Page 12 - Nearshoring to Romania
P. 12
2. Planning to take your business abroad
2.1 Introduction
This chapter will discuss the considerations of companies that are looking at moving part of their
operations abroad.
2.2 Why would you take your business abroad
In general the decision to move part of a business abroad is based on one or several of the arguments
mentioned below:
Opportunities for running a business at reduced costs, because the destination country can
provide raw materials, services or labour at lower costs than the home country;
Access to the local marketplace for the products produced by the company;
Taking benefit of particular skilled labour, not (sufficiently) available in home country;
Production of product with an expiration date close to the marketplace;
The destination country's location is favourable in the sense that it can act as a logistic hub
for a new market;
Companies that want to go abroad should have a thorough understanding of why they want to do so,
because these reasons will be the driver for their consequential decisions: nearshoring or offshoring, set
up an own branch or a company or find a local partner, etc. These topics are further addressed in this
chapter.
2.3 Nearshoring to Romania versus offshoring
2.3.1 Offshoring
Offshoring is the move of a supportive or primary business service outside the home country. In the past
decade offshoring has become equivalent with moving jobs to the Far East, especially in the production
of goods and the IT sector. The biggest perceived benefit of moving services to the Far East is a
reduction in costs. The main benefits of offshoring are:
Cost savings
Access to a new market
An attractive labour market
Can help to fulfil offset obligations
However, not all offshoring projects are successful. In IT, for example, a 50% failure rate is reported
(McCue, 2005). The problems associated with offshoring are:
Infrastructure of the destination county
Governance of the overseas branch or partner
Cost of oversight
Inefficient communications
Problems in cross-cultural collaboration
Expenses related to overseas travel
2.3.2 Nearshoring
Nearshoring is very similar to offshoring, except for the distance (both in physical distance as well as
cultural distance) between the home and destination country.
12
Nearshoring to Romania, NRCC 2013
