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Getting better ROI setting up operations overseas

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Many companies set up shop overseas. Some prosper and others don’t. Many Americans are violently against this. But, people need to consider that it is very expensive setting up shop in certain locations. The labor rate might be high just to get mediocre employees. The rent might be sky high as well. There are other costs that you could consider as well. Avialability of labor that has the skills you need is another huge factor. Many companies will consider political stability as well. Starting an outsourcing company in Kabul might not be the best idea these days (or any days). There are various factors you have to think about when setting up an operation in a location.

So many locations?
Let’s say you were setting up a call center. You could do so in India, The Philippines, Costa Rica, Africa, America, Romania, or Canada. Which location makes more sense? America has the most expensive labor, but has workers who speak clear English and have cultural skills which might be a challange tofind overseas. But, the rent is not necessarily more expensive in America! You can get five square feet of space in Arkansas for the same price is one square foot in Pune, India. Is that foot in Pune any better than it’s corresponding foot in Arkansas? Africa has cheap everything, but god knows when the next coup d’etat is coming not to mention if your internet will be compromised. Each country has different attributes and costs, so how do you decide?

Look into the future
Big companies do very sophisticated analysis as to where they should set up their operations. Some choose Mexico because it takes 17 hours to truck their goods to a central location in the U.S. Others like India for its huge pool of people with technical skills. One company might choose Canada to save on its air conditioning bill (just kidding). But, you have to remember, that conditions never remain the same. The cost of land in India might be expensive NOW. But, in ten years, the population will be up by a significant percent due to the unending birthrate. Additionally, the wealth accumulated in India in the next ten years will push the price of Real Estate up yet another notch. Companies in India are often moving into remote areas to save on rent. But, those remote areas will not be cheap for long the way things are going. The beauty of America is that land in Texas was cheap in 1850. It was still cheap in 1950, and will still be cheap in 2050. If you buy the realtor a few bottles of wine, he might even throw in a few longhorns on the property.

Calculate ahead of time
The bottom line is that some places will have land prices that are priced out of the market in 10 years. Other places will have labor rates that are impossible in 10 years. Many places might have been blown off the face of the earth after 10 years due to political problems. The only way to make up your decision where to get optimal ROI is to really study numbers and look at trends. Visit the places you are thinking about investing and get to know the locals. Get to know what is going on.