Managament

There are two main types of factors that a manufacturing concern would have to consider in deciding on a location in which to set up in a foreign country - qualitative and quantitative. There are four main qualitative factors and three quantitative ones.

The first qualitative factor is the local infrastructure. Manufacturing facilities require significant amounts of power, and often water as well. Infrastructure needs also include institutional needs like banking and legal systems. Also included in this category is the transportation infrastructure, both in terms of getting raw materials or component parts to the facility and in terms of getting finished goods from the plant to market. The second qualitative factor is the education and skill level of the local workforce. Some manufacturing operations involve complex machinery that requires skilled workers, while other operations remain simple. The third qualitative factor are product content requirements. These are often legal requirements designed to stimulate employment by setting rules to dictate how much local material is included in a finished product, or that only products made domestically can be sold in a given market. The relative political and economic stability is the fourth qualitative factor to consider. Political instability can result in severe business disruptions.

The first quantitative factor is labor costs. Normally, this is evaluated with respect to the education and skill level with an eye to striking a balance between the best quality of labor and the lowest price. The second quantitative factor is the exchange rate.

Fluctuations in exchange rates not only add a layer of complexity to the business but can have an adverse impact on profitability as well. The third quantitative factor are the tax rates. Each jurisdiction has its own tax regime and this must be taken into consideration because of its impact on profitability. Moreover, some regions may offer specific tax incentives to attract certain types of industries.