Greenfield Investments in the US: 3 Hurdles Manufacturers Need to Hop for Success

January 30, 2020 Brandon Barborka

In a global economy, it’s natural to think of your supply chain as an international venture. Businesses might source materials from one country, manufacture and assemble them in another, and sell them in a third.  One element of international supply chains that doesn’t always get a lot of attention is the positive impact that foreign investment can have on American manufacturing.

Foreign investment in the U.S. is on the rise. Terry Gou, the chairman of Foxconn, recently announced that the Taiwan-based electronics manufacturer may invest more than $10 billion in the U.S., which would create tens of thousands of jobs stateside. At present, one in five American manufacturing workers is employed by a foreign company, and that number could rise. Most often, this is because an existing American operation was acquired by a foreign company. But there are several prominent examples of greenfield investments in the U.S. as well. The term greenfield investment refers to the decision by a foreign company to build operations in the U.S. from the ground up.

As you might expect, new greenfield investments in America can encounter significant challenges. Here are three common hurdles for these potentially profitable endeavors and three leaps, or strategies for overcoming those challenges.

Hurdle #1: Cultural Divide

Whether the leadership of a new American greenfield facility is German, Chinese or Indian, a cultural disconnect among leaders from different backgrounds can have an impact on overall productivity.

In an Ohio auto parts factory owned by a Chinese company, the director of human resources noted recently that Chinese supervisors and their American co-workers sometimes have competing priorities on the assembly line. The Chinese management tended to prioritize speed while the Americans on the line tended to want to examine issues from multiple angles.

Leap #1: Know Your Culture’s Leadership Style

It's likely that you already have some experience communicating across divides. By understanding the cultural underpinnings of your leadership style and those of your colleagues, you’ll be better equipped to head off miscommunication before it emerges. Collaborate openly with co-workers of different backgrounds to determine whether they form decisions based on consensus or from the directive of an authority figure. Realize, too, that this could be separate from how teams are organized and how they view authority. The key here is openness, communication and self-reflection.

Hurdle #2: Navigating New Safety Standards

Particularly in the world of manufacturing, safety is paramount. The industrial machinery and substances necessary to produce manufactured goods can cause harm to workers who aren’t properly trained or who lack necessary safeguards and personal protective equipment. This is especially true of improperly labeled hazards. Since safety regulations in the U.S. are more comprehensive than in some other countries, workers in American greenfield investments sometimes find there are two competing attitudes toward safety within their workplaces.

Leap #2: Focus on Continuously Improving Safety

It’s important to make safety a core cultural value of your operation. To do this, you must make safety a target for continuous improvement. Every day, you should strive for higher participation in safety programs, greater worker input about safety concerns and accident-free operation on the job. Ultimately, this can lead to gains in productivity and quality, and as time progresses, it can result in workers having a greater sense of investment in their jobs and in the company’s success.

Hurdle #3: Uprooted Connections

There are a variety of different incentives for opening a plant in the U.S., and each incentive has a trade-off. For some companies, one thing they’ll have to come to terms with is that their supply chain could be thrown off balance. Importing raw materials from the same suppliers they had while manufacturing overseas might no longer be a feasible proposition for new greenfield investments in the U.S. Additionally, foreign companies might find that the ideal location for an assembly plant is far away from a population hub where they could find the skilled workers they need for development. For instance, some people wonder: Will Foxconn be able to find the tech workers it needs in southeastern Wisconsin?

Leap #3: Integrate Into Local Supply Chains & Talent Networks

While adjusting to the American landscape might take some time, the supply chains and talent networks available in the states are actually a big advantage. As long as they’re willing to integrate into the U.S. economy, foreign companies will find stable supply chains that, in some cases, date back hundreds of years. Additionally, as long as these companies source broadly, they’ll find the specialized talent they need. For example, consider Chinese search company Baidu. They want to lead the development of autonomous vehicles, so they’ve created a Chinese tech network in the U.S. by tapping into the talent in Silicon Valley.

Check out our top 3 Steps for Improving Your Supply Chain >

Win the Greenfield Race

Greenfield investments in the U.S. can be a great way to diversify an international investment portfolio, access American markets and enhance the reputation of a brand. Even though foreign businesses may encounter some hurdles along the way, these challenges can certainly be conquered. As long as companies openly engage in intercultural dialogue, focus on continuous safety improvement and capitalize on existing supply chains and talent hubs, they’ll be able to overcome the potential obstacles.

Along the way, greenfield investments might encounter other hurdles too. Working with an onsite staffing partner can help you scale rapidly to meet demand and ensure workforce compliance. Learn how you could Increase Efficiency & Reduce Costs With Outsourced Workforce Management >

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