American manufacturesr of various products have watched with horror as much of their business has slowly been lost to Asian manufacturers, primarily China. The US can simply not compete with the drastically lower labor costs of China and other Asian countries, which in the end offer American brands that manufacture there greater margins than if the products were manufactured in the US.
The US automobile industry has long suffered from overseas competition, but here the culprit was the perception that the quality of the overseas cars were simply better. This may have foirst taken root during the gas crisis of the early ‘70’s, but the Europeans and Japanese sensed an opportunity to take advantage of a competitive edge against the American gas-guzzling cars and they never looked back. Simply put, they applied a common marketing adage of “turning lemons into lemonade”. In this case, the lemons were the oversized US cars with their far lower gas mileage. New surveys suggesting that American made cars were rated on par with the Japanese and European autos may be a first step in the long climb back for Detroit.
Automobiles were not the only products that Americans cherished from abroad. They also coveted electronic goods and clothes, leading to an unprecedented US trade deficit. For whatever reason, even in the face of this extraordianry competition, the US has largely paid lip service to invoking patriotism or national pride in promoting Made in USA products, which is the case in many countries.
Until recently, Americans believed that goods manufactured overseas were as good or better than American-made goods, only cheaper. They didn’t think twice about a food that may have included an ingredient from overseas. They certainly never paid attention to a Fisher-Price toy to wonder that it may have been manufactured in China, that is until the recent scandals that rocked China, and recalls by such major US brands as Mattel and Toys-R-Us, who sheepishly admitted that bibs it had manufactured in China included lead.
Suddenly Americans found out that China had no standrads for quality and that goods produced there may in fact be damaging to your health. It certainly turned out to be bad for dogs when several animals died from Chinese produced dog foods.
As you might have guessed, the American toymakers are in the midst of damage control, doing the usual dance that includes the “Dear Parents” full page ads, the new procedures to protect the safety of the goods, and of course their words of reassurance of just how much they care for their customers. If history is any guide, these damage control programs, especially if in the end the customer can buy them cheaper. American comnsumers have a notorious short memory once the reassurances in place. They are amongst the most forgiving people people in the world, believing that mistakes do happen and giving the perpetrator the benefit of correcting things.
Yes, marketing is all about opportunity and this latest crisis of confidence in overseas produce goods is no exception. American manufacturers could use the Chines fiasco to point out that their guarantees of safety to animals and children is iron-clad. They can attack the toymakers as being greedy for trying to save a few pennies at the expense of the welfare of the customer. And they can brag about their quality.
But chances are that the American manufacturers will not get it together in time. The Chinese will announce that they are promulgating new safety standards and the Americans will promise additional safety measures. Before long, the issue will vanish from the from the front pages and it will be business as usual.
Just after a blackout in the Northeast and 9/11, many companies producing such goods as flashlight, masking tape and even water raced to take advantage of a demands for these products. They knew that the attention span of the consumer for these items was limited but realized that it was an opportunity to cash in big time and quickly. In marketing, one man’s tragedy is indeed another man’s opportunity.
To be sure, the toymakers have their work cut out for them. They are unlikely to give up on the ideal supply situation from China. They probably will not say: “OK, we will not buy from the Chinese anymore”. Business is all about profits and they are not about to throw in the towel and take a hit on profits. They will finesse the situation so that it is tolerable and acceptable to the point that the consumer will soon forget the quality issue.
If you are a Mattel, you bank on your successes as a leader and you continue to be an innovator with many new products. You make every effort to cut your losses quickly and you move on. That is sound advice for just about anyone who finds themselves in a crisis of consumer confidence. Making excuses or prolonging the issue can only plunge a company deeper into crisis, perhaps to a point when recovery will be almost impossible.
The lessons here are many but the key ones are to know when an opportunity knocks and to have the contingency to move forward quickly. If you are on the side that suffered the calamity, the most important thing is to cut your losses and plan ahead to exert leadership.
Out of the Box is a collection of strategic marketing articles that Lubicom has published on various topics, trends and ideas in the marketing world. The articles have been published in the Hamodia weekly newspaper circulated on three continents to a readership of well over 100,000.
The name, "Out of the Box" is a term used frequently in business nowadays to describe creative thinking that is not the norm. It is meant to help a business pull away from the pack or separate oneself from the competition. It is to some extent fraught with risk, simply because it is not the run of the mill thinking, but it is at the same time the key to reaching the next opportunity.