Expanding your business into an overseas market requires a huge investment of time and money. To produce goods in a foreign country, you’ll need to invest in raw materials, machinery, and equipment. A manufacturing consultant can help you make informed decisions and plan for a successful overseas business launch. Here are some of the issues that you’ll face as you expand into foreign markets.
Impact of NAFTA
The North American Free Trade Agreement (NAFTA) removed many of the trade restrictions between the United States, Canada, and Mexico. NAFTA had a large impact on Mexico’s IMMEX program, which allows foreign companies to import raw materials and component parts without paying taxes or import duties.
The foreign corporation must produce the goods in Mexico and export the finished goods based on a timeline imposed by the Mexican government. A foreign company can benefit from a lower cost structure and generate a higher profit. Mexico benefits when overseas companies bring in specialized technology and educate the local workforce. To understand the IMMEX program, consider working with a manufacturing consultant.
Purchasing and maintenance
Creating a manufacturing facility in a foreign country is complex. If you build your own factory, you’ll need to purchase land and manage a building process that may take months to complete. The machinery and equipment you purchase will have to meet your specific production requirements, and you may need to buy the items and ship them into the country.
In some cases, the maintenance required to keep an asset in good working order is more expensive over time than the purchase cost. The cost of maintaining a used airplane, for example, may be three times the plane’s cost over a 10-year time period. As a business manager, you must plan for the purchase cost and maintenance expenses you must pay over time.
The Brexit example
One risk you must manage with a foreign operation is a change in trade laws. Brexit is an example of a change in trade law that will have a dramatic impact on many companies across the globe. Brexit refers to Britain’s decision to leave the European Union (EU), which is an organization that makes it easier for countries in Europe to conduct trade with each other.
The Brexit decision has created huge uncertainty in London, which is a financial center for many non-EU companies that do business in Europe. These London-based firms may need to move into other EU countries to maintain their European business relationships. Because the impact of Brexit has not been resolved, many non-EU countries cannot plan their future business operations.
Hire an expert
A manufacturing consultant can help you understand the local culture when you operate overseas. A consultant may have relationships with local government officials, including labor leaders. These relationships can help you hire and manage an effective local workforce. If you have difficulty importing raw materials or shipping finished goods out of the country, a consultant can help speed up the process and keep you on schedule.
In order to earn a return on your large investment overseas, consider hiring a manufacturing consultant. An expert can help you make smart decisions and operate profitably.