Do you know what business you’re in?

what-business-are-you-inI recently was talking with a prospective client. The conversation was a general one, to ascertain their needs and the type of business they conduct.

They told me they were a manufacturer. “Great”, I said, because it is one of the areas where I can speak from direct work knowledge. I asked where the plant was located and whether they were running MRP (manufacturing requirements planning), and with what costing model.

The answer was the plant was in China. Their Production Manager, located in Hong Kong, handled all those issues. If we weren’t on the phone, he would have noticed my perplexed facial expressions, because something was amiss.

I asked again to re-clarify, maybe I heard wrong, that they were indeed a manufacturer.

I didn’t – which on some levels is very good, because my hearing is still working.

The potential client of course isn’t a manufacturer. At least they are an importer and most probably a distributor and a retailer (they do retail e-commerce). But they are not manufacturers.

They probably licensed the manufacturing of their designs to the plant in China, and again there is absolutely nothing wrong with that business model. But when you don’t own, have no direct oversight of any aspect of the manufacturing process, you are not a manufacturer. You are a wholesaler, distributor, and/or retailer and in this instance since you buy it overseas, an importer. But you are not a manufacturer.

Why is this distinction so, so important?

There was an article as my business friend Alan Berkson of the Intelligist Group passed around. He said that we should read this “…brilliant article written for Harvard Business Review in 1960. Yes, 1960.”  The article called Marketing Myopia by Theodore Levitt was republished in July 2004 in the Harvard Business Review.  See HBR or – PDF

It is well worth a few minutes to read because I think you’ll find answer to why it’s so important in knowing what your business is and isn’t.

Think survival!