As with starting a business, you can either build your product from scratch or buy it. below are some factors to keep in mind whether or not you decide to build the product or buy it.The choice of a production strategy is dependent on the industry. It is important to consider the needs of your specific target client and build, produce, and distribute the product based on the attributes the customer desires. Other factors to consider if you decide to go into production are:
i) Market prices of raw materials. This is the price you buy the raw material at. It could be seasonal depending on the industry.
ii) Availability of the raw materials: Raw materials will vary in price depending on their availability.
iii) The market price of the product– will you make money.
iv) Local skills available – if you cannot get local expertise it may be difficult to produce locally.
v) Ability to import skills and attached costs: If you have the resources you can import the skills required.
vi) Supporting infrastructure: Where infrastructure; roads, electricity, and fuel to produce are not available, it may not be practical to produce in one area but probably possible in another. However, if the lack of infrastructure makes it too costly then it may be in your interest to buy until it makes economic sense to produce.
vii) Supporting laws and regulations: Some jurisdictions may require you to invest a certain amount or have certain qualifications to produce a specific product. If this is the case in your industry and you do not have the qualification or your team does not have it you would be wiser importing the product.
viii) Availability of technology: If the technology to produce is available to you then going into production makes sense. if not you may choose to buy to get started on your business and make inroads in the sector.
You may also decide to produce overseas if the local environment or circumstances do not favor local production. However, if your goal is to create local jobs this may not be an option you want to pursue. Often, there is a lot to learn if you have not been in production before or are producing a unique product. Overseas production may be a path you take before you are able to produce your own products. It also gives you the opportunity to test the market before you sink in money into the necessary equipment and commit to personnel.
The greatest disadvantage of seeking producers from overseas is that if your product is patented you cannot be sure they will honor the patent. Often they don’t and it is for you to use your discretion on whether it will be a risk worth taking. If the product is not patented or you are expecting to develop it further in a few short years then it is worth the risk as it would normally take time before a product picks up and an unscrupulous producer feels they can make money out of it.
If you choose to produce overseas or license production, ensure you visit the producer and see a prototype before making orders or payments. If you are not able to travel then use third-party certification and verification. Most trade websites offer the service and will intervene if you have a problem. Do not rely on the word of the producer that they are one. Many are not so checking on the verification shown on the site is the first step in clarifying their authenticity.
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