With rapid development of globalization, many companies have settled their factories in an offshore country in order to gain competitive advantages. There are various benefits to operate in an offshore country, such as cost reduction and cost structure optimization, immediate access to latest technology and technical staff (Euro ITX, 2004); however, it also includes some drawbacks. For instance, culture difference and geopolitical risk. Therefore International managers get big challenges in dealing with political and legal, economic, technology and culture environment in a foreign country.
Key Environment Factors
• Political and Legal Environment
Stable, reliable and secure political and legal environment is considered as the first important factor on offshore outsourcing referred to the host country. Negative policies between two countries towards each other may act as a stumbling block in the business. The main factor for the international managers to think in advance is the suitable government regulations, support and requirements for vendors in the host countries, such as industry laws, customs regime, license and "trade exit" conditions. (QWS, 2006) The developing countries usually have some promotion regulations for foreign investment, such as low rent and tax.
• Economic Environment
Stable economic environment is the strength for company to decide offshore outsourcing. This is usually controlled by the government in host country on fiscal and foreign investment policies. In order to gain more benefits, there are two key parts for taking into account which are financial benefits and labor force.
To think about financial benefits, the first thing to be considered is the cost of setting a business in the host country. Each country has a minimum capital required to invest overseas. International managers have to decide whether to build a factory or just rent a building. And this cost should be referred to the project budget compared...