Outsourcing can be a rather complicated field at times. And one of the areas your startup business will need to navigate is the various external factors that can affect your success with it. That is where frineshoring becomes an essential concept. But what is it exactly? And how do you do it right? Let’s explore and find out.
How Friendshoring Works
In its simplest definition, friendshoring refers to relocating your startup business outsourcing to places that have a low risk of political chaos. The goal here is to lessen the disruptions that these events can bring to your business.
Image from Offshore News.The term is a relatively new development arising from the various global events in recent years. Before, many companies chose to outsource to locations offering the lowest labor rates. However, the political events which transpired in these locales have made that cost-cutting measure less viable.
Shifting Priorities
Like many other recent business trends, the COVID-19 pandemic highlighted the need for businesses to consider this new arrangement. For example, the Chinese government implemented strict policies during the pandemic’s peak that significantly disrupted the supply chains of major brands like Apple.
Such disruptions revealed the fragility of the global supply chain. It highlighted that even minor political upheavals could upend long-established systems. And when one of these chains falls, it can create a domino effect that disrupts the entire business.
Because of that, companies have started reconsidering the pros and cons of outsourcing to these locations. In particular, they had to weigh whether the lower costs associated with these regions outweighs the costs brought about by the disruption.
And this is where they concluded that it might not be worth it after all. That is where friendshoring started to gain more traction. By relocating to a friendlier country, companies hoped that they would be able to stabilize their supply chains again.
The Challenges Of Friendshoring
Friendshoring is an alternative to other commonly used means of relocating business operations, such as nearshoring and nearshoring. In the latter two, the outsourced work is either brought near or completely back to the company’s main base of operations. However, the main issue with the two methods is that they require considerable work to move operations. That is particularly the case if the outsourced operations are located halfway across the globe.
With friendshoring, there is more flexibility in the location. You can relocate to a friendlier country just at the neighboring border of your current location. With that, you don’t have to spend as much while still assuring it would be in a more suitable location.
However, Friendshoring comes with its own set of challenges. These challenges can impact the viability of the process for your business.
Finding Friendly Nations
The most significant challenge is finding the right country to relocate to. Here, you might be surprised at how quickly the list of “friendly” nations can change. Even a small change in the country’s policies can negatively impact your business.
On the other hand, policy changes back home can also have an effect. You might be surprised at how more common it is than you would expect. Even a simple statement coming from the president of the United States, for example, can lead to significant shifts in business orientation.
Because of this, you will often need to be more vigilant about local and international geopolitics. You will also need to predict future changes based on current trends. These help you create a list of potential countries with a friendly political climate.
The Added Costs
Any form of relocation will undoubtedly incur you some costs. That is no different when it comes to friendshoring. As mentioned, those costs would generally be lower than nearshoring or full-on reshoring. However, those costs will still impact the prices of your products.
Here, the challenge lies in finding a way to lessen the impact of these costs. One way to do that is by carefully weighing the different advantages of each friendshoring option. For instance, one country might offer tax incentives which offset the cost of moving your business in. Consider the specific needs of your startup business to determine which would be the best option.
Where Does Your Startup Business Go From Here?
Of course, friendshoring isn’t just about choosing the right country to move into. Once you make your choice, there is the actual work of moving into that country. For that, you will likely need to overhaul your current system.
Here, study the business environment of the country you plan to move into thoroughly. In particular, you want to check out the compatible business laws. Note that you are not just looking for the ones compatible with your home country.
You would also want to look into compatibility with the country you are exiting from. That makes the transition easier since you can bring in some of your existing infrastructure. However, this can be a bit harder depending on the relationship of the countries. Thus, it would be a good idea to get legal experts to help you.
Giving The Support Your Startup Business Needs
One of the most popular countries many Western companies turn to when friendshoring is the Philippines. Being a traditional Western ally means that the country already has the infrastructure needed to help companies ease into doing business here.
And being a Philippine-based outsourcing firm, we at Virtua Solutions are ready to hello you. When you enter a partnership with us, we will assist you in making the necessary arrangements to bring your business in. Our team will also coordinate with regulatory bodies on your behalf to ensure compliance.
Connect With Friendly Nations For Your Startup Business Outsourcing Needs
With outsourcing becoming an essential solution for supply chain concerns, being in the right place can mean a lot for your startup business. So, it’s time to know who your friends are and hop into their place. We will gladly help you with your friendshoring needs. Just give us a call today.