Production in Low-Wage Countries

Abstract: Background: What initially caught our attention was the fact that many Swedish manufacturing firms establish production abroad and consequently many jobs are lost. However we decided to go behind the alarming reports of lost jobs, and instead study the subject from the companies’ perspective. Purpose: The purpose of the thesis is to study why Swedish companies establish production in China and Eastern Europe, how the production in these regions works, and what effects it has had on the company. Method: A qualitative study was conducted where interviews were performed with six Swedish manufacturing firms. The answers from each interview were then analyzed in order to match the empirical findings to the theoretical framework. A joint analysis was conducted where the answers from the six interviews were compared and analyzed. Finally conclusions were drawn as answer to our purpose. Conclusions: Our studies show that there are two main reasons for Swedish manufacturing firms to establish production in China and Eastern Europe respectively. These reasons are reduced costs and possibility to produce closer to the market. Keeping the product development in Sweden when producing abroad does not imply any problems as long as regular visits are paid to the plant. These visits are also important in order to maintain the relationships, which seems to be especially important in China. Cultural differences affecting the production exist to a varying extent both in China and Eastern Europe compared to Sweden. Establishing production abroad seems to be successful for most companies.