COMPETITIVE ADVANTAGE THROUGH OPERATING COST REDUCTION
Reducing operating cost is perhaps the fastest way to obtain or maintain a competitive advantage. Establishing a Global Value Chain (GVC) encourages transferring tasks / functions to lower cost jurisdictions that typically generate savings of 50% to 80% on professional functions, in some cases has reduced manufacturing and processing unit costs by up to 60%, and we have seen examples of up to 75% reduction in sales and customer service costs through establishing a local sales office vs supporting a Canada based international sales rep.
The Foreign Affiliates that make up the GVC are close to customers and allow faster response to changing demand, help ensure production capacity is optimized, and reduce shipping delays and cost, and improve cash flow.
GVC also provide an opportunity to obtain FDI tax incentives, that may include tax holidays, duty free imports, and subsidized power and land, that in some cases have added over 20% to the bottom line.
Professional services exporters without a Foreign Affiliate are often faced with paying non-recoverable taxes that in many cases can exceed 20% of the total invoice, and in at least one example, the cost of the expense exceeded the cost of creating, and then operating a small Foreign Affiliate office for 3 years.
XPM has over 25 years experience in assisting firms develop innovative, legal and ethical cost reduction opportunities.