Reasons of Important Drivers for Relocation - Coursework Example

Important Drivers for Relocation This paper talks about the relocation of production sites from places like Japan, South Korea and Taiwan to places or sites where more conducive production facilities are available in affecting the overall efficiency positively; these latter sites being those of South East Asia and China. Business opportunities and risks in Asian countries: There are many investment opportunities in many of Asia’s markets. These could include places like Vietnam, Sri Lanka, Bangladesh, and North Korea. Places like these are growing at a very fast rate; moreover countries like India and China’s growth has been quite phenomenal. It can also be said that opportunities in these latter mentioned countries are now decreasing, when talking in both international as well as domestic terms as these have started to decrease their market shares. It is a normal concept that as competition soars, it is important that a lot of focus is given to opportunities and risks as well in markets where there exists high growth and competition levels are not that high. China can be said to be a very good opportunity for investment as it is very well known for its competitiveness in especially export oriented markets. Even countries including Bangladesh, Sri Lanka, Vietnam, Laos, Cambodia, and North Korea offer great opportunities in terms of providing a base for other countries to grind and hone their competitive skills. These can be used an s a good forum at the time of increasing risks on a global level. The question now comes, about what exactly are the pointers that drive growth and opportunity seeking in these countries belonging to the Asian region in specific. These can be concluded as following: Growth levels: there is high macroeconomic growth there which means increased profits for companies and investors Developments: developments related t economic criteria are speedy. There is lot of diversification also which means there can be many different opportunities available to companies and investors; in other words less risks in terms of total demolishment or failure Low costs pertaining in these areas, especially labour costs as low. There is more labour available in these regions as compared to regions belonging to the Europe or UK in specific. Therefore this can help the companies investing to get a competitive edge over those who do not have access to this labour cost savings. (The business outlook for Asia’s frontier markets 2008, 2008). Business challenges in countries: ASEAN: this region has been experiencing immense growth and economic development. Because of political disruptions and low structural changes, there have been quite a few challenges in terms of business opportunity seeking in this region. (Wilfried and Landesmann, 2008) China: it has established a prominent place in the global trade scenario. China now competes with various international markets and is much capable of manufacturing brand go high quality that can make competition go up worldwide; the plus point of these goods being low cost. However, china also faces challenges through the struggles that it has to go through in terms of sustainment. This means that there are risks involved not just for Chinese markets in China i.e. Chinese companies basically, rather also in terms of their expansion outside China. This also means that there are challenges involved for multinational companies that want to penetrate Chinese markets. (Tong, 2008) India: India also faces somewhat he same challenges as China, its growth however also being similar to that of china again. However, it is said that India and china both face tremendous energy needs and supply. This is not just bad or these Indian and Chinese markets, rather for the entire global energy supply scenario. Issues like environmental sustainability, supply-chain problems, political and social instability etc. all pose as relative challenges for these markets. (Tong, 2008) Korea: since ten years it can be seen that there has been a huge financial crisis in Korea, which has made many companies there close down because of going bankrupt. Restructuring hence has been undertaken, however this all provides itself as a big challenge for Korea. Many big world companies like those of steel, shipbuilding, and mobile phones have all survived however this financial crisis through intense restructuring. (Tong, 2008) Pakistan: in Pakistani markets however, it is mostly about issues arising from governance related problems and political and social instability. Just recently, due to much such turmoil it was seen that many investors of foreign regions withdrew their investment because of high risks involved in investing in the Pakistani region. The major problems here include: militants, economic problems, nuclear creation, and presence of democracy and of course terrorism. (Challenges that Pakistan’s new president will face, 2008) Sri Lanka: there is possibility of an inability on Sri Lanka’s part to take the BRIC Superpowers face-to-face. However, it can still play the role of a local centre. If BRIC countries are appropriately fed, then economic growth can be seen through an increase in demand of basic agricultural type goods also. However, a challenge that lies here is that of decreasing income disparity between the rich and poor. USA: there are many financial crisis related challenges in America just recently. This includes problems like that of bankruptcy of companies, sub-prime mortgage issues, environmental debates, over-consumption etc. (Business challenges 2008 and beyond- are you geared?, 2008) Important drivers of the relocation of production from Japan, South Korea and Taiwan to locations in Southeast Asia or China: Starting off with this topic we can easily say that China has shown tremendous growth in the last few years. This can be associated with the fact that of China becoming the world’s major supplier of manufactured products. This does not in any way mean that it’s the only site providing the entire world with such finished products it however just adds to the efficiency shown in sites in China amongst other countries belonging to the South East Asian region. Mostly, it’s the United State’s manufacturers that source goods from such places as mentioned. Taiwanese, Hong Kong’s, South Korean businesspeople have set and established their sites in places like China in the last decade or so. U.S. started import goods from Asia around forty years back and hence has established its position as a good consume of these products very well. Previously, it was just Taiwan and South Korea along with Japan and Hong Kong providing these goods. It can hence be said that many companies belonging to United States of America were using the resources in these countries mentioned above for production sites etc. there can be various reasons for employing the Asian region for this purpose only. The many reasons could include the speedy developments happening in the competition in America. Many new labels came up and competition soared up eventually increasing the demand for cost-savings and efficiency thereafter. However, as these companies started popping up more and more in America, demand for Asian countries production sites or in other words re-location demands increased too. These Asian countries eventually also started with their demands, asking for an arrangement relating to a section of the total manufacturing to be done in Asia. This ability was done helped through by Japan. Japanese companies faced a lot of success in this Endeavour of forming capable suppliers in this region also. It became apparent to everyone that these Japanese countries however later were n longer needed to act as the middle-persons, because then all operations started taking place directly between the Asian countries and the U.S. This was the initial scenario in the historical era of this type of interactions for reasons relating to production etc. What is needed to be focused on now is how in this whole scenario China took the place of these countries (Taiwan, Japan, and South Korea). Well, it became much more feasible to shift to China; this can be the one basic conclusion. By the middle of 1990s, many Japanese, South Korean and Taiwanese manufacturers set up their businesses in new sites. Even though many Asian countries still held contracts with the U.S., they started contracting with other countries in Europe, Latin America, and other places/ countries throughout Asia. Hence, U.S. exports decreased by a big amount, and what they, the U.S. businesspeople now needed was a stronger base. This meant them looking for integration proposals, and many expansion ventures to first of all achieve and benefit from cost-savings. They moved in this way, which led to the destruction financially that is of many Asian countries relating to Taiwan, Japan, and South Korea. Manufacturers like Hewlett-Packard, Dell etc. tied with Taiwanese manufacturers. These started to relocate to places in China to have low-end or low cost production benefits. China also at this time was picking up with the global development and growth very massively. China worldwide has now become to be known as the single lowest cost provider of products and hence has captured a huge market for this. Wal-mart could serve as a good example when we say that after having established in 2001, it went on to buy directly through setting up an office in Sheehan, China; this being a little further away from Hong Kong’s border. This first step led to the establishment of many other offices as well. And today we see that Wal-mart has acquired 30 percent share in the export market consisting of China. Also, many French firms like Carrefour are also retailers in China consisting of an even bigger share when compared to Wal-mart. Even German retailers like Ahold also have a big hare consisting of China’s market. (Hamilton, 2005) Dell is one of the largest personal computer manufacturers. Dell also has established a huge plant in Asia and according to statistics this plant has the capability to assemble 95 percent of the total notebooks that it produces for the whole world. This plant is nowhere near America, rather is situated in China hence showing intense importance to how production has been re-located to China. Intel also is situated a little away from where this Dell plant is situated, hence rendering intense competition there. One of the biggest contract manufacturers is also making their biggest production plant in Malaysia, only because they say that the costs there are even lower. This is when we say that south East Asia is also performing a huge role in comparison to China as many businesses prefer Malaysian sites over China also. South East Asia is budding up again as the biggest base for global manufacturers like the ones mentioned above. (Nesvisky, 2005) The economies are flourishing fast there as can be seen from India’s rapid growth as well, amounting to around 5 to 9 percent each year. The biggest driver we can say here is that of manufacturing. A double digit figure is recorded yearly in South East Asian regions as far as manufacturing is concerned in terms of output related to industrial goods. (IANS, 2008) From electronic goods to chemicals, agricultural goods, to clothing and other finished products all are coming from places like India and China. And we see recovery in Japan and other markets belonging to the Europe region as well, however the role played by South East Asian countries and China prove to be quite phenomenal. Even though there have been disturbances related to politics and social security problems especially in Thailand and Philippines, we see that the entire South East Asian region still benefits from huge foreign capital inflows and investment. China itself even is carrying out a huge investment in South East region on the whole, exceeding $1 billion on a yearly basis since the last three to five years. Some of the prominent names that form part of this widening market for manufactured plants “zones” include Malaysia, Indonesia, Philippines, and Thailand. Southeast Asian economies have been string flourishing through especially contracts from Hewlett-Packard, Compaq, Intel and Motorola among many other names. When taking specific products like hard disks and hard drives, it can be seen that 80 percent of their total production comes from Southeast Asian countries like Singapore, Thailand and Malaysia again. China also has become known as the maker of low-end parts and components where drives are concerned in specific. And it’s said that most of these parts actually come from Southeast Asian countries again who have built their plants in China also. (Assif, 2006) China, along with the entire South East Asian region are now rising as the one of the world’s biggest manufacturer catering to the entire world with many manufactured or finished goods. Many U.S. manufacturers like General Motors and also Wal-mart form one of the biggest investors there. China as it seems has become a popular choice. (Hamilton, 2005) Word Count: 2110 words. References Page: 1. Altzinger, Wilfried and Landesmann, Michael (2008) Structural change and economic dynamics [Internet] Available from http://www.sciencedirect.com/science?_ob=ArticleURL&_udi=B6VFN-4R9JTS5-1&_user=10&_rdoc=1&_fmt=&_orig=search&_sort=d&view=c&_version=1&_urlVersion=0&_userid=10&md5=f3b2b3670051d74b3ea86cbe7da2cf30 [Accessed 6 October 2008] 2. Assif, Shameen (2006) Think Southeast Asia is taking a backseat? Think again. [Internet] Available from < http://www.allbusiness.com/business-planning/business-structures/4091336-1.html> [ Accessed 6 October 2008] 3. Business challenges 2008 and beyond- are you geared? (2008) Global competitiveness report 2008 [Internet] Available from < http://www.prlog.org/10044062-business-challenges-2008-beyond-are-you-geared-part-1.html> [Accessed 6 October 2008] 4. Challenges that Pakistan’s new president will face (2008) [Internet] Available from < http://www.iht.com/articles/ap/2008/09/06/asia/AS-Pakistan-Challenges-Glance.php> [Accessed 6 October 2008] 5. Hamilton, Gary (2005) U.S. - China economic and security review commission. [Internet] Available from http://www.uscc.gov/hearings/2005hearings/written_testimonies/05_05_19_20wrts/hamilton_gary_wrts.htm [Accessed 6 October 2008] 6. IANS (2008) India has 9% medium-term growth potential [Internet] Available from < http://economictimes.indiatimes.com/Economy/India_has_9_pc_growth_potential/articleshow/3548605.cms> [Accessed 6 October 2008] 7. Nesvisky, Matt (2005) Will super-high Chinese growth continue [Internet] Available from < http://www.nber.org/digest/nov06/w12249.html> [Accessed 6 October 2008] 8. The business outlook for Asia’s frontier markets 2008. (2008) [Internet] Available from [Accessed 6 October 2008] 9. Tong, Tiffany (2008) Challenge to Asia’s growth. [Internet] Available from < http://media.www.themsj.com/media/storage/paper207/news/2008/01/28/InsideRoss/Upcoming.Asia.Business.Conference.Challenges.To.Asias.Growth-3172465.shtml> [Accessed 6 October 2008] Read More