Anticipating and pioneering the next global trend
We export the work… …not the worker!
- The USA was the World Industrial Power during much of the 20th century;
- Following World War II, within the reconstruction stage, the USA empowered Japan which was then a source of low-cost reliable labor; (possibly USD$.05/hour)
- Louis Marx “Toy King” was quoted in 1945 as saying that the Japanese are clever people; if we provide them with the technology and wherewithal, they can produce;
- Marx Toys pioneered toy production in Japan 1945;
- The rule of Supply vs. Demand dominates;
- Japan prospered so much that within a decade, the labor shortage dried up and the “cheap labor” became costly; the new industrialists became financiers and investors;
- As rates increased with Japan’s prosperity, in 1952, Marx Toys pioneered toy manufacturing (Elm Tool) in Hong Kong;
- Manufacturing began to shift to Hong Kong where it was possible to obtain willing labor at approximately 90 – 95% lower than the comparable cost in the USA;
- Again, Hong Kong prospered creating a new class of wealthy Chinese living under the British Protectorate; Hong Kong became industrialists, investors and financiers.
- The 60s and 70s saw production shift to Taiwan; again creating prosperity;
- Singapore went through the same process in the garment and other industries to become a world financial center;
- During the 1980s China Mainland opened their doors to the most abundant labor supply in the world; the Chinese have excellent work ethics and reliability;
- “American Plastic Equipment, Inc.” contracted by the Chinese government built the “first” toy factory with used machinery from Ideal Toy Corp. of Newark, N J and tooling of Marx Toys with state-of-the-art technology from New York University;
- During these last three decades, as China became the “world’s factory”, we have seen the labor in China become scarce while the cost of labor, overhead and production have skyrocketed. The days of cheap Chinese production are over! Prices and expenses are increasing.
- Under Jay’s theory, “One!” eventually we will all be the same on a global basis;
- However, in the meanwhile, there is still opportunity in the arbitrage of labor;
- The timing is right for the source to shift again;
- The general population is now reluctant or resistant to “Made in China”;
- The USA is still the world’s largest market;
- Canada, the closest neighbor to the north, is also a good consuming nation with similar language and culture;
- Mexico is the closest neighbor to USA and Canada;
- Mexico, USA and Canada are all in North America and make up the NAFTA;
- While the USA and Canada enjoy substantially high standards of Living;
- 40% of the Mexican population is at poverty level;
- 20% of the Mexican population live on USD$5.oo per day or less! (Minimum wage)
- In contrast, the world’s richest person lives in Mexico;
- Due to the compensation differences, many Mexican citizens cross the border to the USA as illegal immigrants in search of economic opportunity;
- The illegal immigrants conflict with the US citizens in competing for work in USA;
- The Mexican worker earns less than the US citizen;
- As a contrast, the same goods sold in Mexico may cost 50% higher than in USA;
- Believed to be due to the economic differences, Mexico is currently in a phase of increased corruption and violence including extortion and kidnapping;
- The circumstances and results are similar to those lived by Colombia during the 1970s and 1980s where corruption controlled the society;
- Mexico has natural advantages (below) to produce and deliver optimum product;
- The time is NOW!
The Bi-Lateral Solution
- Greater labor opportunities in Mexico allow the Mexicans to remain gainfully employed within Mexico; they will not need to cross the border in search of employment;
- If the immigrants are not infiltrating the US job market, the U S Citizens have the job opportunities that they are complaining about losing to “cheap foreign labor”; (it remains to be seen how many of the complaining public actually accept the work)
- With increased education and employment, the corruption tends to diminish;
- With productive employment the violence tend to diminish;
- Education, academic, professional plus specific job training, speaks for itself;
- Under Project México we will provide the employment; and
- The Mexican Government should provide the education.
Create an entity to manufacture the product in Mexico for world consumption; with both:
- Proprietary product and
- Contract manufacturing.
The entity will have its own international marketing machine.
The entity will be composed of existing toy factories with their existing equipment, machinery, buildings, staff, employees, capital and resources. As business develops, it will generate new members and investment as well as the existing contract manufacturers. Demand will create new facilities. We start in the Toy Industry, and may continue to the others such as garment, shoes etc.
Advantages for Mexico
- More work, greater earnings, less violence in Mexico;
When one is busy working, he will not have time to “get into trouble”.
- Greater earnings, greater purchasing power;
- Nationals remain home;
- Greater earnings create greater income hence greater tax income for government;
- Exporting generates income to improve the gross national balance of payments; and
- Domestic production eliminates the need for importation of certain consumer goods;
- Greater market will increase the volume – with increased volume comes economy of scale; The costs per unit in Mexico shall decrease;
- Lower consumer product cost in Mexico due to the new efficiency and supply.
Advantages for USA
- Good neighbor policy;
- Support NAFTA;
- Hemispheric stability;
- Retain the domestic jobs for the domestic work force;
- Keep the cash in the home hemisphere; (previously poor, China is now ‘rich enough’);
- Lower cost of goods;
- Goods more readily available;
- USA loses nothing by adding another supplier for product already produced off-shore;
- Several sources of supply is a healthier position;
- Competition begets efficiency and lower prices.
- Mexico is closer to the USA and Canada;
- Save time and cost for shipping; (to order in China it can take 180 days including the lead time and ocean freight etc. while Mexico is only hours away by truck);
- Same time zone – Mexico time is “Chicago time”; (in China, day is night, night is day!)
- Language – Mexico speaks Spanish and much of the USA also speaks Spanish. Most of the USA speaks English and much of Mexico speaks English. English and Spanish are both Romance rooted languages more similar to each other than Asian languages.
- Similar, almost identical alphabet. The English 26 letters are all in the Spanish alphabet;
- We are only hours away by flights; many non-stop. One could actually fly to Mexico in the morning, meet and return in the evening. China is a long trip.
- From Asia we ship by container; generally 20’ or 40’; from Mexico we ship by truck generally a 53’ truck. A 53’ trailer holds more than a 40‘container. More efficient.
- Begin with the Toy Industry;
- The U S Toy Industry consumption has already become almost all imported;
- Mexico has existing toy factories with installed capacity available;
- Join the best factories in Mexico with complimentary non-competing lines in a union to form a single exporting entity as the biggest and the best;
- Include contract manufacturers as a separate division;
- Compose a group of Sales and Marketing Representatives in USA;
- Compose a group of Sales and Marketing Representatives for Canada;
- Follow with a marketing group for South America;
- Follow with a marketing group to Europe; and elsewhere. India and Africa are growing;
- Provide education for efficient production to the Mexican partner companies;
- Seek U S government and Mexican government support.
The timing is right because:
- The labor and cost of doing business in China has increased and is increasing rapidly;
- The public is weary of Made in China and would prefer Made in North America;
- Mexico is facing a difficult period which will be helped by increased work and prosperity;
- The timing is right to shift the production into Mexico!
By providing gainful employment in Mexico, it will in turn release the higher paying jobs in USA for the citizens of USA.
We export the work, not the worker!