UNREALIZED POTENTIAL IN FOREIGN FACTORIES

Topics: International trade, General Agreement on Tariffs and Trade, Tariff Pages: 2 (517 words) Published: November 15, 2013
In March 1997, Kasra Ferdows of the Harvard Business Review brought the attention of corporations to the topic of unrealised potential in foreign factories. Ferdows preaches, “Superior manufactures gain a competitive advantage by methodically upgrading the strategic role of their plants abroad.” According to Ferdows, traditionally corporations have established and managed their foreign plants to benefit only from tariff and trade concessions, cheap labor, capital subsidies, and reduced logistics costs. Therefore, they assign a limited range of work, responsibilities, and resources to those factories (Ferdows, 1997). The lack of benefits coming from tariffs, low wages, and reduced logistics costs seem to suggest that these options may not be the best alternatives for corporations to approach their activities abroad. This paper attempts to determine if upgrading the strategic role of facilities abroad will improve the performance of that plant through answering the following questions: Why are corporations not tapping into the full potential overseas? Are tariffs, cheap labor, and reduced logistics costs greatly contributing to bottom line? How can a factory located outside the country be a competitive weapon? What factors are responsible for the company's overall success? Shedding light on the limitations of conventional business practises or methods for factories abroad may help other companies how are planning on what strategic factory role to take understand how to improve competitive advantages and productivity in their operations. Why are corporations not tapping into their full potential overseas? An establishment not executing to the best of its capability will hurt its own performance. Lack of meeting potential can lead to a number of issues a few of which are; appearing unattractive when trying to recruit talented employees, lack of innovation, and weakened competitive advantage. Ferdows findings indicate that performance related issues can be linked...
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