In the rapidly globalizing environment of the 21st century in which nearly all businesses operate in, it has become increasingly difficult to maintain a competitive advantage while also being profitable. As many companies’ reach to customers and businesses has amplified because of the internet and the increasingly connectedness of society, it has become imperative that companies reduce costs and save wherever they can. One way that many businesses are coping with this new environment is by outsourcing operations to countries where labor laws and regulatory standards allow for greater malleability. Although the United States has trade barriers that have greatly restricted the abilities of businesses to take advantage of this, the Transatlantic Trade and Investment Partnership (TTIP) and the Trans-Pacific Partnership (TPP) stand to rescind these barriers and open access to these opportunities abroad.
The benefits of looking outside the markets of the US are one of the key strategies that companies have come to implement in order to reduce costs and manage overhead risks. With the passing of the TTIP and TPP, there are many barriers that will stand to fall such as regulatory standards in product design, and tariffs. This means that the positive economic impacts that these agreements could have on the Pacific and Atlantic regions such as increasing the standard of living, it will also allow access to important supply chain options that will greatly reduce costs.
With access to these new markets without tariffs that would normally deter certain supply chain operations, it could now become feasible to expand into these new markets and outsource some processes. As many nations (especially Pacific Rim nations) have greater access to raw materials and labor markets than what is available in the US, outsourcing nonessential operations to these countries has the ability to reduce transportation costs while also efficiently integrating new supply chain options into a business’s strategy. This means that with the option to streamline, businesses will be able to reduce the time it takes to react to markets and become more competitive because of this flexibility.
Another benefit of these agreements for businesses is that they will have the option to outsource nonessential functions of their operations. What this means is that as companies grow to meet or provide more goods or services, many of their areas of proficiency (i.e. transportation or customer service) become stretched and decline in value to their operations. One way to counter this critical issue would be by outsourcing nonessential operations to firms that could provide the service at a lower cost while the original business is able to maintain their integrity of its business. This not only reduces the capital investment risk that businesses face in a rapidly evolving economy, but also gives the business the ability to focus on their core competencies. These core competencies are crucial to a firm’s uniqueness and provide a critical competitive advantage.
When companies utilize the proposed benefits of the TPP and TTIP, they not only increase their competitiveness, but also their flexibility to respond to change, risk from exposed capital investment, and supply chain logistics. By capitalizing on what these agreements have to offer domestic industries in an increasingly competitive global economy, US businesses can mitigate risks and utilize resources more efficiently in which both are key parts of developing a competitive advantage strategy and satisfying organizational stakeholders.
Source by Hunter Hillis