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5.4 Location (Qualitative factors (Safety, Room for further expansion,…
5.4 Location
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Qualitative factors
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- Room for further expansion
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Other locational issues
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- External economies of scale
- Multi-site locations (have advantages & disadvantages)
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Offshoring
Factors to consider:
- Low-cost countries offer substantial benefits. This is undoubtedly the major reason explaining most business offshoring business.
- The potential for higher profits will benefit the finance department despite the high setup costs of overseas operations or transport & communication costs of using subcontractors in overseas locations.
- With labour rates in India, Malaysia, China and Eastern Europe being a fraction of those in Western Europe and the USA is not surprising that multinationals that wish to remain competitive have to seriously consider offshoring to low-wage economies.
- In developing countries, because of the shortage of jobs, the subcontracting businesses will find it easy to recruit unskilled or semi-skilled workers. many of these workers are well educated with good English-language skills.
Potential limitation:
- Language & other communication barriers
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- Level of service concerns
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Insourcing
the reverse of outsourcing as it is undertaking a business function or process within the business rather than contracting it to another business