Amy Checks In On A Fundamental Question

On Aug 6, 2008, at 10:26 PM, Amy wrote:

John, .... Wasn't the goal of importing + exporting to find the best places to produce the items in a cost efficient manner while taking up the advantages of these factories who can produce good quality kitchen towels?

Amy


Amy,

Importing and exporting is a result, the goal is serving customers. Foolish government policies cause people to misallocate resources and malinvest. In the measure the policies are foolish, in that measure there will be distortions that make a supplier overseas more attractive than a supplier in one's home country.

Importing and exporting are not businesses, they are just events. I may have a business selling canned peaches. It does not matter if I can the peaches in the garage or import the canned peaches. The business is selling canned peaches.

There is little Malaysia cannot make for itself. Same is true of USA. Certainly USA needs to import chromium since we have little of it, but we are the biggest exporters of copper in the world, and the biggest importers of copper in the world. We are fighting a war in Iraq for oil, and oil is the USA's #3 export in dollars. That is just nuts.

Serving customers makes me in business. Where I get my product does not matter, except in the sense of serving the customer. Say Amy loves beautiful hand towels and her favorite material is linen. You have retailers who have said your ideas are good and do not exist. Since the best linen comes from France, and you are in Malaysia, to serve your customers best you will specify French linen to your supplier. There are plenty of people in Malaysia who can embroider beautifully, but Malaysian government policy encourages people to do other things than embroidery. So where do you go for embroidery? You study the question and find that Japanese importers are getting their embroidery designs sewn on in villages in Poland. Therefore you make money doing what you love, and by accident you are importing French linen embroideried in Poland and having it shipped to Japan. And as government policies fail, such as is occurring now in USA, trade lines and sources will migrate to new locations, and so will you.

And at the specialty level, cost and price is not a major factor, if at all. What tells you if a specific factory is the best is not the cost or the quality, but if your competitors use that factory. That is the salient point.

Does this make sense?

Bookmark this post --- Email this post