A lot of companies of different types such as technological, industrial and other type bring their business to off-shore zone from highly expensive labor areas. Every day business men make decision if it is necessary to have full off-shore production or partial outsourcing. This work is devoted to identify advantages of moving of a British technological company to offshore zone completely.
Off-shore is determined as a financial center attracting capital from other countries providing good taxation conditions which substantially help companies increase their profits. Consequently, off-shoring is a process of running business in off-shore zones.
From linguistic point of view it is possible to say that off-shore means “out of coast”, that is on the opposite side. Although, this term appeared in the 20th century, the concept itself existed in ancient times when trade people chose other market places because of better working conditions.
Looking at present situation, it is possible to say that running business off-shore has got a lot of advantages. Firstly, in comparison to national regularities, companies situated off-shore are sure of their financial confidentiality. It is not possible to reveal company accounts, data, profits and annual reports. Secondly, the main advantage is tax reduction. Taxation system is usually more simplified and minimized in such zones. Thirdly, investment are much more secure than in any other place, because such zones are less vulnerable to inflation. Banks run professional currency policy. Fourthly, personal data of shareholders can not be revealed and made public. Banking, investment, insurance services are at higher level. It is possible to register off-shore company very quickly or buy already working company with functions that you need to have. In off-shore zones there is no red tape and complicated reporting systems.
Analyzing the concrete example about the UK company, it is necessary to point out that moving from the UK to off-shore is inevitable if a company wants to develop further. The UK is a relatively closed state, situated on islands, with its own currency, problematic situation in demography and not enough competitive basis for development of technological company.
Another way is to outsource partly. This term is considered by economists in different ways: as a partly production bought from different country, and as a partly off-shore leaving an administrative block in the main country and moving producing to the off-shore zone. Using such forms of business running as partial outsourcing is quite illogical way. First of all, administrative block which is going to stay in the UK is a headquarter and will provide reports which will show number from their production business block. All decision must be approved by a headquarter and it will make the process more difficult to manage. Top management will not have financial security because they go public. Decision makers have to visit their production units often and it will result in transportation costs increase. More than that, sharing administrative expenses for both offices is more profitable then to spend twice.
Looking at advantages and disadvantages of both options, full off-shore and partial outsourcing, it is necessary to say that the first one is offering more advantages. More than that, such examples of world giants as HP, Apple, Microsoft, which offshore 70% of their business and unknown companies which are completely off-shoring, show that such way of making business very profitable and developing.