Opportunities and Risks Related to Partial Shift of Manufacturing Concerned with Move to Other Countries

The report highlights opportunities and risks related to partial shift of manufacturing concerned with move to other countries. The opportunities include accessing new technologies, utilising government incentives, meeting new people and raising cultural awareness, economies of scale, establishing multiple revenue streams, and greater brand recognition. However, the risks include regulatory and legislative risk, larger and frequent economic swings, technological risk, cultural risk, changes in political landscape, and currency fluctuations. It is important for Euroleathers to carefully evaluate these risks and opportunities before making a decision.

Project

Contents
Contents...........................................................................................................................................2
INTRODUCTION...........................................................................................................................1
MAIN BODY..................................................................................................................................1
Opportunities and risks to company related to partial shift of manufacturing concerned with
move to other countries...............................................................................................................1
CONCLUSION................................................................................................................................6
REFERENCES................................................................................................................................8

INTRODUCTION
While planning expansion of manufacturing and production to other countries, businesses
are able to grab ample opportunities and faces risks. Cross cultural aspects are based on
differences between human resources of business of distinct background, ethnicities, nations and
significance of bridging them. Expansion of manufacturing production is something that an
entrepreneurs aspire to, as well as early success fuels dreams of organisational growth.
Euroleathers is a small family business established at Northampton, UK which stock wide
number of quality leather and manufactures shoes for supplying volume orders for larger
manufacturers addition to smaller quantities for a growing band of bespoken craftsmen. The
company uses natural materials to ensure healthy along with comfortable feet for many years. It
is a team of 17 locally based people to offer highly focused services (Euroleathers, 2021). The
shoe company is planning expansion of production to Vietnam, China or Ethiopia.
The report highlights opportunities and risks related to partial shift of manufacturing
concerned with move to other countries.
MAIN BODY
Opportunities and risks to company related to partial shift of manufacturing concerned with
move to other countries
As per Van Rossum (2017), in present international economy, businesses of all sizes are
establishing production and other operations in foreign markets (Van Rossum, 2017).
Manufacturing enterprises plan programs for gaining competitive edge in marketplace as well as
reduce rates of defect on production line. In association to Euroleathers, expansion of production
in other countries including Vietnam, China or Ethiopia needs adherence of various laws and
other aspects. Expanding production operation permits an establishment for new opportunities
along with proves a valuable long term investment. With expansion or shift of production, huge
number of opportunities could be grab by human resources. Mentioned below are certain
opportunities to Euroleathers associated with partial shift of manufacturing related with moving
to Vietnam, China or Ethiopia:
Accessing to new technologies: In accordance to Ordorica (2021), Machinery addition to
software technology are ever growing element of developing world and rapidly expansion in a
country with good opportunities (Ordorica, 2021). Expansion of shift of production brings
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opportunity for company to gain access to new tools, equipment, innovations and technologies.
For example, China and Vietnam continues to attract interest from companies which are looking
for expansion of production sites. Expansion in such countries bring opportunity of accessing
new technologies for Euroleathers without requirement to incur high costs as well as expend
resources.
Utilising government incentives: It has been analysed that many countries across the
globe offer incentive for businesses that are looking expansion of operations internationally. It is
because it brings new ventures to their nations. For Euroleathers, partial shift of manufacturing to
other countries, such as Vietnam, China or Ethiopia provides opportunity to make utilisation of
government incentives. One of the common incentive that can be an opportunity for the shoe
manufacturer is lowered tax after deductions. Due to this, the business can take the opportunity
to shift production overseas for lowering overall income tax rates (Polyvyanyy, Pika and ter
Hofstede, 2020).
Meeting new people along with raising cultural awareness: It is an opportunity for
business to expand overseas as whether working as sole proprietor or in partnership, going
overseas provides a chance to enterprise to meet many kinds of new people. It has been analysed
that various local people are interested to gain insights for reason of expansion. For Euroleathers,
expanding or shifting productions in Vietnam, China or Ethiopia brings opportunity of meeting
new people together with extending the organisational network. Moreover, meeting new people
which belong to diverse cultures as well as background assist the entrepreneur and other
professionals to forget stereotypes addition to understand others in more deep manner (Chernov
and Chernova, 2018). With new level of empathy together with awareness of culture, managers
of Euroleathers are able to start embracing addition to appreciate diversity with new
mechanisms.
Economies of scale: It is another opportunity for an establishment to expand in new
country. It is because when enterprise achieve growth, suppliers and vendors are more
incentivised for providing business managers with discounts as they order in larger quantities
(Jiang and Holburn, 2018). For Euroleathers, it reflects that the company will be paying less for
getting more suppliers as well as commodities they require from suppliers while shifting
production to other nations. Furthermore, more of money of the company could be used for
building the establishment to become more profitable.
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Establishing multiple revenue streams: Expansion or shifting of production gives a
company an opportunity to offer variant range of commodities and services (Pehrsson, 2020).
With this, a business is able to diversify its revenue stream, it states that the company is not
exclusively reliant on selling one core item or service. With shift of manufacturing in other
countries, it is an opportunity for Euroleathers to establish variant revenue streams. Business
managers inoculate the venture the company from downward trend in sale of shoes through
offsetting losses with earning, assisting to ensure that the establishment will survive when
demand of shoes or other footwear product declines.
Greater brand recognition: Shifting or production to other countries is not restricted to
diversification of revenues as it brings opportunity for wider recognition of brand (Pattnaik,
Singh and Gaur, 2021). For Euroleathers, branding is about ensuring that target people associates
particular ideas, characteristics and potentials with offerings, Human Resource Managers of the
shoe manufacturing establishment achieves branding through outreach marketing which
emphasises on channels of social media where audience gathers. With expansion of business in
countries, such as Vietnam, China or Ethiopia, personnel of Euroleathers have opportunity of
expanding possibilities of reaching wider audiences through executing marketing tactics assisting
in growing business awareness among prospective customers. The adage that bigger is better is
said true because it is associated to branding as audiences are more likely to pay attention for
businesses at the time they consider products to purchase. It do not mean that company has to be
a large corporation, rather becoming a bigger fish in small pond of industry provides opportunity
of greater branding.
Risks are said to possibilities of something bad occurrence (Gulanowski, Papadopoulos
and Plante, 2018). There are various risks that a company faces while expanding production to
other countries. In aspect to Euroleathers, some of risks concerned with partial shift of
manufacturing related to moving to other countries, including Vietnam, China or Ethiopia are as
follows:
Regulatory and legislative risk: When business plans an expansion, it reflects
implementing a business model in new location. It is a potential which regulations as well as
legislations by government could alter prospects of business of ventures. In context to
Euroleathers, partial shift of manufacturing of shoes to other nations comprises of regulatory and
legislative risk which is direct outcome of actions of government or through altering of demand
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patterns of customers of company. Many a times, copy and paste from business model in a
country wherein HR Managers are planning to expand, in other cases, it has been tailor fit to
target expansion market (Sabahi and Parast, 2020). For the shoe manufacturer, it has been
determined that every part of partial shift of manufacturing is risk factor, ranging from value
propositions to target customers, ways to deliver value propositions to customers, mechanisms of
revenue along with costs which generate profits to practices addition to resources required for
operating the model. There are different legislations for different countries, when one of
legislation changes it brings huge risks for the company to carry out operations globally.
Larger and frequent economic swings: Zwilling (2016) says that the inability to
perfectly forecast, predict or prepare sudden changes in local economic environment leads to
causing risks for markets which managers are aware of, but can wreak havoc for international
initiatives (Zwilling, 2016). This kind of economies are ill prepared to deal with economic
shocks. For Euroleathers, shifting production process to other countries, including Vietnam,
China or Ethiopia, has greater chances of facing economical risks which needs to be keep in
mind. For example, serious recession can damage wealth of business and have ability to put the
small sized venture out of business.
Technological risk: Technological risk refers to the change in technology, methods and
recent market trends related to the production and sell of the product in international market. In
the context of Euro leathers, the company expand their shoe business in many countries such as
Vietnam, China or Ethiopia to increase their productivity and profit. There are various
technological risk for the company as they shift or expand their production and selling activities
in many countries. The operational managers of company face various challenges in their
production function of shoes. To operate their business in these countries the production
managers and workers have to learn new technologies, methods of production process as well as
adopt the various changes in their activities (Šarvajcová, 2021). At initial of expansion the
employees and manager of Euroleathers find difficulties to adopt the changes in their production
process such as they produce shoes with labour intensive techniques in their host country but in
global market they have to shift on capital intensive techniques to produce large quantity of
goods related to shoes. The workers of Euroleathers find difficulties to work with these high-
tech machines as they do not understand about the instalment and implementation of these
technologies. Also, the marketers of Euroleathers find difficulties to promote their product by
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using digital marketing in international market as well as there are chances of cyberattack,
leakage of information, fraud and password theft of important document of Euro leathers as they
hire new employees for production and various marketing agencies for promoting their shoes in
international market.
Cultural risk: Cultural risk refers to the expectation for a organisation's operations in a
nation to struggle because of different in norms, language, customs and customer taste and
preferences. In the context of Euroleathers, the company want to expand their business in
Vietnam, China or Ethiopia to get huge customer base and market share for the growth of the
organisation. Before expanding their business, the managers and marketers of company must
know about the cultural risk related to shoes associated with these countries. Due to change in
income, taste, preferences, customs, needs and demands of the customers in different countries.
Cultural are vary from country to country also the needs and demand for the product is different
from one country to another country. To operate in these countries, the managers of Euroleathers
need to know about the values, labour rights and various law related to employees because they
have to hire and appoint employees in that countries for smooth functioning of their production
and selling activities. Sometime, the managers of host countries find difficulties to interact with
the employees of multiple branch in many countries due to change in their language and
mindsets which leads misunderstanding and disagreements among them. The marketers of
Euroleathers needs deep analysis to understand the customer trends and current market fashion
such as demand and trend for casual shoes, formal shoes, sports shoes to survive in Vietnam,
China or Ethiopia market.
Changes in political landscape: Political risk can be described as a probability that
business can be impacted instability and fluctuations in a country. Identification of political
climate is significant to asses risks while expanding businesses to different countries. There are
varied risks involved while expanding business to other countries which managers have to face
in order to become efficient. Varied types of political risk which can affect companies such as
civil unrest, war, jurisdictional decisions. Managers of Euroleathers have to take care of varied
political risks of country where they want to expand their business operations. Companies
sufferers a lot because of political unrest. China's market is largely a domestic market. Its
citizens are used to purchase products or services from their nearest domestic markets. It is
difficult for new company and influence their citizens in buying their products. Chinese
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government is very strict in foreign direct investment in country. Here goods are checked,
tracked and overlook the manufacturing process and products. In Vietnam, political climate is
moderate and have a stable environment. Vietnam government is not strict and appreciates
foreign direct investments whole heartedly. They want to develop their economic growth by
welcoming companies to set up their business in their country. In Ethiopia, government new
policies have allowed foreign companies to enter into their country and trading directly.
Currency fluctuations: This can be described as variations in exchange rates of different
currencies in varied countries. This fluctuation occurs due to changes in demands and supply. In
general terms, weaker currency persuades more exports as well as make imports expensive.
Continuous fluctuations in currency makes it volatile and adversely impacts local as well as
foreign trade. Managers of Euroleathers have to identify and evaluate currency fluctuations of
different countries in order to determine nation where it wants to expand their business activities.
Managers need to understand that this fluctuation are based on demand and supply mechanism. It
suggests that an increase in demand reflects an increment in prices (Pattnaik, Singh and Gaur,
2021). Managers need to evaluate weak and strong currency of expected nations where it wants
to expand that is China, Vietnam and Ethiopia. A weak currency can lower the production cost of
a company. However, profits will also be declined as it also affects the purchasing power of
people. For instance, if operating country of Euroleathers has weak currency against the
currency, for example, China, managers have to pay higher prices of setting up of their
production plant. This, in turn, increases prices of their products and make them to lose their
competitive edge in the market. This further lessens their profitability and revenues. This risk of
currency fluctuation needs to be adhered by top management of Euroleathers as this can hamper
their image in a foreign market. It is desirable for them to critical evaluate risk associated with
currency fluctuations in order to expand their business further.
business further.
CONCLUSION
From the presented information in the report, it has been concluded that business expansion
at international level allows in developing new relationships, developing brand recognition and
gaining new customers together with corner markets. With partial shift of production to other
nations, a company is seen as credible addition to successful which makes it more attractive to
new talent that are looking for jobs. While expanding or partial shifting manufacturing with
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move to other countries, various opportunities are accessing to new technologies, utilising
government incentives, meeting new people along with raising cultural awareness, economies of
scale, establishing multiple revenue streams and greater brand recognition. Risks concerned with
partial shifting of manufacturing with move to other countries are legislative risk, political risks,
currency fluctuations, cultural risk, technological risks and frequent economic swings.
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REFERENCES
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the 32nd International Business Information Management Association Conference,
IBIMA 2018-Vision 2020: Sustainable Economic Development and Application of
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Šarvajcová, M., 2021. Adaptation to Information Technology and the Risks of Excessive Use of
Smartphone. Megatrendy a médiá. 8(1). pp.599-606.
Online:
Euroleathers. 2021. [Online]. Available through: <https://euroleathers.com/about-us/>
Ordorica. S. 2021. A Look At Emerging Markets And Opportunities For International Expansion.
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