In
tough times, it is always the little guy that is affected the most. It would
seem that this remains true at a microeconomic level as well. Small and mid-size
companies in the United States have undoubtedly wagered on a bumpy road,
especially in the post-recession era. It would seem that a shortage of skilled
workers is a regional problem for North America. Both Canada and the U.S. are
facing the common dilemma of a shortage of workers in the future. In Canada, there
is a shortage pending in specific sectors. The mining & petroleum sector,
for instance, is a prime example of an industry that faces a serious shortage
of skilled labor over the next decade. The construction business is also in
such a predicament. Skills Canada is predicting that an estimated one million
skilled laborers will be required by the year 2020. “We know we have these huge
investments and opportunities, particularly in a huge swath of northern Canada,
through the massive multibillion-dollar investments in the extractive industries
that will require tens if not hundreds of thousands of skilled workers who are
not currently available,” said Jason Kenney, Canada’s Minister of Employment
and Social Development.
In
the United States, we are seeing the “little guy” being hit the hardest.
Stanley Furniture Co, a crib maker based in NC, has recently misjudged the
willingness of American to pay more for domestically produced goods when
cheaper imports are available. What we are seeing is somewhat of a shock but it
shouldn’t necessarily come as a surprise. We already know that the U.S. outsources
most of its business abroad to take advantage of cheaper production costs in
countries like China, but have we really thought how such actions affect the
U.S. small business owner? The fact remains that 80% of companies bringing work
to the United States have around $200 million in sales or in most cases even
less. Many of the small businesses in America are looking to supply bigger
companies. Other than that, they look to sell directly to consumers in order to
cut out on a lengthy supply chain via Asia. Needless to say, this is often much
easier said than done as the bigger companies in America thrive from the
competitive costs coming out of China. Multinational companies such as Walmart
have many factories based in mainland China to provide consumers with the best
price possible. Often times, the difference of even a penny can have a huge
impact.
Let’s
take a look at Stanley Furniture, for example. This is a prime example of a
company looking to bring back business to America. The company relocated to N.C.
after having furniture production in China. The move alone was a big gamble as
the company was expecting locals to pay a hefty premium for its domestically
made U.S. baby gear. A domestic made product also meant domestic costs. The
cribs sold by the company retail for almost a $1000, whereas imported cribs
often go for a quarter of that price. Often times, even the production element
of the trade can cost quite a bit. Stanley’s CEO Mr. Glenn Prillaman has said
that U.S. based wood and veneer suppliers have shifted most of their attention
to exporting American hardwood to factories abroad (mainly in the Far East).
When it comes down to business, small institutions such as Stanley are
only a small fraction of the business. “We were such a small part of
their business that we were seeing price increases the Asians weren’t,”
says Glenn Prillaman, Stanley’s CEO.
At
the end of the day, it all boils down to price. From what I can tell, consumers
generally do not have loyalty based on nationality. They want the most bang for
the buck. In today’s world, this can often mean importing goods from abroad for
more attractive prices.
Disclaimer: This article was posted with the permission
of a third-party contributor and the opinions contained therein do not
necessarily reflect those of Smallcappower. Smallcappower does not endorse
any investment advice provided by these third-party contributors.
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