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Offshoring isn’t only for lowering your costs

Offshoring is an outsorcing process to a distant country

Outsourcing to a distant country

Offshoring consists of subcontracting particular services to other specific geographical areas to reduce costs. The companies often offshore their production process to countries where work power is cheaper than in their original countries. It also offers the perfect opportunity for possible expansion and even more flexibility, such as customer service hours. For example, having a customer service team based in Australia will help you cover the hours of a 24-hour phone line.

Offshore services is very common in business. For example, a lot of companies outsource their costumer service to a movil phone operator. In this way, they manage customer care from locations where this service is cheaper and saves costs for the company.

Offshoring also includes hiring a single foreign employee who may be better equipped for the job than the talent available near your company’s location. If you can do the job remotely, why not open a global search? 

Types of offshoring

Depending on the company and its needs, there are different types of offshoring. These can be understood from other points of view, as it can be done in many different ways.

Depending on the point of view, we could classify the different types of offshoring according to the following characteristics:

  • Ownership
  • Distance
  • Process

Ownership

Offshoring: The company establishes sites in the regions to which it intends to relocate, with the company itself providing the capital and assets to carry out the processes.

Outsourcing: The company agrees with a company to contract the elaboration of some process or service. An external and independent company carries out these tasks.

Offshoring distance

Offshoring to distant territories: You can get lower production costs in these countries. However, there is a more significant cultural asymmetry.

Nearshoring: Relocation to nearby territories. This practice is increasingly common, especially in the United States with its neighboring countries. Hence the name “nearshoring.”

Processes

Services: This consists of the provision of services abroad. Very common in services such as customer service.

Manufacturing: outsource of production processes to factories and production sites abroad.

Sales: This occurs when companies wish to open up new markets and establish new sales networks.

Research and development: This consists of offshoring those activities that add value to the service or product. In this way, many companies establish their research centers in more developed locations.

Advantages and disadvantages of offshoring

When a company decides to apply offshoring in its business, it should be aware that it is not all advantages. Even if cost savings are significant, other risk factors, such as the loss of intellectual property have caused significant problems. 

For this reason, if a company decides outshore to a distant country, it should be aware that several advantages and disadvantages are fundamental. 

Among the advantages of offshoring, we could highlight the following:

  • Cost savings.
  • Increased productivity.
  • Opening up new markets.
  • Hiring cheap labor. 
  • Diversification of risk.

On the other hand, the disadvantages of offshoring include:

  • Loss of intellectual property.
  • Cultural and linguistic conflict.
  • Loss of product quality.
  • Precarious workers.
  • Loss of control in the company.

1. Cost savings 

This is probably the most apparent benefit of offshoring. By offshoring to a country where labor is cheaper, you automatically save money on both services and production (as long as shipping is not more expensive).  

The continent where the accounting department is located is likely to have much lower rental costs. This benefit includes labor costs in the country where you have offshored and the cost of office space. You don’t have to worry about where to put the accounting department if it is on another continent. 

2. Tax benefits 

This is another excellent way to save money. If you choose your offshoring location carefully, you will be able to take advantage of tax breaks if the foreign government is trying to stimulate the local economy by reducing taxes for businesses. 

3. New markets and ease of scaling up 

Offshoring parts of your business will meke much easier for you to open up new markets. After doing that, is much easier to expand in the country you are offshoring to, and hiring new foreign workers is less of a financial burden. 

4. Experience 

Offshoring allows you to access a completely different field of professionals and create a diverse and talented team by hiring foreign employees at lower labor costs. 

 

Select an offshoring reliable partner

Offshoring is an excellent alternative to significantly lower production costs and expanding a business. As we can see, it is also necessary to weigh up the cons of offshoring. Because of that, it is essential to draw up a detailed plan that determines the objectives of the business strategy. It is critical to deal with the risks or drawbacks that certain operations in a foreign country may entail.

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Think Global, Translate to Local

This image shows all the world

Does your company have a website in other languages than your own? If not, maybe you should think about all the benefits that translation of your website to other commonly used languages would bring. Having websites in both your native language and in English is a good start, but is it enough? You never know who might visit your website or want to contact you from other countries. Becoming at least somewhat international does not hurt now. In fact, it is important, even if you plan to focus mostly on local markets.

You might think having a website translation into English is enough since almost everyone speaks English. Well, you would be wrong, since only around 28% of the 3 billion internet users speak and understand English. Even though 55% of the content on the Internet is in English. According to Common Sense Advisory 72% of consumers spend most of their time online browsing sites that are in their own language. These people also said that to buy your products you should have a website available in their language. The European Commission’s analytical report shows that 90 % of people from Europe like to use websites in their native language. But 42% of these people said that they never buy from sites that are not available in their mother tongue.

Benefits of multilingual websites

Translated websites and online shops are much better for building trust between the product/service provider and the customer. Than places with a limited language selection. Multilingual websites should include in your business strategy. Customers want to be sure of what they are buying. So, using a language that they may not understand makes them uncertain and possibly turns them away from your website.

Having your website available in many languages is also a cost-effective way to market your company. When people from other countries visit a nearby area they will most likely check websites of local companies. And choose the place that has a website available in their own language. This may lead to new customers, especially if they plan to stay longer in the area. If you run a restaurant in the area where travellers visit often and your website is available in their language. They are more likely to check your place of business and maybe even buy something. Most importantly, your company will have way more visibility in search engines like Google, Yahoo and Bing. But keep in mind that these search engines do not default in countries like China, Japan and France.

So, having websites available in many languages gives a higher chance of being found in other search engines also.

Which languages translation to focus on?

The reason for English being the most common language on websites is that the Internet started on that language. Now people everywhere around the world have access to the Internet. There are much higher markets available for other languages also. Which languages should you think then? 85% of the users in Common Sense Advisory and the European Commission’s studies speak one of these 10 languages. English, Chinese, Spanish, Arabic, Portuguese, Japanese, Russian, German, French or Malay. There are around 7000 languages in the world, but only 23 of them account for half of the world’s population.

So, if you are a small or medium-sized company, you should only target around 3-5 foreign countries. For example, if you are a Finnish company you should probably focus on Swedish, Russian and English languages. Also, to Finnish unless you plan to market your company on a wider scope.

The data collecting services, like Google Analytics, can be used to collect. And then analyze data about who and from where people visit your website. You can focus on the specific countries from which most of the people that visit your website come from. But what if you do not know anyone who can communicate in the required languages? This is something you should consider when hiring people. To make sure you have customer service and help desk available in those languages. If you do not have an online store, you need someone who is able to speak fluent English. In addition to the other required languages, for making sales happen.

This image shows the translation in different language of word "hello"

No time or people for translation your websites? Here are some tips for you!

There are several ways to proceed, but also essential elements that you should take into account. You can hire a professional translator, buy services from companies that provide the necessary language. Or to hire employees that can speak and understand those languages. Having at least a couple of multilingual employee is a big benefit with foreign customers.

Of course, there is always the option of a free translation from Google. But that does not send a good impression to your target audience. In a lot of cases, the translation via Google Translate contain errors or misspelt sentences. It will give an unprofessional impression to customers if they realize that your business is using the most common tool.

Human translations are always a better option. Since automatic software has not yet reached the point of being able to understand all nuances of languages. The vocabulary of this translation software is also still lacking, but there have been some improvements over the years. There are plenty of freelancers and companies that offer translation services for reasonable prices.

How to create a website with multiple languages translation

When choosing between website builders, pick the one that suits your needs best, and offers enough for you to easily combine different language options in one site, while maintaining the outlook and all information regardless of the website-visitors’ country of origin.

After all, it is important to remember why we make websites at all. It is because we want the right people to find us, we want them to find whatever it is that they are looking for, and most importantly we want them to do what we want them to do. For example, we want them to see what we have on offer, to buy our products from online stores or to find the company’s address and contact information.

Once your company has a website and an online store, get them translated to other common languages in order to expand your potential customer base. Also, try to focus on multilingual people when you hire new personnel. This will help you in the long run to get more customers, sales and most importantly visibility around the world. When people can understand your website they are more likely to buy and even recommend you to their friends and family. It is time to secure your foothold on the Internet and build multilingual websites.

Find out more: https://katrium.eu/

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Challenges of Internationalization and How to Tackle Them

The demand for customers is continuous and influenced by many factors. In today’s competitive markets getting new customers is vital. And the potential customer base in your own country might not be sufficient enough to carry your business in long term.This means that internationalization it’s almost mandatory for many companies.

In this article it will be presented challenges of internationalization and how to tackle them.

Imagine the following situation: Your current business and a different country with a different culture and customs. Your first thought might be tackling the cultural and regulatory challenges in a new environment might take too much resources. But a skilled businessman has to be prepared for quick changes in the market. And be able to take the bull by the horns immediately when the time comes. In this article, we observe how and why internationalization is rather a great opportunity than a heap of problems. We use as an example here the Uppsala model.

What is Uppsala model? Some of you might already be familiar with it, but let’s have a short overview of the model: Uppsala model was based on the process of acquisition of foreign business environment. It could be just the step forward that your company should take. Considering the fact that internalization of your business could be a ground-breaking improvement. And actually could help attracting a wide range of new customers with unknown potential for future growth. But, on the other hand, there are also lots of threats one should be aware of and acquainted with. In order to successfully expand operations abroad.

Face-to-Face with Uppsala Model

The theory in the Uppsala model says there are two types of companies: ones that are so-called “born-global” companies. This means that they were established for the sole purpose of selling products and/or services in the foreign markets. And ones that were created for a specific marketplace in a specific country but want to cast their net wider. The Uppsala model has been a great stepping stone for the latter type. Which means that the companies made a plan, were ready to take a risk and are now very successful. Both domestically and internationally. To go more into detail of the model, the whole idea was built on four Swedish companies: Sandvik, Atlas Copco, Facit, and Volvo.

What is then the key to success according to the Uppsala model? J. Johanson and J.-E. Vahlne, are the authors of this method. They argue that these companies had given preference to the safe and more sophisticated way of reaching the foreign market. In the model, they describe the particular steps required in the process. From the phase when a company has not any connection to the wanted target market. Until the final phase, the success when a company has established its subsidiary abroad. When you peruse the particular steps in the model the whole thing might seem easy. But we cannot ignore the fact that the process does require a lot of planning and hard work. Better known as resources and flexibility from the company.

 

Steps to ensure successful internationalization

Always be aware of sensitive information about your company. Be critical. What have you done until now? Which actions were good? Which were not? What more can you do? How and what are you able to manage? With what would you need help with to manage? The first step, of course, is to make a strategy. Ask these questions from yourself about the domestic market and then about the wanted target market. Compare your answers. Find the opportunities in both. Think also one more time. Is it necessary to expand your operations? Are there no new opportunities in your country anymore?

To answer the last question you should consider these points about the domestic market:

  • Is there global competitiveness in your domestic market?

  • Are there foreign companies or companies with higher earnings?

  • Do you have an increasing number of customers?

  • What is better for your company? Be dependent just on one market or have at least some operations on the foreign market.

If you consider expanding abroad

First you consider and answer these questions. If you have arrived at the conclusion that expanding abroad is a viable option it is time to take the next step. Expanding to a foreign market will require money but more importantly time. Study the culture in the target market, in business as well as national level. Make sure you understand the do’s and don’t’s and distinguish the cultural differences that might be challenging. You must make sure that your company is prepared for the changes in surroundings as well as in practical matters. That will be the ace up your sleeve.

According to the Uppsala model, this phase is characterized as “No regular export activities”. Because in this step most companies have no idea what is waiting for them abroad. And often they don’t make the aforementioned research beforehand. Due to a lack of information and confidence, they try to avoid any problems by just waiting on the market. How many companies do you know that have succeeded by doing nothing and waiting for things to come their way? Nobody can take this step for you. You cannot outsource it. But the time spent on the research will be handsomely paid back if you succeed in the end.

 

Internationalization: two ways

internationalization – Networking is the key

If and when you are really sure that the chosen foreign target market fits your company. And your reasons are sane and well thought out. Then prepare yourself because it is time for executing the strategy.

Orientation for both, new and old staff on the new target market is important to do with care and precision. Because if you get it right, is the first time you have a big advantage in your hands already. After all, people are your best resource. When you get the operations rolling, it is time to cast the net out and catch some fish. But where and when? Again, information is the key.

Now that you are already in the market…

You need to know information about local partners or regulations. And the best way to get the best information is to have local contacts. You have already executed some basic market research in the previous steps. But now it is time to deepen this information. Be active, be social, be very much hands-on-deck and go to events, network. Find the professionals who can help you with this comprehensive work. That way you will get more intricate, intimate data, which makes the cornerstones of your advantage when you really start off in the new market.

The Uppsala method expresses the importance of communication and contacts on internationalization. It is like a huge ripple effect. These contacts will lead to information, worthwhile advice and also customers. Each of us must master networking if we want to have any chance of success outside our own familiar borders.

If you are a skilled networker, you can have access to all answers streaming from many years of experience. Adapting it to the new production policies and regulations; Possible distribution channels; Suitable pricing policies; Cultural preferences when it comes to products and services, etc. If somebody offers you advice, take it no matter how trivial it may seem at first. Your worst mistake could be ignoring the teeniest cultural difference.

Don’t ignore cultural differences 

Here are a couple of the millions of examples in underestimating the cultural differences. In Japan Pepsi Cola thought that the American way of marketing could work as well in the Asian business giant. Their slogan “Come alive” literally means ‘come out of the grave’ in Japanese. Which obviously did not go down too well. A Finnish furniture company, Asko, had to retreat from the Spanish-speaking markets because their name means ‘ugly’ in Spanish. Imagine the  money and effort that could have been saved if somebody had talk to local people in the target country.

Every company has a chance on the foreign market. As long as the base work is done well and executed with care. There will always be risks and challenges. But if you are afraid of these two things, what chance does your business have? Especially in today’s very competitive markets. Just remember when internationalizing that communication plays the main role at every step. It will save you time, money and guarantees you the information that will enable you to succeed. Be prepared and rule the world!… Or at least the markets where you want to rule.

If you are interested, go through our website and find out more about our company: https://katrium.eu/services/

References:

http://www.podnikatel.cz/clanky/5-kroku-pro-uspesny-vstup-na-zahranicni-trh/

http://www.forbes.com/sites/theyec/2013/10/08/five-steps-to-expand-your-business-globally/

http://www.businessballs.com/business-networking.htm#be-different

Lea Kubíčková (2013), Limits of the Uppsala model application in the internationalization process of Czech SMEs

Johanson, J. and Vahlne, J.-E. (2009), The Uppsala internationalization process of the firm – a model of knowledge development and increasing foreign market commitments

Šárka Zapletalová (2009)