In this new age of globalization, companies such as Miele are rare. All multinational corporations want to make profit, and most do this by designing new and innovative products, then manufacturing them for the lowest price possible.
Globalization has reduced the price of producing a product by lowering the walls between countries and making communication and trade easier. This allows for offshoring: an easy way for companies to reduce the cost of manufacturing. Companies send labor away from home to countries like China, where labor is very cheap and there is an excess of population in need of employment. The work is done in China, for a very low price, then sent back to the home country and marketed. A small portion of the money saved by offshoring is reflected in the price, but most of it goes directly to the company. This basic model of globalization is essentially to offshore the mindless work, the work that anyone can do, the work that the company doesn't need to pay full attention to. This system is used because it not only saves money, it makes room at home for the innovation, and that is what really makes a product marketable. Miele, a home appliance company, places much more focus on the quality of its products. Besides selling products because of new and exciting innovations, Miele sells expensive products that consumers have great trust in because of their high-quality standards. By keeping the manufacturing of their vacuums in their country and in their control, Miele maintains a much higher quality standard that is unparalleled by the standard vacuum cleaner. The price Miele pays for not offshoring all labor makes the vacuums much more expensive, but the trust consumers have in Miele vacuums makes up for the difference in price and allows the company to continue operating in the same way.
All manufacturing of the components used in making Miele vacuums is done in Germany, which allows for the company to control quality to a higher degree. In a more conventional vacuum company, all the major components would probably be bought from a different Chinese company, and the assembly would be done in China also. Because this way of building a vacuum lets the quality control out of the company's hands, Miele chooses to do almost all the work in Germany, where the company originated. The production of a Miele vacuum begins at the main Miele factory in Gütersloh, where the electronics are made, The electric motor is produced in Euskirchen, and the main components are made in Bielefeld, which is also where the vacuums are developed. The plastics and spare parts are manufactured in Warendorf, and finally everything is shipped to the Hong Da factory in China where the pieces are assembled. Only the assembly of the product, just one piece of the process, is completed outside of Germany. Miele also manufactures its own factory equipment in Germany, meaning the manufacturing itself will be more reliable and produce better results. Miele even has a management system that is “continuously monitored by Miele auditors within the context of fixed assessment programs.” This kind of monitoring would be difficult to accomplish in China, where laws make control over production from afar very hard, if not impossible. This level of control is especially important when producing the electric motors, which are essential to almost all of Miele's appliances. Miele needs electric motors that it can depend on, and the only way for the company to achieve that is to make the motors themselves. For this very reason, “Rather than outsource to low-cost suppliers, it makes 4 million electric motors a year (enough for all its products) in its own plant near Cologne.” Because Miele keeps its production in Germany, it can have much more control over manufacturing, and this makes the products more reliable and of higher quality in the end.
For Miele to stay ahead of other companies' innovations and still keep the quality high, it devotes even more money and facilities to product development than competing companies. When other companies offshore labor overseas, they do it mostly because it allows for the innovation of new technologies and products to occur at home. This system makes the products innovative and new, but not of high quality. Miele is all about quality, but to compete in the market it must also be innovative. To make up for the decrease in attention towards innovation, Miele does two things: first, it devotes over 12% of its earnings to innovation alone. This is much more than any other company allows for innovation, and it is part of the reason Miele products are 50-70% more expensive than competing products. Miele also divides its product development between the three different factories, in which those products are produced. This allows for a tight-knit connection between innovation and production, one that could not have existed if the innovation and production were being done on two different sides of the world. These two efforts promote innovation in Miele products, so they are not left behind while competitors set their focus mainly on innovation.
