Companies in developed countries are increasingly likely to outsource services that were once performed in their home countries to companies in developing countries. These services include manufacturing, design and even customer service. In response to this development, some companies act as intermediaries between companies in developed nations that wish to outsource, and companies in developing countries that wish to perform outsourced services.
Items you will need
- Articles of Incorporation
- Application to establish a representative office
Decide which services to specialize in. Manufacturing is by far the most outsourced service, because it is a labor-intensive activity that can be performed cheaply by low-wage workers. Developing countries often do not possess sufficient resources to produce capital-intensive services such as engineering design in an economically efficient manner. India's computer industry is an exception to this rule.
Establish a corporation in your home country and make sure that it is adequately capitalized. Establishing a Limited Liability Company (LLC) is less desirable, because some foreign countries are not familiar with the LLC business form.
Set a up a representative office in the foreign country or countries where you wish to outsource services. In most countries (including China), a representative office is rather easy to establish and is considered a branch office rather than a subsidiary of the home company. Although representative offices are generally prohibited in engaging in direct profit-making activities, they are allowed to locate local contacts, introduce contacts to the home office, and even negotiate contracts as long as these contracts are signed in the company's home country. Minimum capital contributions are often required.
Staff your representative office with executives from your home country, as well as local employees who understand the business environment and can help you overcome the language barrier. Be sure to research local labor regulations before hiring foreign employees to staff your office.
Make contacts with local manufacturers or other service providers, and get estimates of their production costs. This should provide you with the basis for negotiating the price of outsourced services.
Use manufacturing directories (see Resources section) and other sources of information to locate companies in your home country that could benefit from outsourcing the services your company specializes in. Provide them with cost estimates and offer to commence negotiations with foreign service providers. Concentrate on companies that do business primarily in areas where outsourcing has not yet taken hold - the US Midwest, for example.
Broker deals between companies in your home country and service providers in the countries where you maintain representative offices. Your company's income can be stated as a flat fee or a percentage of the value of the deals that it brokers.
Carefully consider where to locate your representative office. If you specialize in the outsourcing of manufacturing, China is a good bet. If you prefer to outsource services such as software design or call centers, India is a popular and low-cost destination.
Low labor costs will not save you money in the long run if the country in which you operate has a shortage of skilled workers, serious infrastructure problems or a meddling and bureaucratic government.
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