8 Answers | Add Yours
Production is of special importance because, as #7 states, each country can give different benefits to local production. I would even go a step further and say that if you are able to produce in each country of consumption, you can drastically reduce operating costs and increase profits by moving more inventory at a lower-overall consumer cost; lower the MSRP with cheaper local production and move more units for a greater profit overall.
The benefits of working in a MNC in our globalised world today means that there is massive value to be gained if you are able to take advantage of the mobility and transport benefits. Choosing a country that has low labour costs and finding a method of shipping that product to your market can save incredible amounts of money, making these two aspects key things to consider.
A business that can spread its operations over a large number of countries can use the benefits from performing different operations in different countries to utilize the inherent advantages offered by each for example some may have cheap labor, others could have a favorable taxation policy, etc. All of this boils down to the business being able to produce products and offer services at the least cost incurred. Logistics has to be taken into account too as transportation costs can be quite substantial.
All the previous answers are very helpful, and the report about Turkey is fascinating. As that answer, in particular, suggests, managers will need to be constantly alert to changes in the competitive advantages of different countries, and no country can really count on keeping its competitive edge. In some ways, this is good, because it forces countries to try to be as competitive as possible, but in some ways it is bad, because it often means that the lowest cost is the key consideration, no matter the impact on the environment, etc.
Labor costs, access to ports, cost of resources, infrastructure in the form of railroads, and other logistical concerns play into decisions about where to locate. Other concerns might help determine where and how to market certain goods, including local culture, demand in a particular region for a certain good, geopolitical situations, trade agreements, and so on. The point is that every nation is unique, and while multinationals have a way of throwing their weight around when it comes to influence, they also have to adapt to local realities.
As post 2 states, there are many considerations. First, each country will differ in production costs. For example, when it comes to furniture, companies are moving from China to Turkey. Turkey is now cheaper. Second, fuel and transportation costs make a big difference. If you will ship very far away and the cost of transportation is enormous, you might want to reconsider the locations. Third, you need to consider raw materials. If the raw materials you need to manufacture something is far away, then you might want to reconsider as well. Finally, you willneed to consider international laws and taxes.
This is because the MNC has to decide where to make things so as to get the best combination of productivity and shipping costs. Firms have to make decisions about which country or countries they should produce in. They must look, of course, at the cost of production in the country. However, they must also look at the logistics of getting the goods from one country to the others. Firms must pay attention to both of these factors when making decisions about where to produce.
We’ve answered 319,669 questions. We can answer yours, too.Ask a question