Benefits And Drawbacks Of Company Moving Its Production Operation

BENEFITS AND DRAWBACKS OF COMPANY MOVING ITS PRODUCTION OPERATION IN THE DEVELOPING COUNTRIES Name: Professor: Institution: Course Title: Date of submission: Benefits and Drawbacks of Company Moving Its Production Operation in the Developing Countries Its 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 the 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 the 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 easternAsiahas 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 highcompetition 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 local goods. Taxation and incentives In addition to other economic benefits that a company gets the taxation system of the developing countries is relatively lower compared to the developed countries. These countries have the pressure of high unemployment and due to this pressure, the countries will always want to have more foreign companies invest in their local market. Some countries such as Ghana in western African offer incentives to labor-based industries that wish to invest in the country and they also reduce the amount of taxation. This makes these companies make more profit as compared to the companies that are located in the developed world. Social Benefit The foreign goods taste There are only a few social advantages that one may get into investing in the developing countries. One of the main reasons is the belief that the large companies specifically from the developed world always have better products. Many people in the developed world have suffered from the manipulation of the local companies who always tend to produce inferior goods due to factors such as the lack of advanced technologies for production (Radu&Mircea, 2015 p. 34). From these experiences, people from these countries will always want to buy goods produced by big companies that have international standards. This social belief always works to the advantages of companies that wish to invest in the developing world. The company can produce an equally high quality product with the same cost and using the same materials. But people will even p...