Impact of the rising cost of industry (China)


China Economic Net:

Even Chinese companies feel pressure from increased costs, whether from material or labor.

“To Chinese enterprises, price is determined by the supply-demand relation, so it seems clearly different for various industries in aspect of the influences they suffered from the material price rise as well as the speed and extent of transferring the influences to their downstream enterprises.”

Some western capitalist companies don't want to recognize the Toyota model, where Profit = Price – Cost. Many western companies still believe in the Price = Cost + Profit model, where if one component of cost goes up, they must obviously be entitled to price increases, to keep their profit entitlement. In reality, if one component of cost goes up, you must be willing to reduce costs in other areas in order to maintain profits.

Here is an article about a company that is moving a China factory to the Philippines, mostly due to cost concerns.

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Mark Graban
Mark Graban is an internationally-recognized consultant, author, and professional speaker, and podcaster with experience in healthcare, manufacturing, and startups. Mark's new book is The Mistakes That Make Us: Cultivating a Culture of Learning and Innovation. He is also the author of Measures of Success: React Less, Lead Better, Improve More, the Shingo Award-winning books Lean Hospitals and Healthcare Kaizen, and the anthology Practicing Lean. Mark is also a Senior Advisor to the technology company KaiNexus.


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