The entrance to the global market and gaining presence to a bigger audience may seem idealistic especially for starting businesses. The costs of expansion and operations in a different country,  with different laws and cultures, are quite risky and uneconomical. But this is now possible. Not just big and established brands can meet the diverse needs of growing demand across the world. Your business can, too, through offshoring.

offshoring

Offshoring is “the moving of various operations of a company to another country for reasons such as lower labor costs or more favorable economic conditions in that other country.” (businessdictionary.com)

Offshoring and Outsourcing

These two often work hand-in-hand as an offshored team are usually an outsourced one. Though offshoring and outsourcing have similarities, offshoring is more of a geographical activity. You may outsource your offshore team but on the other hand, your outsourced team doesn’t mean is an offshored one.

Major Reasons

Reasons for offshoring range from expensive local(of the company) labor costs to expansion per se. As a start-up business, it is a cheaper and facile option that is more economically efficient.

Expensive local labor cost.

In a thriving economy and country, the cost of labor also increases that is why [multinational] companies look for alternative ones. They can consider allocating these business processes to a third-party company in countries like the Philippines, China, India, and Malaysia where labor costs are cheaper yet the force is competitive. For instance, hiring local CSRs (customer service representatives) in Australia could cost an average of $60,000 annually while you can get this service in an offshored team in a quarter of the price and in an equal (or even better) quality of service.

Business Function Needs.

There’s no harm admitting that all business functions can not handle well by a single entity. There will come a time that it will need help because of instances like shortage of employees and skill to needs like chat support, creative or graphic design or IT solutions and such. Searching for help may be a challenging process considering the range of companies offering excellent services across the world. After all, businesses need a third party who specializes in a specific business function so they can maximize excellent output.

Costs Issue.

Cutting costs will always be a reason. Building a brick and mortar office, flying, recruiting and training a new set of workers/team to a foreign country will surely break the bank. Thus, strategists will always nod at the cheaper yet effective option.

Global Presence.

Attaining a global presence and meeting demands of a growing diverse market are the main reason for big brands like Nike to have some of its manufacturers in a foreign land. Why another country? Simply because it has cheaper labor costs.

Companies like Apple, Microsoft, and IBM also have departments in countries like the Philippines and India. Both countries are somehow considered as the BPO industry capital of the world and a top offshoring site for companies abroad.

Through offshoring, they are able to get quality service (that is competitive to what their local labor force can offer) at a cheaper price. Who wouldn’t want that?

24-hour service.

The geographical fact that the countries have different time zones and offshoring is taken advantage of companies to offshore. Through this, they can function 24 hours, though not in the same location. After all, you can’t require a single employee to work for you for 24 hrs. But workers in countries like the Philippines are more willing to work at different time shifts.

For growing companies and those that need expansion, offshoring is an option. It is a cheaper option indeed and a more efficient one when the right partnership with the third party has been done. As the global demand for products/services of a particular industry increases, they have to keep up to supply those. This is an opportunity they should not miss, well, of course after proper risk calculation and such.

Did you know that Akron Global can provide your much-needed team here in the Philippines? Yes, we can definitely help you with your expansion or your offshore team. Want to know more? Write to us at bd@athl.com.hk.