What are the manufacturing costs in different countries?
A major factor affecting where many businesses decide to manufacture their products is to do with labor. This includes costs, laws, and productivity. The main factor being costs. The table below from the Vancouver Sun, 1992 shows a comparison in hourly wage costs in manufacturing ($US).
This table shows us that the highest hourly wage costs in manufacturing are in Germany while the lowest is in Brazil. The difference between the two is an 870% increase from Brazilian to German wage costs. While these figures may be from 1992, they show an obvious difference between the costs. Surely, this table would gain the interest of most businesses around the world. Looking at the table would show you that variable costs could be able to be decreased massively by offshoring production to one of these countries – something that many multinationals do today such as Apple in the technology sector or basically all retail shops such as H&M or Primark. However, there may be reasons behind the staggering difference in costs. For example, the quality of production or productivity might be much higher coming from Germany than it would in Brazil. If the businesses USP (unique selling point) is quality, then risking this might cause them to lose their differentiation from competitors and cause a decrease in demand, especially in very saturated markets. The opportunity cost of the chance to lower variable costs could be their whole business plan – too big a price to pay for something that could be decreased in other, more sustainable ways.