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Insourcing 1 Outsourcing 0

January 12th, 2010 admin Leave a comment Go to comments

Interesting article in this morning’s paper which could have a big effect on the Swiss watch-making industry, dominated by the Swatch Group. The group makes not only Swatch watches, but also Omega, Longines and a whole set of other labels, to such an extent that it has a fairly monopolistic position in the market. In its infinite wisdom, some year ago the Swiss equivalent of the Monopolies Commission forced the Swatch Group to provide components to other companies for assembly. Now, we can all probably guess that this was not implemented with the greatest of enthusiasm, and it seems that there have over the years been a number of law suits and court cases against the Swatch Group for not complying with the orders.

I mentioned the ‘infinite’ wisdom of the Monopolies Commission, but maybe their wisdom is not that unconstrained. For the order they made was imposable through to the end of this year only. And surprise, surprise, the Swatch Group is threatening to stop supplying its competitors. As outlined by its president, Nicolas Hayek,

we have invested almost 2 billion Swiss francs into our production capability while others invest in marketing while using us as a supermarket…. Who, apart from ourselves, takes on the risks, makes the investments, absorbs the costs and trains the personnel?”.

A lesson maybe for those companies that have developed foreign sources of low-cost components rather than using local sources or even insourcing. What guarantee do they have that those sources will always want to carry on supplying? In the same paper, confirmation that the Chinese automotive market is now the world’s biggest. For how long will some of the more ‘exotic’ Asian low-cost sources want or even have the capacity to export their products?

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