Skip to content
covercows.com
covercows.com

  • Home
  • Business
  • Fishing
  • Health
  • Social Media
  • Food & Nutrition
  • Contact
  • Write for Us
covercows.com

What Is Meant By Offshore Manufacturing?

Austin Fairley, August 8, 2024

Offshore manufacturing is a business aspect where an entrepreneur relocates or sets his/her manufacturing plant in another country where conditions of manufacturing like labor and raw materials are more cheaper or where the manufacturing environment is more favorable for export and/or eventual import to the manufacturer’s home country overmolding.

The main reason for offshore manufacturing is to reduce production costs for a manufacturer who is trying to make more profits by exploiting the comparative advantages that exist in other countries and which are not in his/her country. This aspect of manufacturing occurs in an environment where there is free trade which is informed by the generally accepted fact that entrepreneurs should freely exercise the freedom to trade in products that cost them the least to produce.

Offshore manufacturing is beneficial to both the manufacturer’s country of origin and the host country for it provides employments opportunities, taxes and other benefits for the host country. As for the company’s origin country, it lowers the cost of goods and services because goods produced cheaply are also sold at a competitively cheaper price.

In most cases companies are attracted to offshore manufacturing because of the tax breaks offered by the host. Also, some home countries do not levy taxes on profits made from overseas manufacturing as long as the profit does not come into the country. This is the other intoxicating factor that makes many companies to invest overseas so as to avoid this taxation. The flipside is that offshore manufacturing leads to job losses in the manufacturer’s country of origin, but then this again creates an extra incentive for those workers who have lost jobs to work hard so as to scale the high value jobs which their country has a comparative advantage to produce. Similarly, offshore manufacturers incur expenses like shipping, inventory, communication, travel, training, permits, duties, tariffs, compliance with import/export restrictions and others which they may not incur in their country. This in the long run pushes the production cost.

Even more critical, other costs like training costs especially in countries where there is inadequate skilled manpower will force the manufacture to invest in staff training and this will make offshore manufacturing unviable. Also because of competition and the supposedly cheaper labor may make it harder for the foreign investor to retain the workers he has invested heavily to train. This may result in a higher turnover of employees hence straining the operating finances.

In most countries, especially in the developing nations, there are some hidden costs that a foreign investor comes to find about once he has already established his company. For instance, in Asia and Africa it is commonplace for investors to bribe, give kickbacks or even pay protection fee to facilitate services and shield their investments. This normally pushes operating costs up thus making offshore manufacturing unviable.

Offshore manufacturing can make better sense if the overseas company is located close to where they have a bigger percentage of the target market. For instance, Japanese automotive companies like the makers of the Toyota car are setting their manufacturing plant in America where they have a huge market while they export other units home and to the rest of the world.

Opinion

Post navigation

Previous post
Next post

Leave a Reply Cancel reply

You must be logged in to post a comment.

Archives

Categories

Recent Posts

  • Men’s Short Leather Jacket

  • Best Men Packable Down Jacket

  • Top 10 Best Zebco Fishing Reel 33 Comparison

  • Smartwool Men Sweater Sale

  • Top 10 Best Mud Pie Trivets Comparison

  • Top 10 Best Archery Fishing Reel Kit Comparison

  • 100 Cashmere Sweaters Men

  • Zara Leather Jackets Men’s

  • Men’s Black Jean Short

  • Mens Short Size 30

  • Top 10 Best How Much Is a Men’s Suit? Comparison

  • Mens Brown Sport Coat

  • Top 10 Best Stereo Microphone Techniques Comparison

  • Top 10 Best Left Handed Fishing Reels Covers Baitcaster Comparison

  • Canvas Moto Jacket Men’s

  • Top 10 Best Major Phone Companies In Usa Comparison

  • Top 10 Best Wq3000 Fishing Reels Comparison

  • Buy Short Online for Men

  • Top 10 Best Penn Fishing Rods Saltwater Comparison

  • Infant School Shoes

  • Mens Shorts 4 Inch Inseam Pockets

  • Men’s Denim Jackets L

  • Nfl Bomber Jackets Mens

  • How Do You Know if a Sport Coat Fits?

  • Toronto Sweatshirt

  • Baby Snow Boots Size 8

  • Peace Bowl

  • Top 10 Best Hayabusa Fishing Reels Comparison

  • Cheap Coats for Men

  • Kohls Cotton Shorts Men’s

©2025 covercows.com | WordPress Theme by SuperbThemes