Why Do Companies Need to Go Overseas?

by Evangeline Marzec; Updated September 26, 2017
Airplane flying

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.

About the Author

Evangeline Marzec is a management consultant to small high-tech companies, and has been in the video games industry since 2004. As a published writer since 1998, she has contributed articles and short stories to web and print media, including eHow and Timewinder. She holds a Master of Business Adminstration from Thunderbird School of Global Management.

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