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There are many factors that AutoEdge needs to consider as it relates to the manufacturing operations going forward. While financial questions may be the most significant ones, there is also the question of legal and cultural factors involved in the manufacturing process. Considering the factors of production can be a great way to decide where the best place to go is (Singh).

First consider some of the financial factors that should be involved when deciding where manufacturing should take place. One of the key factors here is going to be the labor rate. There are multiple countries that have non-existent or very low minimum wages compared to the rest of the world. For example many Asian countries or Caribbean countries offer a great opportunity for cheap labor rates. Along with the labor come other costs to consider though. It is going to be harder to train people in an Asian country that does not speak English as their primary language. It is going to require hiring people who are effective with both English and whatever the native language might be for that country. Training will more than likely involve lots of travel to the country of choice so employee expenses for travel and training need to be considered.

The availability of parts is also important financially. If the company were to choose an Island in the Caribean for the low labor rates, they are going to have to consider the costs of shipping products overseas. Islands generally do not have all of the resources required to build a full size factor and it will require bringing in large amounts of resources from other countries for production. If raw materials are not located in the chosen country, then there will continue to be costs for getting the raw materials for production brought into the plant.

Being in the auto industry, there are countries all over the world that use the final products. It is important to know where the final products AutoEdge is producing go to as there could be large shipping costs if they need to travel a long distance.

As mentioned financial factors are not the only important factors. Legal factors come into play as well. A company needs to make sure that there are no local laws that would hinder the production of the products AutoEdge is producing. For example, there could be certain restrictions on what is allowed to be produced in the region. Also there could be laws set in place regarding how the environment is treated that could be hard to comply with. Another legal factor to consider is the nation’s shipping and receiving laws. There could be certain items that take on taxes in some countries, but not in others.

When it comes to cultural factors the nation of choosing must not be one that is dealing with any sort of domestic issues such as civil war or political disruption. These types of issues can slow down any sort of business taking place in the region. The people living in a country may also not want a large corporation to take over the area. This presents another cultural issue that needs to be considered when moving into a country.

Economic factors need to be considered as well when it comes to picking a nation for handling production. An economy in turmoil could lead to the government wanting to take over or mess around with operations of successful operations. It is hard to prevent government interaction sometimes and a poor economy can lead to government action quickly. The economy does not need to be one that is top tier, but it should at least not be one that is currently in a dangerous position.

When deciding where manufacturing should take place all of the following need to be considered. Without understanding of not only financial factors, but economic, cultural, and legal ones as well AutoEdge could make a decision that would cripple operations for years to come.

Reference

Singh. (n.d.). Factors of Production : Land, Labour, Capital and Entrepreneur | National Income. Retrieved May 17, 2015, from http://www.bibme.org/apa/website-citation/edit?hide_webeval=true