There are many reasons for a company to establish in a certain area, and the motivations are as varied as the companies and their markets. That said, there are some motivations that appear more often and, in the last few years, they have grown in importance as the United States has become more familiar with concepts like “on‐shoring,” “re-shoring” or “near‐shoring.”
The first motivation has always been a factor, but in the past 50 years it had faded somewhat. The great advance in the 1960s and 1970s was the ability to mass produce, and that produced an era driven by the need to make the same item for every market as cheaply as possible. Japan was the first nation to ride that wave. However, the consumer began to demand far more unique goods. Thus, it is more important to be as close to the market as possible so that full use of the ability to customize could take place. As such, many American companies are migrating back to be closer to core markets.
The second motivation is connected to the ability to manage. As the consumer has become more demanding and the production process has become more complex, the control issues have become more important, and it is simply harder to retain the preferred level of quality control when the core operations are thousands of miles away.
The third motivation is the deterioration of the original advantage. The vast majority of companies that elected to locate production overseas did so for reasons including cheaper price of labor or to escape regulation of labor or environmental protections. These costs have increased in the developing world, narrowing the gap. It’s a notable issue in China, particularly.
The fourth motivation is that getting the production from these nations to the markets where they will be sold is not cheap, and anything transportation-related grows more expensive all the time.
Finally, there is a growing awareness of where a product is made, and consumers are starting to react. Granted, there is realistically a limit to how much the consumer is going to alter their spending habits. This is as close to a level playing field as U.S. manufacturers of consumer goods have gotten in decades.
-Armada Corporate Intelligence