Reasons why outsourcing and global production exists
Global companies place production facilities when costs are lowest. But for some companies costs are only a small part of the production picture. Countries along the world have increased the number of trade barriers, but in another hand market in Asia and Eastern Europe have opened for foreign investment. This made the global production much more possible.
Tariffs level made importing too expensive, so production facilities now can be placed in other countries. Basic manufacturing costs become more important. Another problem is that costs can subject to quick change. This adds another decision in company’s global investment strategy. The availability of employers also need to be examined when investment decision are being made.
Outsourcing of production gives a company more flexibility and fits well with global strategy. In addition outsourcing cause lower capital employed. A business must be placed to supply the products better. And there is still the problem with workers in some plants. Lack of ownership does not bring freedom from responsibility.