Question

What are some of the advantages for Sony, Toshiba, and LG Electronics to outsource TV manufacturing from South Korea, Japan, and Mexico to plants in China and Taiwan?

Answer 1

Ans.

The demand for televisions has been of course increased in recent years, but these manufacturers were required to reduce their manufacturing cost due to an increase in competition and declines in overall television price. Considering this, any cost-cutting in production would significantly increase the profit margin. This is one of the reasons why companies like Sony, Toshiba, and LG are relocating their production plant from South Korea, Japan, and Mexico to China or Taiwan because outsourcing to low wage and low-cost countries can significantly affect the manufacturing/production cost.

China and Taiwan both are developing countries with huge potential. If we think about China, it is a massive market for the electronic industry. Both countries are integrating into the world economy and opening their borders. Productions from these two countries are becoming more and more sophisticated with better quality. This is also one of the advantages companies are considering relocating their manufacturing/production plants to China or Taiwan. In simple words, the main advantages of outsourcing manufacturing can be identified as follows.

• Low wage costs: There are lower wages in China and Taiwan compare to South Korea, Japan or Mexico. Companies need not worry about high costs on worker's compensation insurance or social security payments etc.
• Employee/Labour Supply: Labour availability is another advantage for these companies to outsource their manufacturing to China and Taiwan.
• Self-sufficient with raw material at a competitive price: Material abundance and Competitive price on materials required to manufacture are comparatively cheap in China and Taiwan.

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