General Strategic Planning as the Starting Point for Going International for Production and Sourcing

Abstract

General strategic planning can show the need to need to reduce costs. Western European and North American companies are often confronted with this. An effective way to reduce costs is to relocate production or sourcing to a country with lower costs. This chapter shows, how general strategic planning can lead to the need to analyze possibilities for relocating production and sourcing activities. First, the value chain analysis is presented. This analysis shows the activities of a business in a structured way and it constitutes the basis for cost analysis. Then, strategic cost analysis with the help of activity-based costing is looked into. Finally, the options available to a company to reduce costs, are described and assessed. The assessment shows that there is great potential for cost reduction through the relocation of production and sourcing to low cost countries.