informative post here.
For Some U.S. Companies, Time to Head Home March 29, 2012
Posted by Jeff Fuchs in supply chain, Uncategorized.Tags: offshoring, outsourcing
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In an article at Bloomberg Businessweek, Matthew Phillips writes about a developing trend of U.S. companies that are returning their operations home. A panoply of issues face those companies which seek to outsource, such as separating physical production from engineering, cost of travel in terms of money and time, and globalized supply chains. For many companies the cost of all of these factors is too much. 21% of U.S. companies sourcing in China are now considering shifting back to the United States.
To read Matthew’s article, head on over here.
The Case for Onshoring January 30, 2012
Posted by Jeff Fuchs in supply chain.Tags: offshoring, outsourcing, supply chain
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Guy Morgan, writing at IndustryWeek, makes a compelling argument for onshoring. Morgan contends that clear thinking is important as U.S. companies move forward. They must consider the total costs of making a product. Logistics matter. As wages and labor costs rise in other countries, the United States is prepared to meet the change with highly sophisticated yet easy logistical systems for those seeking to work within the country.
Read Mr. Morgan’s persuasive article here.
The Case for Onshoring January 30, 2012
Posted by Jeff Fuchs in supply chain.Tags: offshoring, outsourcing, supply chain
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Guy Morgan, writing at IndustryWeek, makes a compelling argument for onshoring. Morgan contends that clear thinking is important as U.S. companies move forward. They must consider the total costs of making a product. Logistics matter. As wages and labor costs rise in other countries, the United States is prepared to meet the change with highly sophisticated yet easy logistical systems for those seeking to work within the country.
Read Mr. Morgan’s persuasive article here.
787 Dreamliner Teaches Boeing Costly Lesson on Outsourcing April 20, 2011
Posted by Jeff Fuchs in manufacturing, supply chain.Tags: manufacturing, offshoring, outsourcing, supply chain
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The Los Angeles Times reports that Boeing, which outsourced labor and material around the world, is losing money on the 787 Dreamliner. The plan was to use one factory near Seattle to gather together the parts produced around the world, and assemble them. But early on, problems emerged –from parts that didn’t fit to shortages of parts altogether. Because of this, the airliner is 3 years late and almost one billion dollars over budget.
Check out the L.A. Times article here.
787 Dreamliner Teaches Boeing Costly Lesson on Outsourcing April 20, 2011
Posted by Jeff Fuchs in manufacturing, supply chain.Tags: manufacturing, offshoring, outsourcing, supply chain
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The Los Angeles Times reports that Boeing, which outsourced labor and material around the world, is losing money on the 787 Dreamliner. The plan was to use one factory near Seattle to gather together the parts produced around the world, and assemble them. But early on, problems emerged –from parts that didn’t fit to shortages of parts altogether. Because of this, the airliner is 3 years late and almost one billion dollars over budget.
Check out the L.A. Times article here.
How Apple’s iPhone Widens the Trade Deficit with China (And How to Fix It) January 22, 2011
Posted by Jeff Fuchs in economy, government, supply chain.Tags: economy, government, outsourcing, supply chain
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Though the iPhone is an American invention, it is contributing $1.9 billion to the trade deficit with China. Developing countries export the high-tech products that affluent countries themselves invent. If Apple were to pursue American workers instead of Chinese workers, the manufacturing cost of a phone would rise from $6.50 to $68 per phone –but selling it for the going rate of $500 would still give Apple a more than-50% profit margin. And if the U.S. produced and sold its own phones, that $1.9 billion trade deficit would disappear –and the U.S. would add $5.7 billion to U.S. exports.
Check out the FastCompany analysis here.
How Apple’s iPhone Widens the Trade Deficit with China (And How to Fix It) January 22, 2011
Posted by Jeff Fuchs in economy, government, supply chain.Tags: economy, government, outsourcing, supply chain
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Though the iPhone is an American invention, it is contributing $1.9 billion to the trade deficit with China. Developing countries export the high-tech products that affluent countries themselves invent. If Apple were to pursue American workers instead of Chinese workers, the manufacturing cost of a phone would rise from $6.50 to $68 per phone –but selling it for the going rate of $500 would still give Apple a more than-50% profit margin. And if the U.S. produced and sold its own phones, that $1.9 billion trade deficit would disappear –and the U.S. would add $5.7 billion to U.S. exports.
Check out the FastCompany analysis here.
Is Labor a Significant Cost…Or Not? August 12, 2010
Posted by Jeff Fuchs in Lean Thinking, supply chain, workforce.Tags: Lean Thinking, outsourcing, supply chain, workforce
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Kevin Meyer at Evolving Excellence has demonstrated in the past that, based on internal improvements, North American companies can compete well – from North America. The only real cause to move a business overseas might be to be closer to the customers. Rising labor costs in China are becoming a headache for businesses who once viewed outsourcing as a more plentiful source of return. Indeed, lack of a mature supply chain structure in other countries – like Vietnam – ultimately cause costs other than labor to rise, and total cost goes up as a result.
Check out Mr. Waddell’s post here.
Is Labor a Significant Cost…Or Not? August 12, 2010
Posted by Jeff Fuchs in Lean Thinking, supply chain, workforce.Tags: Lean Thinking, outsourcing, supply chain, workforce
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Kevin Meyer at Evolving Excellence has demonstrated in the past that, based on internal improvements, North American companies can compete well – from North America. The only real cause to move a business overseas might be to be closer to the customers. Rising labor costs in China are becoming a headache for businesses who once viewed outsourcing as a more plentiful source of return. Indeed, lack of a mature supply chain structure in other countries – like Vietnam – ultimately cause costs other than labor to rise, and total cost goes up as a result.
Check out Mr. Waddell’s post here.
Outsourcing Point/Counterpoint February 3, 2010
Posted by Jeff Fuchs in supply chain.Tags: outsourcing, supply chain
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Outsourcing does not always ensure a healthy bottom-line. According to Dr. Lowell Yarusso at Industry Week, this can be averted by avoiding “two critical errors that frequently result in value leakage across the entire portfolio of outsourced good and services”.
The first error is described as “Fire, Aim, Ready-Decision Making”. Companies have a tendency to rush into it, believing it will give them an immediate competitive edge or that quick outsourcing will bring about quick profits. Careful planning is essential.
The second error is described as “Don’t Confuse Me with Facts Decision Making”. In companies that push outsourcing as the best strategy, the inherent danger is that management may reject any analysis whatsoever that outsourcing may not be successful. Because of this, “Knowing what results are expected, assumptions, data collection, analysis, and conclusions may be skewed to support a recommendation to proceed.”
Some of the most critical factors that need to be fully understood when outsourcing are laid out in Dr. Yarusso’s article. These include “Specific vs. General Competencies,” in which include the continually changing process of where and when to outsource; “Leading vs. Following,” which includes looking at both short term and long term values, recognizing that entering an emerging field increases risk-taking, and not entering an emerging field may prove costly.
Third, there is “Total Cost of Ownership vs. Fully Loaded Costs” which examines the indirect causes that can have consequences on profit based on outsourcing. Outsourcing cost savings are often offset by hidden costs “that have not been allocated to the outsourcing effort.”
Finally, there is “Cost Arbitrage vs. Value Arbitrage.” The traditional advantage of outsourcing rests in taking advantage of the difference of –usually – labor cost in two different markets. However, before the commitment is made to outsource to a particular locale, “it is absolutely critical that future market potential in that locale be included in the equation. The so called Optimal Zone, where cost savings are high and local market potential is high, should be the long-term goal of any outsourcing strategy.”
Companies seeking to outsource should bear all of these factors in mind. The most jarring cause of poor returns on outsourcing, it would seem, are the indirect costs related to outsourcing.
Check out the Industry Week article here.
Outsourcing Point/Counterpoint February 3, 2010
Posted by Jeff Fuchs in supply chain.Tags: outsourcing, supply chain
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Outsourcing does not always ensure a healthy bottom-line. According to Dr. Lowell Yarusso at Industry Week, this can be averted by avoiding “two critical errors that frequently result in value leakage across the entire portfolio of outsourced good and services”.
The first error is described as “Fire, Aim, Ready-Decision Making”. Companies have a tendency to rush into it, believing it will give them an immediate competitive edge or that quick outsourcing will bring about quick profits. Careful planning is essential.
The second error is described as “Don’t Confuse Me with Facts Decision Making”. In companies that push outsourcing as the best strategy, the inherent danger is that management may reject any analysis whatsoever that outsourcing may not be successful. Because of this, “Knowing what results are expected, assumptions, data collection, analysis, and conclusions may be skewed to support a recommendation to proceed.”
Some of the most critical factors that need to be fully understood when outsourcing are laid out in Dr. Yarusso’s article. These include “Specific vs. General Competencies,” in which include the continually changing process of where and when to outsource; “Leading vs. Following,” which includes looking at both short term and long term values, recognizing that entering an emerging field increases risk-taking, and not entering an emerging field may prove costly.
Third, there is “Total Cost of Ownership vs. Fully Loaded Costs” which examines the indirect causes that can have consequences on profit based on outsourcing. Outsourcing cost savings are often offset by hidden costs “that have not been allocated to the outsourcing effort.”
Finally, there is “Cost Arbitrage vs. Value Arbitrage.” The traditional advantage of outsourcing rests in taking advantage of the difference of –usually – labor cost in two different markets. However, before the commitment is made to outsource to a particular locale, “it is absolutely critical that future market potential in that locale be included in the equation. The so called Optimal Zone, where cost savings are high and local market potential is high, should be the long-term goal of any outsourcing strategy.”
Companies seeking to outsource should bear all of these factors in mind. The most jarring cause of poor returns on outsourcing, it would seem, are the indirect costs related to outsourcing.
Check out the Industry Week article here.
How to Calculate Total Landed Cost October 30, 2009
Posted by Jeff Fuchs in manufacturing, strategy, supply chain.Tags: manufacturing, outsourcing, supply chain
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An occasional collaborator of mine, Larry Loucka (a brilliant supply chain consultant, by the way), recently blogged and listed all the many elements of total landed cost. This is one of the better lists I have seen, and I wish more business leaders used it in considering their offshoring strategies. In many cases I have personally seen, decisions to move a product to China, or source a product from India, have delivered negative financial results. In some of these cases, the companies don’t even know it, simply because they are not adding up all the factors.
I am not anti-globalization, per se. I would simply prefer that leaders do all their homework before they make a shortsighted, “me too” decision.
See the list of Total Landed Cost elements here, and see how bad the problem is according to the Aberdeen Group Global Supply Chain Benchmark Report here.
How to Calculate Total Landed Cost October 30, 2009
Posted by Jeff Fuchs in manufacturing, strategy, supply chain.Tags: manufacturing, outsourcing, supply chain
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An occasional collaborator of mine, Larry Loucka (a brilliant supply chain consultant, by the way), recently blogged and listed all the many elements of total landed cost. This is one of the better lists I have seen, and I wish more business leaders used it in considering their offshoring strategies. In many cases I have personally seen, decisions to move a product to China, or source a product from India, have delivered negative financial results. In some of these cases, the companies don’t even know it, simply because they are not adding up all the factors.
I am not anti-globalization, per se. I would simply prefer that leaders do all their homework before they make a shortsighted, “me too” decision.
See the list of Total Landed Cost elements here, and see how bad the problem is according to the Aberdeen Group Global Supply Chain Benchmark Report here.
Speaking of Supply Chains, Consider the Benefits of Outsourcing to Domestic Firms October 6, 2009
Posted by Jeff Fuchs in manufacturing, strategy, supply chain.Tags: manufacturing, outsourcing, supply chain
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While the attraction of lower initial costs is undeniable, many companies are discovering that the actual savings achieved through outsourcing to the Far East can be significantly less than expected. When viewed in the context of robust supply chain design in a turbulent world economy, this fact provides strong incentive to consider looking for strategic partners a bit closer to home.
Outsourcing the manufacturing of electronic equipment to the Far East may seem to be beneficial to U.S.-based original equipment manufacturers (OEMs) because of the lower labor costs; however, Reliable Plant reports that the increased logistics costs tend to increase supply chain expenses.
Also, “cheap labor in China slowly is becoming a thing of the past. Double-digit growth in wages now is the norm, and there is an increase in switching jobs. China’s economy also is growing, so there currently is a shortage of skilled manufacturing, quality control, and middle-management workers—precisely the profile of the worker that is needed in factories turning out high-technology products for American companies.”
For a summary of this article, along with other highlights from APICS, click here.
For the full Reliable Plant article, click here.
Speaking of Supply Chains, Consider the Benefits of Outsourcing to Domestic Firms October 6, 2009
Posted by Jeff Fuchs in manufacturing, strategy, supply chain.Tags: manufacturing, outsourcing, supply chain
add a comment
While the attraction of lower initial costs is undeniable, many companies are discovering that the actual savings achieved through outsourcing to the Far East can be significantly less than expected. When viewed in the context of robust supply chain design in a turbulent world economy, this fact provides strong incentive to consider looking for strategic partners a bit closer to home.
Outsourcing the manufacturing of electronic equipment to the Far East may seem to be beneficial to U.S.-based original equipment manufacturers (OEMs) because of the lower labor costs; however, Reliable Plant reports that the increased logistics costs tend to increase supply chain expenses.
Also, “cheap labor in China slowly is becoming a thing of the past. Double-digit growth in wages now is the norm, and there is an increase in switching jobs. China’s economy also is growing, so there currently is a shortage of skilled manufacturing, quality control, and middle-management workers—precisely the profile of the worker that is needed in factories turning out high-technology products for American companies.”
For a summary of this article, along with other highlights from APICS, click here.
For the full Reliable Plant article, click here.
Offshoring Fuels the Aerospace Jobs Debate January 19, 2009
Posted by Jeff Fuchs in supply chain.Tags: aerospace, outsourcing, supply chain
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How outsourcing and the outsourced worker are viewed depends on which side of the issue – and the world – you stand.Is the relocation of work destroying the aerospace industry or creating a global industrial base that is essential to its health? Is a job moved offshore a loss or a gain for the industry? These questions came to a head in 2008 as outsourcing played a role in the collapse of the U.S. Air Force KC-X tanker competition, the unraveling of Boeing’s 787 program and ultimately the strike that idled the U.S. giant’s commercial aircraft production for eight weeks.
Aerospace is not alone in outsourcing, but the issue is far more complex for this industry than for any other. Manufacturers move work to other countries not just to reduce their costs, but to enter markets, spread risk, access funding and fulfill offset obligations.
As the global economic recession tightens its grip and the growth curve turns downward, outsourcing will come under ever greater and more critical scrutiny.
Read deeper analysis in this Aviation Week article.
Read the full article here.
Offshoring Fuels the Aerospace Jobs Debate January 19, 2009
Posted by Jeff Fuchs in supply chain.Tags: aerospace, outsourcing, supply chain
2 comments
How outsourcing and the outsourced worker are viewed depends on which side of the issue – and the world – you stand.Is the relocation of work destroying the aerospace industry or creating a global industrial base that is essential to its health? Is a job moved offshore a loss or a gain for the industry? These questions came to a head in 2008 as outsourcing played a role in the collapse of the U.S. Air Force KC-X tanker competition, the unraveling of Boeing’s 787 program and ultimately the strike that idled the U.S. giant’s commercial aircraft production for eight weeks.
Aerospace is not alone in outsourcing, but the issue is far more complex for this industry than for any other. Manufacturers move work to other countries not just to reduce their costs, but to enter markets, spread risk, access funding and fulfill offset obligations.
As the global economic recession tightens its grip and the growth curve turns downward, outsourcing will come under ever greater and more critical scrutiny.
Read deeper analysis in this Aviation Week article.
Read the full article here.
The Future Of Outsourcing December 8, 2008
Posted by Jeff Fuchs in manufacturing, supply chain.Tags: manufacturing, offshoring, outsourcing
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Globalization has been brutal to midwestern manufacturers like the Paper Converting Machine Company in Green Bay, Wisconsin. First came the 2001 recession. Then, two years ago, one of the company’s biggest customers told it to slash its machinery prices by 40% and urged it to move production to China. Last year, a St. Louis holding company, Barry-Wehmiller Cos., acquired the manufacturer and promptly cut workers and nonunion pay. In five years sales have plunged by 40%, and the workforce has shrunk from 2,000 to 1,100. Employees have been traumatized, says operations manager Craig Compton. “All you hear about is China and all these companies closing or taking their operations overseas.”
But now, Compton says, he is “probably the most optimistic I’ve been in five years.” Hope is coming from an unusual source. As part of its turnaround strategy, Barry-Wehmiller plans to shift some design work to its 160-engineer center in Chennai, India. By having U.S. and Indian designers collaborate 24/7, PCMC hopes to slash development costs and time, win orders it often missed due to engineering constraints — and keep production in Green Bay. Barry-Wehmiller says the strategy already has boosted profits at some of the 32 other midsize U.S. machinery makers it has bought. “We can compete and create great American jobs,” vows CEO Robert Chapman. “But not without offshoring.”
Chapman and others see a chance to turn around dying businesses, speed up their pace of innovation, or fund development projects that otherwise would have been unaffordable. More aggressive outsourcers are aiming to create radical business models that can give them an edge and change the game in their industries. Old-line multinationals see offshoring as a catalyst for a broader plan to overhaul outdated office operations and prepare for new competitive battles. And while some want to downsize, others are keen to liberate expensive analysts, engineers, and salesmen from routine tasks so they can spend more time innovating and dealing with customers. “This isn’t about labor cost,” says Daniel Marovitz, technology managing director for Deutsche Bank’s global businesses. “The issue is that if you don’t do it, you won’t survive.”
Read the full article in BusinessWeek here.
The Future Of Outsourcing December 8, 2008
Posted by Jeff Fuchs in manufacturing, supply chain.Tags: manufacturing, offshoring, outsourcing
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Globalization has been brutal to midwestern manufacturers like the Paper Converting Machine Company in Green Bay, Wisconsin. First came the 2001 recession. Then, two years ago, one of the company’s biggest customers told it to slash its machinery prices by 40% and urged it to move production to China. Last year, a St. Louis holding company, Barry-Wehmiller Cos., acquired the manufacturer and promptly cut workers and nonunion pay. In five years sales have plunged by 40%, and the workforce has shrunk from 2,000 to 1,100. Employees have been traumatized, says operations manager Craig Compton. “All you hear about is China and all these companies closing or taking their operations overseas.”
But now, Compton says, he is “probably the most optimistic I’ve been in five years.” Hope is coming from an unusual source. As part of its turnaround strategy, Barry-Wehmiller plans to shift some design work to its 160-engineer center in Chennai, India. By having U.S. and Indian designers collaborate 24/7, PCMC hopes to slash development costs and time, win orders it often missed due to engineering constraints — and keep production in Green Bay. Barry-Wehmiller says the strategy already has boosted profits at some of the 32 other midsize U.S. machinery makers it has bought. “We can compete and create great American jobs,” vows CEO Robert Chapman. “But not without offshoring.”
Chapman and others see a chance to turn around dying businesses, speed up their pace of innovation, or fund development projects that otherwise would have been unaffordable. More aggressive outsourcers are aiming to create radical business models that can give them an edge and change the game in their industries. Old-line multinationals see offshoring as a catalyst for a broader plan to overhaul outdated office operations and prepare for new competitive battles. And while some want to downsize, others are keen to liberate expensive analysts, engineers, and salesmen from routine tasks so they can spend more time innovating and dealing with customers. “This isn’t about labor cost,” says Daniel Marovitz, technology managing director for Deutsche Bank’s global businesses. “The issue is that if you don’t do it, you won’t survive.”
Read the full article in BusinessWeek here.
'Globality': Competing with Everyone from Everywhere for Everything November 25, 2008
Posted by Jeff Fuchs in product development, supply chain.Tags: Creativity & Innovation, outsourcing, supply chain
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Tata Motors, Embraer and Good Baby make vastly different products, but they have one thing in common: They are among a new breed of emerging-market companies that are reshaping global business. In GLOBALITY: Competing with Everyone from Everywhere for Everything, the authors contend that the old model of globalization is evolving into a new phase in which “challengers” from rapidly developing economies such as Brazil, India, China and Russia are competing with incumbent Western giants and growing at a staggering 30% per year. In this video special report, a managing director at The Boston Consulting Group discusses the factors that are contributing to this shift and what it means for companies hoping to compete in the 21st century.
See the video here.
'Globality': Competing with Everyone from Everywhere for Everything November 25, 2008
Posted by Jeff Fuchs in product development, supply chain.Tags: Creativity & Innovation, outsourcing, supply chain
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Tata Motors, Embraer and Good Baby make vastly different products, but they have one thing in common: They are among a new breed of emerging-market companies that are reshaping global business. In GLOBALITY: Competing with Everyone from Everywhere for Everything, the authors contend that the old model of globalization is evolving into a new phase in which “challengers” from rapidly developing economies such as Brazil, India, China and Russia are competing with incumbent Western giants and growing at a staggering 30% per year. In this video special report, a managing director at The Boston Consulting Group discusses the factors that are contributing to this shift and what it means for companies hoping to compete in the 21st century.
See the video here.
‘Globality’: Competing with Everyone from Everywhere for Everything November 25, 2008
Posted by Jeff Fuchs in product development, supply chain.Tags: Creativity & Innovation, outsourcing, supply chain
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Tata Motors, Embraer and Good Baby make vastly different products, but they have one thing in common: They are among a new breed of emerging-market companies that are reshaping global business. In GLOBALITY: Competing with Everyone from Everywhere for Everything, the authors contend that the old model of globalization is evolving into a new phase in which “challengers” from rapidly developing economies such as Brazil, India, China and Russia are competing with incumbent Western giants and growing at a staggering 30% per year. In this video special report, a managing director at The Boston Consulting Group discusses the factors that are contributing to this shift and what it means for companies hoping to compete in the 21st century.
See the video here.
‘Globality’: Competing with Everyone from Everywhere for Everything November 25, 2008
Posted by Jeff Fuchs in product development, supply chain.Tags: Creativity & Innovation, outsourcing, supply chain
add a comment
Tata Motors, Embraer and Good Baby make vastly different products, but they have one thing in common: They are among a new breed of emerging-market companies that are reshaping global business. In GLOBALITY: Competing with Everyone from Everywhere for Everything, the authors contend that the old model of globalization is evolving into a new phase in which “challengers” from rapidly developing economies such as Brazil, India, China and Russia are competing with incumbent Western giants and growing at a staggering 30% per year. In this video special report, a managing director at The Boston Consulting Group discusses the factors that are contributing to this shift and what it means for companies hoping to compete in the 21st century.
See the video here.
