In a context of financial globalization and outsourcing, the choice of firms' location has become a complex issue. Indeed, some companies prefer to locate their investments close to their markets whereas others make the choice to establish themselves in the most appropriate country where ever it be . These options depend on market types, the firm's strategies and worldwide business context.
In order to understand these two different approaches, we will present the actual international business environment and the necessity to establish the firm close to the market. Finally, we will explain the reasons to be located outside the domestic country. The international business environment has bitterly changed because of the interdependence between the markets. Now, globalization of the economy increases expansion of multinational companies through foreign direct investments which enable outsourcing of means of production.
[...] Generally, customers, partners or public opinion do not appreciate that the firm decides to relocate some business operations, particularly if it is ending a part of its domestic process. Moreover, exploitation has become a difficult issue to control in poor countries. Some brands do not hesitate to hire children or to make work people seven days a week in order to cut costs or to manufacture more rapidly. If the consumers notice that an item has been realised in bad working conditions, they can boycott this brand. [...]
[...] o To improve international competitiveness Globalization has increased worldwide competitiveness. Consequently, the importance of obtaining new market shares and new customers has conducted firms to expand new international marketing strategies. In other words, these plans consist in the improving of internationalization of sales. Enterprises have to outsource in order to stay at the same level of their rivals. They have to locate their investments abroad to gain in terms of profitability and lower costs. Indeed, the main motivation of manufacturing and service outsourcing is cost reduction and greater efficiency. [...]
[...] That is why, a company can; on the one hand, relocate its research & development to have access to intellectual property, to manage risk better and to concentrate on the main activity of the firm. In this context, China and India are the two most populous areas which offer over 200,000 engineers and scientific experts each year. On the other hand, because of the increasing flexibility, companies have to relocate manufactories in order to diminish production costs and to improve quality of service with new technological innovations. [...]
[...] Moreover, it offers flexibility because the enterprise can adapt production during fluctuating demands and periods of staffing issues. III. The necessities to establish the firm close to the market Outsourcing has becomes the new issue of the 21st century. However, some companies have to establish themselves close to their market: it concerns principally service industry Necessities linked with expenses o To decrease transport costs First, transportation represents sometimes a big part of firms' budget, so staying near the market limits transport costs and risks. These savings relate to non-high value products such as food or chemicals. [...]
[...] That is why; companies focus their research and strategies on the role of face-to- face interactions. For example, the hotel chain Hilton has understood that nothing can substitute old fashioned face-to-face even if new technologies (email, videoconference) enables to maintain relationship business. In other words, direct meetings with potential customers are obviously the most successful means to book business. Moreover, the majority of local stores (groceries, hairdressers, butcher shops ) or public services (education, health, post offices) need to be close to their clients. [...]
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