Why Do Companies Need to Go Overseas?

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American companies and corporations that move their operations overseas have created much controversy in recent years. Many American workers have lost their jobs as a result of companies shifting part or all of their business to a foreign country. Most companies have specific reasons and financial incentives for making this difficult business decision.

Reduced Costs and Taxes

  • Many costs of doing business, including wages, electricity and raw materials, are lower in other countries. In addition, American companies that relocate overseas may pay lower taxes to the U.S. government.

Competition

  • Domestic companies must compete with companies in other countries for customers. Because those competitors have lower costs, they can charge lower prices than a U.S. company that doesn't go international.

Exports

  • A company might wish to sell its products in both the U.S. and another country. It’s often much cheaper and more effective to set up additional offices in that other country than to manage everything from home.

Law

  • Some countries require that American companies doing business in their country must partner with a local company and base some of their operations in that country.

Risk

  • Having all of a company’s operations and customers in one country is akin to having all your eggs in one basket. Companies go overseas so that when one country has a bad year, the other countries can help balance it out.

Expertise

  • Some countries are famous for a particular area of expertise, such as Italian silk manufacturing and Indian technical support. Companies go overseas or outsource jobs to take advantage of those skills.

References

  • Photo Credit Thinkstock Images/Comstock/Getty Images
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