For manufacturers, Mexico is heating up. According to a recent survey from AlixPartners, 41 percent of manufacturing and distribution executives globally believe that bringing production back from overseas – a strategy known as nearshoring – is an opportunity for their organizations, and 86 percent of that group report that they have nearshored or expect to within the next few years.
Is vertical integration a thing of the past? On the contrary, it seems to be making a comeback, particularly in Silicon Valley, where it's been given a new label (just to remind us that everything that emanates from there is innovative!): the "full stack" business model.
A push to reshore apparel manufacturing and technical skills is steadily taking hold in the United States. Industry organizations, as well as academe and suppliers, are identifying areas for job creation, inventing new ways to think about apparel production and building incubators that nurture a budding apparel workforce via expert tutelage and business advice.
A manufacturing production index for Latin America as a whole is expected to show this year experienced no growth - instead, it is forecast to decline a slight 0.1 percent. This challenging regional picture masks sizable differences across countries, however. The poor performance of the index published by the Manufacturers' Alliance for Productivity and Innovation Foundation is explained by recessions in Brazil and Argentina that have offset the good performance of Mexican factories.
These are challenging times for emerging markets. China's economy is expanding at the slowest pace in more than a decade, and annual growth in once-booming nations like Brazil, Mexico, Russia, and South Africa has slowed to about 1.5 to 2.5 percent. Look around the developing world, and currencies are weakening, worries about asset bubbles and rising debt are mounting, and foreign direct investment has fallen sharply. This volatility leaves many companies wondering if they are overexposed to the risks of emerging markets.
For every company that thrives in a foreign market, probably five companies stumble. The complexities of entering a foreign market can result in many strategic mistakes and missteps. Even businesses that eventually "win" in a geographic region can teeter on the edge for years.
Analyst Insight: Economic growth has recently slowed in the BRICS countries, causing concern among both global and domestic investors. In many industries, the time for reaping quick rewards from investment has passed. If companies want to continue succeeding in the BRICS markets, they need to increase their focus on creating competitive operational models, with a major emphasis on improving supply chain management. - Viktoria Sadlovska, Managing Director, Prameya Research, & Lead Author of the Pragmatic Value Chains Blog