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• Political factors: Companies are to a higher extent exposed to a “low cost –high quality
challenge” from many developing countries. A strategic risk of transferring know-how to
these countries is highlighted.
• Economic issues: Labour costs in the developing countries will increase in the future. In
addition to this, wages are not a good indicator of low production costs, i.e. low wages do
not necessarily mean low production costs. Furthermore, the costs can vary due to
fluctuating exchange rates.
• Social pressures: An increased risk of political instability, due to increased living
standards in the developing countries, is discussed. Also the risk of strikes etc. in the US
and Europe may increase when production is moved offshore.
• Technological imperatives: Companies from the USA and Europe with production
facilities in the low cost countries find themselves forced to transfer more and more
advanced technology. This increases the likelihood of “cloned” low cost competitors in the
future. Several authors argue that the globalization of supply chains and the trend towards
outsourcing, have worsened the risk exposure as well as the impact of supply chain
disruption
Titany answered the question on November 24, 2021 at 12:48
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