Question

Why have many manufacturing facilities relocated from Western Europe to Asia? Discuss the motives and risks?

Answer 1

The major reason for relocation are cheap labor availability, more skilled labours on productions, availability of raw materials at more economical rate. Infact the lower production cost is one of the major reason for shifting from Western European countries to Asian countries. The population of Asian countries are more than Europe which creates a labor and more supplier pool where companies can invest on contract manufacturing and reduce the overall cost. In Europe skilled labor shortage is there as well as their labor cost and other incentives are way higher. All this are the major motives for this movement. The major risk associated with this movement are

• Over dependancy on Asian countries
• Risk in transfer of goods such as logistics movement
• Threat of labour union strikes which is prevailing in countries like India which will impact the production
• Natural calamity risk which will impact the overall order fulfilment
• Changing political and economical situations might impact such contract manufacturing in future.