The Pros and Cons of Offshoring
In case you’re a business owner looking for ways to boost your profits, you should definitely consider offshoring. This is an activity that involves the relocation of a certain business process to a foreign, typically developing, country. When you manufacture products in the United States, you’ll likely have to place them on the market at higher prices than most of your competitors. The reason why you will need to set high prices is because you will have to pay a lot of money in salaries for people who manufacture and distribute them.
However, if you choose to make the product in developing countries, you’ll spend less money on manufacturing. This way, you’ll take advantage of cost differentials in a cheaper economy. Of course, just because you will be able to increase your profits through offshoring doesn’t necessarily mean that you should do it. Making such a big change requires a lot of consideration. In order to help you make the right decision, here are the pros and cons of offshoring. Remember that you should do this practice only if it makes sense for your business.
The Pros of Offshoring
The most obvious advantage of offshoring is that you’ll be able to cut your costs. This is not only because you won’t pay high labor fees, but because other costs will be lower in developing countries as well. For instance, let’s say you decide to handle your manufacturing in India. The costs of infrastructure, materials, and utilities are all significantly lower in this country. Pair that with the fact that you won’t have to spend a lot of money on Social Security benefits, health insurance, and other costs, and you’ll see why so many companies decide to do offshoring.
Apart from being able to boost your profits, you can choose to move your operations to countries with high unemployment rates. If you can provide jobs to people in developing nations, you’ll improve the image of your brand. Doing this may even enable you to expand and reach new markets quicker. In some countries, people just want an opportunity to work. So, why not offer them jobs? Know that doing this may also improve the job satisfaction of your employees in the United States.
Think about it, your workforce doesn’t want to do the same tasks over again every day, especially if they’re qualified for something much more. Having educated employees is a huge asset that you should use to your advantage. Offshoring will allow you to leave the mundane tasks to someone else, why your staff can focus on more important things. Of course, just because you’re thinking about offshoring doesn’t mean you’ll only hire factory workers. You can also hire marketing experts that will help you break into new markets and reach your key demographic in a foreign country.
Due to different time zones across the globe, you can also hire customer service workers in other countries, so that consumers can reach you no matter what time it is. Keep in mind that customer service is one of the most important departments a company has, and is essential if you want to run a successful business. In this day and age, customers have learned to value reliability and trust more than anything else. By seeing that you’re always available and there to help them with their questions and problems, consumers will appreciate your brand more and be more likely to purchase something from you in the future again.
The Cons of Offshoring
The number one problem when it comes to offshoring is that the quality of products and services won’t be guaranteed. In order to ensure the workers make good products, you will need to send good people to train them and oversee the production. With that being said, you should create a team tasked with overseas training in development early on. Consider enrolling the people in this team into a class where they will learn the native language of the country they’ll be working in. This will help you reduce communication issues to a minimum, which is very important when you’re thousands of miles away from where some of your business operations are taking place.
Remember that whenever you want to do business overseas, there will most likely be some social and cultural barriers you’ll need to overcome. Before doing business with a foreign country, it’s imperative that you thoroughly research the local culture. Know that even your way of talking may be considered offensive in some cultures, especially if you’re always straightforward and blunt when you speak.
There is no denying that there are a lot of advantages to offshoring. Nevertheless, this process will have to be done carefully in order to avoid any major setbacks. This is why you should focus on forming a reliable team of people to help your new overseas employees. Finally, remember that you should consider offshoring only if it makes sense for your business.
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