The concept of offshoring is the relocation that a company makes when it moves its factories or production systems to another country or territories. It is a process that is the result of globalization.
An example of this are the companies that until recently produced in Europe, but that in view of the salary advantages and the costes They have chosen to settle in Asia or America. A translation of offshoring would be relocation.
Advantages and disadvantages of offshoring
Before moving a business to another country you must be clear about the benefits and drawbacks of offshoring.
Benefits of offshoring
Offshoring has a series of advantages such as:
- It contributes to the hiring of cheap labor.
- Lets open a new mercado, so it will also involve the opportunity to increase sales in the new destination.
- It reduces manufacturing costs, which will allow to offer the customer cheaper products and even obtain more profits.
Disadvantages of offshoring
There are some risks of this relocation among which we can find:
- There are possibilities that the production of the goods will lose quality.
- It implies a possible loss of control of the company.
- In some places it is difficult to find qualified employees for certain tasks.
- Existence of a culture shock, with linguistic differences and lack of communication.
Difference between offshoring and outsourcing
Companies are looking for strategies to increase sales, reduce production costs and achieve short-term profits. There are several options, such as through outsourcing or offshoring.
Offshoring vs outsourcing are designed for different needs.
Offshoring is when companies move their production systems to another region at the lower cost of resources and labor. A part of the production process is mobilized to a third country. For his part, outsourcing it is used to define the displacement of the company's services to other states. The services that are most often outsourced are programming and customer service.