Labor cost and currency rates do not matter that much to manufacturers anymore. That was one of the key points of a report recently published by Strategy + Business. Instead, four other considerations—all of them more complex—play a larger role in driving companies’ choices of where to manufacture. They are:
1. Skill level and quality of potential employees.
2. The presence of clusters of companies in which manufacturers can interact and learn from one another.
3. Having a country nearby that not only offers some low-labor-cost capacity, but also an emerging consumer market (for the United States, this means Mexico).
4. A competitive regulatory and tax environment.
The United States is not an obvious leader on any of these points. However, it could be a strong contender in all these areas if it chose to make strategic course corrections aimed at emphasizing these strengths.
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