Question

Considering that most companies need to choose between the following offshoring situations:

2. Complete closure of a production site in one country and opening of a replacement site in another country.

3. Complete closure of a production site in one country and search for a subcontractor/supplier in another country.

4. A combination of the two solutions aiming to reduce local production and increase overseas production.

Explain what the advantages and disadvantages of each of these alternatives.

Answer 1

Location choices are long-term and comprise substantial financial obligations and risk, often happening universally, which makes a comprehensive location tactic a critical element of a company’s total business strategy. By improving “locational consciousness” and holistically estimating the business footmark, corporations can more skillfully place assets in the right place at the right time and strike a balance amid talent availability, cost containment, risk mitigation, and market access.

1.   It is a way to expand your prospects.
2.   The branding of the business will increase globally.
3.   It will increase the revenue as there will be an increase in sales due to exposure to more customers.
4.   The competition reduces as there is less number of entrants of the same product

5.   Expansion in the other countries brings the fresh talent of multicultural to deal with different cultures across the globe, and you can delegate the work to others
6.   Due to access to more markets, the changing trend does not affect the business.

Disadvantage
1.   The time-lapse of different countries create a time-lapse in productivity
2.   Different culture means different language and hence can cause language as a major barrier to make the work slowdown.
3.   Profits get affected due to currency fluctuation.
4.   The local politics might affect the business tremendously as the government might make changes in certain policies or subsidies that will affect the overall profit of the business.
5.   Since the markets are unknown you have to rely on third-party decisions in terms of policies. Since the markets are unknown it is difficult to run the business in unknown terrain.