Foreign Safety Standards

In the United States we often take for granted the safety standards and regulations that are in place to protect us. The picture above from May 2007 demonstrates the conditions that window cleaners in Beijing endure. Without a safety net, these men hang from rope as they descend from floor to floor of a very large building (looking very similar to a cat toy). While I will always be a supporter of overseas investment, it is still important to think about the specifics as to why production costs are low in other markets. When investing in overseas production, ensure that reasonable safety standards are met. Be socially responsible to your foreign employees and implement the highest standards possible without sacrificing the benefit of accessing cheaper resources abroad.

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Written by Kelly Kasic, President of GLOBAL ID, LLC.

Exporting May Not be the Best Option

There are several situations in which exporting may not be the most feasible form of entering a foreign market. If it is cheaper to produce the product abroad then it is more cost-effective to establish a manufacturing facility in the foreign market. This will be a more productive way to serve that market and its surrounding export markets. If the transportation costs of exporting to the foreign market are a high percentage of the manufacturing costs, then exporting won’t be very efficient. Keep in mind that the farther the market is from the home country, the higher the transportation costs and transportation costs can vary a lot depending on the product. If the product needs to be altered to better serve this foreign market, an additional investment might be needed. It may be more efficient to make this investment in the foreign market to save on transportation costs. Also, trade barriers play a huge role in deterring exports to foreign markets. If the market is large enough, it might be worthwhile to invest directly in these countries in order to bypass the trade restrictions. These are several situations in which exporting may not be the appropriate option for pursuing international business, however there are many factors that go into such an important decision.

Written by Carl Phelps, Research Associate for GLOBAL ID

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