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Outsourcing

The stock market seems to love outsourcing, and cutting jobs at home seems to be the panacea for all the developed countries of the world. Why have manufacturing plants with those blue-collar guys, when the entire emerging world waits at your beck and call? Call-Centers are the new mantra from the land of Gurus, and executives only need to sit back and count the cash!

There is great truth in such thinking for day traders, speculators and gamblers who lurk in and around every stock market! Buy before word spreads and sell as soon as it does. Ride the crest of euphoria, and clear out before the froth settles near the shores of reason. Make a killing - in numbers!

However, the logic is not sound for a long term stock market player, who seeks to stay invested in the best managed companies. Manufacturing includes core know-how, and to gift this to a franchisee is a kind of ‘hara-kiri’ in stock market terms! Outsourcing decisions may also reflect motives which small stock market operators do not know.

Interaction marketing failures can kill a business. The practice of outsourcing customer relation operations can dilute or even distort a brand. There is always the risk that the recipient of a contract forward integrates. Witness for example, what happened to Murdoch’s first TV foray in India-the associate has set up rival channels of his own. IBM went even a step further-they handed Lenovo on a platter to the Chinese. Now how might that look when cell phones converge and Vista is on the shelf?

Stock market analysts should look for companies with enduring assets. Many of these do not have nominal values, and do not appear in balance sheets. They concern how things are done, and come only by traveling the learning curve. It would be a shame to jump off near the peak, and let a Sherpa plant his flag!

Executives come and go, but your net worth has to survive even you! Invest in companies which are on the stock market to stay because they have proprietary processes, and do not give the family silver to franchisees!