With the advent of globalization and the Internet era, more and more companies have begun the process of internationalization (Lin, Chen, Hsieh and Chien, 2018). A very important manifestation of internationalization process is a company’s moving its production operations to a developing country. However, it is worth noting that there are many successful cases of moving production operations to a developing country, there are also some cases of failure (Alimadadi, Bengtson and Hadjikhani, 2018). Thus for companies, what are the benefits and drawbacks of moving their production operations to developing countries, it is a topic worthy of study. This essay will use this topic as a research objective, first analyzes the benefits from three aspects: social, economic and political effects. Followed by the drawbacks from the above three aspects, finally it suggests for companies on how to avoid risks of moving production operations to developing countries.
2.1.1 Economic benefits經濟效益
From an economic point of view, the benefits come from the following aspects:從經濟角度看，效益來自以下幾個方面：
184.108.40.206 Optimize resource configuration優化資源配置
A company moves its production operations to a developing country, which can better achieve optimal allocation of resources. Due to the economic level and the low cost of living of the people in developing countries, the prices of labor are usually low, and companies can pay less wages and welfare expenses to meet the needs of the labor force (Chen, Saarenketo and Puumalainen, 2018). Many developing countries have abundant natural resources, including electricity resources, water resources and land resources, enterprises in the countries can obtain these resources at lower prices (Kujala and Törnroos, 2018; McHenry and Welch, 2018). In addition, if a company moves its production operations to a developing country, the products produced can be sold directly in the local area or sold around the country, which will greatly reduce the transportation costs of the products, the losses during transport, insurance costs to significantly reduce the total costs of products (Dominguez and Mayrhofer, 2017).
220.127.116.11 Play the role of its own competitive advantage發揮自身競爭優勢
Moving its production operations to a developing country will help a company to effectively exert its own competitive advantages. Under normal circumstances, the internal competition in developed countries is fierce, and the competitive advantage between enterprises is not too obvious (Knight and Liesch, 2016). Once a developed-country enterprise moves its production operations to a developing country, the advantages of the enterprise can be more clearly reflected than those of local enterprises, the advantages include technical advantages, management advantages, and scale advantages (Alimadadi, Bengtson and Hadjikhani, 2018). Companies that use these advantages can better profit in the competition in the local market in a developing country (Alimadadi, Bengtson and Hadjikhani, 2018).
2.1.2 Social benefits
A company moves its production operations to a developing country, which will inevitably need to deal with the local government, employees, consumers and suppliers. During the exchange process, the company can more clearly understand the local market environment and consumer needs. Based on these materials and information, the company can carry out targeted improvements to make their products more competitive in the local market. At the same time, the company's production in the local area can increase the local influence of the products in the market, increasing the local consumers’ awareness and acceptance of the products and fostering the consumer loyalty to the products to lay a foundation for the company's long-term development in the local area (McHenry and Welch, 2018). In addition, the development of the enterprise in the local area has a positive effect on the improvement of the local economic level and the increase of the local people’s income. As a result, the consumers’ spending power and level will also be increased, which will have a positive effect on nurturing the local market into a mature consumer market.
2.1.3 Political benefits
From the perspective of enterprises, moving their production operations to a developing country will help them to maintain a good relationship with the local government. This will not only help them to get support from the local government in terms of taxation, land, and environmental protection, as well as avoiding trade barriers, but also help them to achieve a long-term development in the local market and be taken as a partner in the long-term development plan by the local government (Ernst and Kim, 2002). In addition, local production can also help a company to make use of the trade agreement signed between the local government and other countries to expand its own sales (Dominguez and Mayrhofer, 2017). For example, the shoes and hats produced by foreign companies in Vietnam can allow the companies to enjoy tax benefits in other ASEAN countries, because Vietnam and all ASEAN countries have signed a free trade agreement. As long as products are produced in Vietnam, they will be treated as Vietnam’s products. From a national point of view, investment in a developing country can also promote cooperation and mutual trust between the host country and the governments of the destination country. It also has a positive effect in promoting cooperation between the two countries in other projects.
2.2.1 Economic drawbacks
To move its production operations to a developing country will make a company’s advantages in management and technology be imitated by local competitors, which improves the competitiveness of the local competitors and makes the company lose its own competitive advantage in the local or even in the international market.
Moving production operations to a developing country will greatly increase the difficulty of a country’s management. In some cases, the quality of products cannot be effectively guaranteed. Because developing countries still have certain flaws in the skills, quality, and professionalism of workers, there are also deficiencies in the efficiency of raw materials supply and the quality of raw materials (Belderbos, Capannelli and Fukao, 2001). Therefore, if the company still wants to ensure the quality of their products, they need to make more efforts in management, but in the actual situation, the quality of products has decreased due to moving production operations to a developing country, which happens frequently.
2.2.2 Social drawbacks
The theory of country-of-origin effects shows that origin has a significant impact on consumer attitudes and behaviors (Costa, Carneiro and Goldszmidt, 2016). Product production in developing countries may reduce consumer acceptance of products and brands, and they may consider that quality and design of products produced in the country of origin will be better, while products produced in developing countries will be relatively inferior.
2.2.3 Political drawbacks
Move production operations to a developing country will make product production of a company vulnerable to the impact of the local political situation. If the political situation in the area is turbulent, not only the normal production of products cannot be carried out, even the personal safety and property of employees will be threatened (Benjamin, 2012). For example, in Libya, due to the turmoil in the domestic political situation, it has caused huge losses for the local foreign property, and there is no good way to protect the interests of the foreign companies in the country. In addition, the relationship between the local country and the government of the country of origin will also affect the production of the company's products. If there is a conflict between the two governments, it will inevitably affect the production and sales of the company in the local country. For example, Korean companies in North Korea were forced to close several times because of conflicts between the two countries.