Moving operation-vehicle for increasing living standards

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THEME :
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“THE MOVING OF OPERATIONS TO LOW COST COUNTRIES”
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Vehicle for increasingliving standards

Abstract :
For about a decade companies have actively moved their operations to low-cost countries. Contrary to what one might think this trend does not imply loss of value in developed countries but a specialization in more added value jobs. On the other hand developing countries really benefit from abroad investments. Then globalization can be seen as a vehicle for levelling upworldwide life standards. But we should care about implied environmental implications.

Current Issues in Accounting and Financial Management

Table Of Contents :

Introduction – 3 –

Market’s requirements – 3 –

Offshoring as a transition to a new age – 5 –

Consequences – 6 –

Conclusion – 9 –

References – 10 –

Introduction

During the last decade our occidentalcountries have faced a migration of the companies’ activities, of part of the firms themselves. These different practices are well-known as outsourcing, offshoring, nearshore and offshore outsourcing. This trend is publicly perceived as bad for the society, leaving workers unemployed and moving value into developing countries instead of create it in home developed countries. This paper will tend to givea wider insight into this current issue that companies have to deal with and to spotlight what it would imply. It will focus more especially on the value point of view and try to show that wealth is not obviously decreased in western countries.

Market’s requirements

First of all it is important to draw an accurate picture of what our economy is going through. In fact before analysingdecisions that businesses have made we have to understand the environment they are living in.

Lots of companies act on a market that has reached maturity state, which implies a fierce competition to keep customers. Such environment, according to Johan Bygge, does not allow to go ahead with underperformers, and forces you to reduce costs. But maturity implies also the need to find out new markets, newpeople who could be interested by buying your goods. In fact a survey tells us that companies have mainly recourse to delocalization to achieve costs reduction, growth strategy and because of the competition pressure. Moreover companies in a global market have no choice but following the wave because the world will keep changing with or without them. Furthermore it would be more profitable to bethe first to act to “get the best piece of the cake”.
We can conclude that the competitive environment companies are facing forces them to create value for customers whatever the way they do it and, of course, to capture some of that value. If the management thinks moving operations is the appropriate solution having considered alternative decisions, having made accurate financial cost analysesand keeping in mind that there is often a gap between what is expected and the reality , this decision will be the only one to make in order to keep the firm sustainable. Otherwise it would be neglected by customers who will be attracted by the most active firms and what they are offering. In this case the loss of value for the society would be greater because the whole firm’s and not only someemployees, jobs or business units would be in danger.

Another protagonist acts as an incentive in the choice moving operations to low-cost countries. The shareholders actually want the companies to have what Martin Carlsson-Wall called a “China-Strategy”. Otherwise the share price could be subject to a drop. In order to meet market expectations management could be tempted by choosing…