Outsourcing: advantages that the industrial location of Eastern Europe has over China
If you want to save money on production, you are currently looking to Eastern Europe. In addition to offshoring, the relocation of business processes to Asian countries, nearshore outsourcing has become a real alternative, especially for European companies.
Various studies show that European employers are increasingly opting for nearshoring for the countries of Eastern Europe. However, this is not surprising, especially as there are many good reasons for outsourcing business activities in these countries.
Increasing production costs has a huge impact on competitiveness. As a result, many European companies are forced to outsource their own manufacturing activities. In this context, the next step is to ask the question of a suitable country. Nearshoring to Eastern Europe is on the rise, as these regions offer many advantages over developing countries such as India and China.
An overview of the advantages of the Eastern Europe location
1. Low labor costs
Of course, one of the main reasons why European companies are outsourcing to Eastern Europe is the comparatively low labor costs. By awarding work to these nearshore regions, some cost savings of 30 to 50 percent are expected. The view of some HR managers that people in these countries lack the necessary training and skills is increasingly being refuted. In the meantime, several Eastern European countries have already established themselves as outstanding production locations.
2. No big cultural hurdles
Since the political changes in 1989, cultures in Europe have converged visibly. Value views, the relationship to hierarchies, reliability, and manners differ only very slightly today. This is a big advantage overproduction in Asia, where cultural differences can lead to complications and higher project costs.
3. Good language skills
Linguistic difficulties can burden a business relationship and involve expensive misunderstandings as well as longer project durations. From this point of view, Eastern Europe can reap further benefits, especially as it is proven that almost 40 percent of all students in the new EU member states are learning German. More than 70 percent also learn English at an internationally competitive level. The language of the employees is an important basis for efficient communication.
4. Availability and qualification of personnel
Each year, a large number of students graduate in Eastern Europe. As a result, the supply of qualified professionals is very large. Because the profile of requirements for the quality of education has increased significantly, university graduates and entry-level professionals have in-depth know-how.
5. Travel and time zone
Another positive aspect of nearshoring is low to light visa and entry requirements for citizens of Eastern European countries. Add to that the easier avoidance of privacy risks. Last but not least, engineers from Eastern Europe are better acquainted with EU laws (eg with regard to intellectual property) than a specialist from Asia. For Eastern Europe but also speak the short journey and the low to nonexistent time differences. Between Germany and China, however, the time difference is 6 to 7 hours depending on the summer or winter time. Geographical proximity is thus a decisive competitive advantage. Many problems can only be solved face to face in personal contact.
Conclusion Location Eastern Europe
Calculations on the share of Eastern Europe in the global outsourcing market assume 43 percent, thus ranking second directly behind Asia. Experts believe that this proportion will increase in the coming years in view of the above reasoning. Already the cost advantages, the geographic proximity, the increasing education level as well as the comparatively small cultural differences, speak for increasing interest of European companies in offshoring in favor of Eastern European states.
The disadvantages of industrial outsourcing to China
No matter what company you have, it is always wise to analyze the pros and cons. Here are some of the problems that can occur when outsourcing to China.
A big problem for companies that outsource their production to China is quality control. China may look very impressive on the surface, many products may look good, but the many standards and regulations are different from European regulations.
In order to save production costs, it may be that inferior materials are used. The resulting risk to its reputation as a company should not be underestimated.
If you have your manufacturing base in China, you have to be very careful about copyrights, trademarks, and plagiarism. IP law is very different in Asia, but you can hardly protect yourself as a company.
Most Chinese understand little or no English. This can lead to business processes not working properly and serious communication and voting problems. Collaboration with a translator is therefore essential in most cases in China.
The success of a business largely depends on whether the company is in a position to attract the best employees and, more importantly, to retain them in the long term. This task is often already a challenge in the home country of a company where the company is well versed in culture and economics. In developing countries with a foreign culture and other rapidly changing economic conditions, the phenomenon of high (voluntary) turnover is a seemingly insurmountable hurdle for long-term success for many European companies. Nowhere else in the world is the War for Talents relentlessly fought like in China, Therefore, the problem of high turnover in China is also symptomatic of the problems in other Asian countries.
Conclusion Location China
Manufacturing in China is challenging! If you want to invest in China over the long term, your business strategy needs to adapt to the specific conditions of this challenging market - which means focusing not just on low production costs.