Foreign vs. Local Production

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Overview

Some enterprises manufacture products in the country where the enterprise is based or distributes, while others import from other countries (often China). Whether an enterprise manufactures locally is majorly affected by the product they offer. Smaller, mass-produced products such as lanterns and stoves are much easier to manufacture abroad than large installations such as community power plants. Many enterprises manufacture some products locally and import others.

Local Production vs. Foreign Production

Local Production

Local production promotes local manufacturing, and builds capacity where the social enterprise is working. Some products are large scale and hard to transport (ex. community power plants), or build into villages (ex. biogas digesters). Large products are more easily made locally. Import taxes can be high, giving enterprises further incentive to manufacture locally. Some enterprises may be based in one country and distributing in another, and don’t want the logistical hassle of adding a third to their supply chain (ex. Promethean Power Systems).

Foreign Production

Some countries, especially China, specialize in manufacturing custom products and can offer good prices and strong quality control. Economies of scale can be realized by using large manufacturers who may not be available in-country. The resulting low product cost that can be turned over to the customer is a major advantage in foreign production. Sometimes it is difficult to find strong manufacturing or quality-control capacity in-country, and the benefit of manufacturing locally is not worth the cost of product challenges.

 

Case Studies

ToughStuff has developed a modular set of products that address three main electricity needs of off-grid consumers – lighting, information, and connectivity – using a lightweight, robust, portable photo-voltaic solar system designed for personal use.

ToughStuff differentiates its products based on robustness and affordability, and has the goal of making its product as widely available as possible. It also has a small, mass-produced product sold through retail channels in a number of countries. Therefore the logical approach is to manufacture in the least expensive way possible. Products are manufactured in China. While Chinese products often have a bad reputation in Africa, ToughStuff has been able to find strong partners who deliver good affordable products. It would be challenging for ToughStuff to find local manufacturers who could deliver the same affordable products, as few African manufacturers operate on the scale of Chinese factories.

Enterprises