When deciding about company’s production, one important issue is to decide that whether or not complete production using third party manufacturing. Many companies like Apple, HP, and Adidas are using third party manufacturing. Shifting operations of production to international countries is very critical and risky. Outsourcing can be advantageous for companies, but in a case of not aware of the risk of the international market, it may lead towards failures. Outsourcing production in China is risky due to differences in regulations. China has governance risk and risk of ethical sustainability (O’Brien, 2014).
Outsourcing production in India may lead towards copyright and licensing issues. It may lead towards problems of quality. India also has political instability. It may affect on a production of goods or services. It is very difficult to secure personal data in countries like India where financial regulations are not very strong. The difference in the production standards and laws are also risky for outsourcing in India (Passioncomputing.com, 2016). Outsourcing production in Vietnam may lead towards the shortage of skilled labor. These countries also contain a risk of high taxation. It may increase the cost due to high tariffs (Forbes.com, 2010).
Strategies to reduce risks
Businesses should prepare them for risky situations. They should compare their advantages with risks. They should understand the regulations of other countries to secure them from different risks. They should analyze countries deeply. Communication and transparency are important strategies to reduce risks. Companies should not only target countries that have the low cost of labor, but they should try to find out skilled labor. They should improve sustainable production in countries. They can also use the help of a partner of a third that knows the country. Companies should ensure the legal compliance of international countries in case of outsourcing production.
Forbes.com. (2010, March 15). Outsourcing To Vietnam. Retrieved October 5, 2016, from http://www.forbes.com/2010/03/12/vietnam-china-labor-business-manufacturing-outsourcing-oxford.html
O’Brien, B. (2014, December 2). Pros and cons of outsourcing your manufacturing in the international business environment. Retrieved October 5, 2016, from http://www.tradeready.ca/2014/trade-takeaways/pros-cons-outsourcing-your-manufacturing-international-business/
Passioncomputing.com. (2016). Disadvantages of Indian Outsourcing. Retrieved October 5, 2016, from http://www.passioncomputing.com/articles/disadvantages-of-indian-outsourcing