May 2, 2006--A Very Different Kind of Outsourcing

My only experience with product counterfeiting involved being confronted on Canal Street in New York City by vendors selling either knock-offs of Prada handbags or bootleg DVDs of films currently showing in movie theaters. But I’ve always been a small-time operator, in truth not even interested in the stuff for sale on the street, so you can only imagine my surprise and perverted admiration for the audacity of those people in China and Taiwan where there are pirates faking entire companies—not just individual products but a full line of company products. Most amazingly, putting out goods under a major corporate brand that the company itself doesn’t even manufacture! (See article below from the NY Times.)

The hijacked company is the electronics giant NEC. The counterfeiters put out a line of 50 fake NEC products, including any number the company doesn’t produce, including home entertainment centers and MP3 players. They were so bold that they didn’t just find factories in Hong Kong to make cheap copies but even had fake NEC business cards to help them infiltrate the NEC production and distribution chain, commission product research and development, and write and print phony warranties.

One great irony in all of this was that the way NEC began to discover they had a problem was when customers who bought “NEC” products that NEC doesn’t manufacture called to complain about them. Since they were not legitimate NEC merchandise, they began to figure out that there was an extensive line of products being sold under their brand name that were not in fact theirs.

A further irony—the counterfeit and parallel lines were of such high quality that there were in fact very few complaints!

I am straining to find meanings here.

Does this suggest that a few individuals, without huge infrastructures and extensive capitalization, can become as successful in a business that traditionally requires all of these kinds of things, some of which may or may not be all that necessary?

At a time when companies are making huge investments in research and product development and are concerned that there is not enough talent of this kind to keep them growing and globally competitive, what about all this apparent entrepreneurial creativity and drive that seems to be available in “non-traditional” places?

Maybe, then, rather that dragging these guys off to jail, NEC should put them on the payroll.