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Benefits And Drawbacks Of Company Moving Its Production Operation (Essay Sample)


Benefits and Drawbacks of Company Moving Its Production Operation in the Developing Countries


Benefits and Drawbacks of Company Moving Its Production Operation in the Developing Countries
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Benefits and Drawbacks of Company Moving Its Production Operation in the Developing Countries
It's in the desire of any company to expand and increase their productivity for them to make more profit. Several companies across the world have adopted the strategy of expanding their markets to foreign countries especially in the developing nations. Notably, the McDonald's, the Starbucks and the KFC (Kentucky Fried Chicken) are among the few companies that have adopted this strategy. However, for a company to expand its production to these foreign countries several factors are considered which include but not limited to the economic, political and social factors. This paper analyses the various benefits that these companies get when they move their production to the developing countries and the drawbacks that they get in these developing countries in consideration to political, economic and social factors.
Economic benefits
Ready market
Most of the world population is located in developing countries such as the Asian and African countries (Bacci, 2017 p.12). Due to this high population, these counties will always have a high demand for goods and services that any company would want to sell. Statistically, it is proved that the biggest consumers of modern technology are countries in Asia and African continents (Hirsch & Silverstone, 2003 p. 8). These countries are characterized by low technological developments and opening a company dealing with technological products a company may be a sole seller of the product. For example, if one decides to introduce a car manufacturing company in Somali or in Syria, there is a high possibility of such a company to dominate the country's car market.
The availability of labor
Notably, most developing countries have a lot of the population, will a high population serve as a benefit to the company which takes its production operations to the developing countries. The most commonly available labor is unskilled labor. However, some countries, specifically in Asia and some parts of Africa have improved their education system, hence these countries have increased in the number of skilled labor too (Buchmann&Hannum, 2001 p. 4). A country like India, although it is a developing country in eastern Asia has made a big step in the education system, and a company located in such a country will have a little problem when looking for experienced labor. In addition to this, due to the high competition of the few jobs by large populations, people will work with fewer wages as compared to people in the developed world. Hence, increase the profitability of companies that run their operations in these countries.
Availability of raw materials
Some of the developing countries are endowed with a lot of resources. Generally, the agricultural resources in these countries are adequate. Other resources such as minerals are not fully exploited due to poor technology. With these aspects, these countries will always have a lot of raw materials at lower prices. When the companies in these areas use these resources to their advantage, then the company is probably able to boost its profit. For instance, a country like Kenya in the eastern side of Africa is ranked as one of the highest producers of coffee in the world, however, despite all these raw materials in the country, it has no coffee manufacturing industry (Gesimba, at el2005 p. 33). If a foreign company decides to start a coffee manufacturing industry in the country, then there are high chances of such a company to have some benefits of buying direct loca...

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