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Off shoring

A classic Make Or Buy Decision
Offshore, Near Shore, Best Shore, No Shore,

Location, Location, Location…

Off shoring Production relocation across the national boundaries to take advantage of cost savings and other benefits in countries where products or services can be produced more efficiently. .

Pros and Cons Pros • Reduced labor cost • Improved proximity to materials • Efficiency in business process cons • Cultural differences • Cost of monitoring a global supply chain .

Potential Cost Savings • Companies that globalize their cost structures to include low cost countries can realize savings of 20-40% in the landed cost of their products. .

“Exporting America” • Companies: – – – – – – – – – Anheuser-Busch AOL Boeing Coca-Cola Dell Computer Delta Airlines Gateway Computer Home Depot American Express .

WOW! Huge Cost Reductions! Off shoring is the Way To Go… RIGHT??????? .

Not So Fast My Friend…. There are Some Risks Involved With that Decision! .

Off shoring Risks • • • • Economic Risks Culture Risks Demographic Risks Political Stability Risks .

Tapping the mass market in emerging economies • • • • Saturated home market Large population in other market To grab the opportunity in new market Also global expansion .

Competing with Multi-National firms High pressure to globalize Dodger Contender Low pressure to globalize Defender Extender strengths suitable for local market Strengths that can be transferred abroad .