With the advancement of the globalization of the economy, many companies are engaged in outsourcing their production, tech support, and other functions to low-cost countries. The advantages of such a decision are fairly obvious: low-cost countries are often in a developing stage and can offer services similar in quality to post-industrial nations but at a much lower price. It is cheaper to buy land there, purchase materials, and hire high-skilled workers. Examples of low-cost countries include China, India, Vietnam, and certain Eastern-European nations. As a result, it is possible for companies to produce goods cheaper, making their pricing more competitive. Other advantages include close proximity to large markets as well as tax exemptions offered by developing nations to attract investors.
There are some risks to outsourcing, however, many of whichare related to the specific country of choice. The first issue is the language and cultural barriers – companies seeking to expand into low-cost countries typically carry Western-European cultural baggage, which may be inapplicable in low-cost countries. Additional risks include the unstable political and economic situation in many of these countries, meaning that the chances of the bottom line being hit by factors outside of the company’s control are much higher. In order to mitigate these risks, it is possible for companies to purchase local brands and implement local employees and management while subsidizing production from the company budget in order to claim the market and fit better from a cultural perspective. However, such a solution would mean less direct control over the enterprise.