Evolution Of Overseas Manufacturing Set Up

By Author: George Mathew
Total Articles: 24
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Car industry has some unique features which make it completely different to operate from the rest of the industries. In Japan alone, the manufacturers of car alone provide more than half of the gross domestic product for the country. The brands that are operative in this country are recognized world over. The amount of investment in the automotive industries in this country alone accounts to more than some countries total investment in all industry circles.


Toyota Hong Kong is one of the oldest automotive makers and traders. They started of their business some decades back with a small amount of investment. Later they kept producing the best of the cars which make them recognized in good words in the customer circles. This resulted in increasing demand of their cars and hence increasing revenues and profits. They kept investing the profits back in their business and this way their business continued to expand. That expansion was not limited to increased profits and revenue but soon they came up with an idea to export their products to some other countries ...
... of the world. Later this export mode took a toll and some other form of business needs to be conceived and acted upon. Exporting was profitable initially but as the amount and level of export grew in size and numbers, some other forms of business was required to tackle the uprising foreign demand. The fact that Hong Kong car was high in demand was because of their unique features and low cost to consumers. When the demand started to increase the customers were worried the payment of high duty for importing cars. So the company then started thinking other ways of reduced cost for its customers. Since exporting attracted duties and in some countries the duties were of the same amount as the car was, this was a factor threatening for the company.


Due to the problems that later arose for exporting the company then decided to have a feasibility conducted for setting up a manufacturing concern overseas, in countries where the exports were the highest. As it was the initial step so the company was not aware of the profitability that it would get from taking this step. The feasibility was conducted on the basis of investment money required to establish a manufacturing facility overseas. Firstly the countries that were selected for conducting such study were restricted to those that were the source of good revenue for the company. The study then started off and the amount of required investment was estimated. This amount of investment was then compared with the future cash inflows that the company expected to be receiving the later years. The cash flows were then discounted using some appropriated discount rate. Since the company was confident of getting at least the amount of existing revenue, they added a slice to this amount in order to get a closer estimate for the future revenue. As the establishment of foreign manufacturing facility was something new for the world, it was a good expectation to have an increased revenue for the future. So after getting positive feasibility reports, the company then decided to set up manufacturing facilities abroad as well and then profits started to increase manifolds. Toyota trader also decided to bring some new perspectives to their businesses so since they saw that the company is now moving toward overseas manufacturing, they found it a good opportunity to expand their business by exporting of vehicles, the form of business the company used to do before venturing on the new business.


Author Bio
George Thomas is a mechanical engineer who have years of experience in Auto industry. He is giving advice for Toyota car owners and Hong Kong automobile companies specially Hong Kong car | Toyota trader. He is also testing and checking variety of Mitsubishi Automobiles.