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Pathways to obsolescence

April 21, 2013

Abstract: Successful business organizations paradoxically risk obsolescence. When the natural life cycle of their products or services ends, such companies face difficulty in adapting because the knowledge and skills making them successful stop being a competitive advantage. Chinese manufacturing and Indian software illustrate this point.

Chinese manufacturing has perfected low-cost production, but two critical inputs — technology and marketing — are provided by foreign organizations. China stands to lose if any of the following occurs:

  • Production relocates to other low-cost nations;
  • Labour displacing technology like robotics makes (otherwise) high-cost locations elsewhere in the world attractive; and
  • Costs in China increase.

Indian software has taken advantage of (a) low labour costs; (b) effective aggregation into large units; and (c) the telecom boom, to fuel efficiencies and growth.

However, the demand for products predominantly comes from abroad and the intellectual property is generally foreign owned. To avoid obsolescence, the two sectors need to gain control over technology, intellectual property and their markets.

Keywords: business organisation; business obsolescence; manufacturing; software; China; India; adaption

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