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CSO statistical release, 17 April 2013, 11am

International Sourcing Survey

2009-2011

International sourcing by type of enterprise group structure, 2009-2011
  Number of enterprisesPercentage of enterprises engaged in international sourcing
  Engaged in international sourcing  Not engaged in international sourcing  All enterprises
In enterprise group 143 662 80517.8
    Enterprise group head 15 111 12611.9
    Subsidiary 127 552 67918.7
       - Subsidiary with global group head in Ireland18 182 2009.0
       - Subsidiary with global group head within EU2752 179 23122.5
       - Subsidiary with global group head outside EU2757 191 24823.0
Not in enterprise group 6 448 4541.3
Total 148 1,111 1,25911.8

12% of large Irish enterprises source internationally

Figure 1: Enterprises by type of enterprise group structure, 2009-2011
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The purpose of the International Sourcing Survey is to establish data on the movement of Irish business activity abroad during the reference period 2009-2011.  It provides information on the level and pattern of international sourcing in the Irish business economy. International sourcing involves the movement of one or more business functions abroad to an enterprise within or outside the enterprise group.

Almost 12% of large Irish enterprises (100 or more employees) engaged in international sourcing during the period 2009-2011.  Around three-quarters of these enterprises were part of multinational enterprise groups with the head of the group residing outside of Ireland.  The vast majority of international sourcing from Ireland was to other Member States of the EU.

Of those enterprises that engaged in international sourcing between 2009 and 2011, almost 86% were subsidiaries controlled by other enterprises; just over 10% were enterprise group heads; and just over 4% were standalone enterprises.

Figure 2: Subsidiaries who sourced internationally by location of group head, 2009-2011

 

Looking specifically at the subsidiaries who engaged in international sourcing between 2009 and 2011, almost 86% were controlled by group heads outside of Ireland. This consists of almost 45% with a group head outside of the EU27 and almost 41% with a group head inside the EU27.  See Figure 2 and Headline Table.

Therefore, of the 148 enterprises that sourced business functions abroad between 2009 and 2011, 109 enterprises were part of multinational enterprise groups with a foreign group head.  See Headline Table.

Similar surveys on international sourcing were carried out by a number of countries across the EU27.  EU aggregates are not available as not every EU country participated in the survey.  Using these international comparisons, it can be seen the Nordic countries of Denmark and Finland had the highest rates of international sourcing between 2009 and 2011 at over 25% and almost 21% respectively.  Romania and Lithuania had the lowest rates of international sourcing at over 3% and almost 1% respectively.  At almost 12%, Ireland had a similar international sourcing rate to both Norway and Slovakia.  See Figure 3 and Table 7.

Figure 3: European comparisons of international sourcing rates, 2009-2011

Almost 78% of enterprises who engaged in international sourcing in Ireland tended to source business functions to enterprises within their enterprise group.  This highlights that the nature of international sourcing in Ireland between 2009 and 2011 was largely based around foreign multinationals moving business functions abroad to other enterprises within their own enterprise group.

When the enterprises that sourced within their own enterprise group across the different business functions was examined, there were high proportions in evidence across both core and support business functions.  The business function with the highest proportion of enterprises sourcing within the enterprise group was “Marketing, sales and after sales services” at over 86%.  See Figure 4 and Table 1.

Figure 4: International sourcing within the enterprise group, 2009-2011

As already shown, almost 12% of large Irish enterprises sourced one or more business functions abroad during the period 2009 to 2011.  Almost 6% of enterprises sourced their core business function and almost 10% sourced one or more support functions.  Of the individual support business functions, the rate of international sourcing ranged from over 2% for "Research & development, engineering and related technical services" to over 4% for “Administrative and management functions”.  See Figure 5 and Table 2

Figure 5: International sourcing by business function, 2009-2011

When comparing the rate of international sourcing within the sectors of "Industry" and "Non-Financial Services", it can be seen that within every category of business function "Industry" displayed a higher rate of international sourcing.   At the overall level, almost 16% of large industrial enterprises engaged in international sourcing during 2009 to 2011 while the equivalent rate for large services enterprises was just over 10%  See Figure 6 and Table 2.

Figure 6: International sourcing by business function and sector, 2009 - 2011

There was some variability in the rates of international sourcing among large Irish enterprises when the detailed sectoral breakdown was examined.  Two sectors with particularly high rates of international sourcing were "High & Medium High-Tech Manufacturing" at over 23% and "Information & Communication" at over 30%.  See Figure 7 and Table 3.

Figure 7: International sourcing by detailed sector, 2009-2011

Of the 148 large Irish enterprises that engaged in international sourcing, 80 enterprises or over 54% sourced at least one business function to the UK and 74 enterprises or 50% sourced at least one business function to one of the other EU15 countries.  Other popular destinations for international sourcing were the EU12, India, USA and Canada.  Note that an enterprise may have sourced business functions to more than one destination during the period 2009 to 2011.  Therefore, the total number of enterprises who sourced internationally is not equal to the sum of the geographical breakdown. See Figure 8 and Table 4.

Figure 8: International sourcing by destination, 2009-2011

Over 56% of enterprises indicated that a strategic decision taken by the group head was a very important motivation for international sourcing during the period 2009 to 2011.  The majority of Irish enterprises that sourced business functions abroad were subsidiaries within enterprise groups.  The second most cited motivation for international sourcing, at almost 43%, was a reduction of labour costs.  See Figure 9 and Table 5.

Figure 9:  Motivations for international sourcing, 2009 - 2011

The survey enquired of all responding enterprises about the barriers to international sourcing.  Almost 23% of enterprises indicated that taxation issues were a very important barrier to international sourcing during the period 2009 to 2011.  The next two strongest barriers to international sourcing were legal or administrative barriers and uncertainty over the quality of the products/services to be supplied abroad.  See Figure 10 and Table 6.

Figure 10:  Barriers to international sourcing, 2009-2011
Table 1: International sourcing by type of business partner, 2009-2011
 Number of enterprisesPercentage to enterprises within own enterprise group abroad
 To enterprises within own enterprise group abroadTo enterprises outside own enterprise group abroadNo answerTotal 1 
       
One or more business functions (core & support) 2115426148 77.7
  Core business functions4919673 67.1
  One or more support functions100286125 80.0
     - Distribution and logistics216432 65.6
     - Marketing, sales and after sales services382444 86.4
     - ICT services369247 76.6
     - Administrative and management functions457456 80.4
     - Research & Development, engineering and related technical services242430 80.0
     - Other support functions287843 65.1
       
1 Enterprises can source to other enterprises both inside and outside the enterprise group for the categories "one or more business functions" and "one or more support functions". Hence the sum of the columns does not equal the total for these categories.
2 Enterprises can source more than one business function. Hence the sum of the individual business functions do not equal the totals.
Table 2: International sourcing by business function and broad sector, 2009-2011
 IndustryNon-financial servicesTotal
    
All enterprises 3618981259
    
Number of enterprises engaged in international sourcing   
    
One or more business functions (core & support) 15792148
  Core business function235173
  One or more support functions4778125
     - Distribution and logistics131932
     - Marketing, sales and after sales services192644
     - ICT services153247
     - Administrative and management functions173956
     - Research & Development, engineering and related technical services121830
     - Other support functions133043
    
    
Percentage of enterprises engaged in international sourcing   
    
One or more business functions (core & support) 115.810.211.8
  Core business function6.45.75.8
  One or more support functions13.08.79.9
     - Distribution and logistics3.62.12.5
     - Marketing, sales and after sales services5.32.93.5
     - ICT services4.23.63.7
     - Administrative and management functions4.74.34.4
     - Research & Development, engineering and related technical services3.32.02.4
     - Other support functions3.63.33.4
    
1 Enterprises can source more than one business function. Hence the sum of the individual business functions do not equal the totals.
Table 3: International sourcing by detailed sector, 2009-2011
 Number of enterprisesPercentage of enterprises engaged in international sourcing
Sector 1Enterprises engaged in international sourcing All enterprises
Industry (B-E)5736115.8
    
    Manufacturing (C)5433816.0
      - High & medium high-tech manufacturing 4117723.2
      - Low & medium low-tech manufacturing 131618.1
    Other industrial (B,D,E)32313.0
    
Non-financial services (F-N excl K)9289810.2
    
    Distribution (G)3228311.3
    Information & Communication (J)247930.4
    Professional, Scientific & Technical Services (M)158318.1
    Other services (F, H, I, L, N)204534.4
    
Total148125911.8
1 Please see background notes for NACE Rev. 2 classifications
Table 4: International sourcing by destination and business function, 2009-2011
 Number of enterprises  Percentage of enterprises
  Sourcing core business functions   Sourcing support business functions  Sourcing any business function  Sourcing core business functions  Sourcing support business functions  Sourcing any business function
            
UK30688041.1 54.4 54.1
EU-15 excl. UK32557443.8 44.0 50.0
EU-1219284126.0 22.4 27.7
India11304115.1 24.0 27.7
USA and Canada15283920.5 22.4 26.4
Oceania and other Asian countries17172923.3 13.6 19.6
Other European countries1882424.7 6.4 16.2
China15112220.5 8.8 14.9
Rest of World14122119.2 9.6 14.2
Russia5496.8 3.2 6.1
     
All destinations 173 125 148     
            
1 Enterprises can source a business function to more than one destination. Hence the sum of the regions does not equal the total.
Table 5: Motivating factors for international sourcing, 2009-2011
 Number of enterprises Percentage very important
 No answerNot importantImportantVery importantTotal
Strategic decisions taken by the group head423398314856.1
Reduction of labour costs440426314842.6
Focus on core business1454374314829.1
Reduction of other costs than labour costs642574314829.1
Access to specialised knowledge/technologies 1175253714825.0
Access to new markets 1379272914819.6
Lack of qualified labour1196202114814.2
Reduced delivery times1788222114814.2
Improved quality or introduction of new products1492241814812.2
Less regulation affecting the enterprise1610218121488.1
       
Table 6: Barriers to international sourcing, 2009-2011
 Number of enterprisesPercentage very important
 No answerNot importantImportantVery importantTotal
Taxation issues157402415285125922.6
Legal or administrative barriers174402402281125922.3
Uncertainty of the quality of the products/services to be supplied abroad177416394272125921.6
Tariffs and trade barriers165473385237125918.8
Proximity to existing client needed167459400233125918.5
Overall concerns of the sourcing operation exceeding expected benefits179371482228125918.1
Access to finance or other financial constraints173577332177125914.1
Difficulties in identifying potential/suitable providers abroad168463451177125914.1
Linguistic or cultural barriers165498430166125913.2
Concerns of the employees (including the trade unions)186476436162125912.9
       
Table 7: European comparisons of international sourcing by broad sector1, 2009-2011
 Number of enterprises engaged in international sourcing  Total number of enterprises  Percentage of enterprises engaged in international sourcing
 Industry Non-financial services All sectors Industry Non-financial services All sectors Industry Non-financial services All sectors
            
Denmark152162314 4527921,244 33.620.525.2
Finland144102247 5026961,198 28.714.720.6
Belgium8150131 362460822 22.410.915.9
Portugal190191381 1,0451,4512,496 18.213.215.3
Norway8092172 4459861,431 18.09.312.0
Ireland5792148 3618981,259 15.810.211.8
Slovakia7368141 7235541,277 10.112.311.0
Netherlands203244447 1,2823,2784,560 15.87.59.8
Estonia36845 247267514 14.73.18.7
Latvia172441 208392600 8.26.16.8
France473327800 4,5079,02413,531 10.53.65.9
Romania7868146 2,2832,1634,445 3.43.13.3
Lithuania077 383562945 0.01.20.7
            
1 Please see background notes for NACE Rev. 2 classifications

Background Notes

International Sourcing Survey 2009-2011

Background Notes

Survey Design

The International Sourcing Survey was carried out between July and December 2012.  It used the CSO eForms which allows respondents to complete the questionnaire via an internet portal.  It was a census of all enterprises in Ireland with 100 or more employees in the Irish business economy (NACE Rev. 2 sectors B to N excluding K).  Enterprises were identified using the CSO Central Business Register. The survey was issued to 1259 enterprises and the overall response rate was 44.3 per cent.  Full details of the response rates for the main sectors are outlined in the table below.

International Sourcing Survey 2009-2011 – target population and response rates by sector.

Sector (NACE Rev. 2)

Total number of enterprises with 100+ persons employed

Number of responding enterprises

Response rates

       

Mining and quarrying (B)

5

2

40.00%

Manufacturing (C)

338

161

47.60%

Electricity, gas, steam and air conditioning supply (D)

6

3

50.00%

Water supply; sewerage, waste management and remediation activities (E)

12

4

33.30%

Construction (F)

51

16

31.40%

Wholesale and retail trade; repair of motor vehicles and motorcycles (G)

283

132

46.60%

Transportation and storage (H)

65

36

55.40%

Accommodation and food service activities (I)

191

65

34.00%

Information and communication (J)

79

34

43.00%

Real estate activities (L)

10

4

40.00%

Professional, scientific and technical activities (M)

83

49

59.00%

Administrative and support service activities (N)

136

52

38.20%

All sectors

1,259

558

44.30%

 

Definitions

International Sourcing

Sourcing refers to the movement of business functions from an enterprise to another enterprise within or outside the enterprise group.  The movement of business functions within Ireland is referred to as domestic sourcing and the movement of business functions outside Ireland (including previously domestically sourced functions) is referred to as international sourcing.

Please note that this survey enquired specifically about international sourcing of business functions during the period 2009-2011.  Therefore, an enterprise was not counted as having engaged in international sourcing if the movement of the activity occurred previous to 2009

Enterprise group

An enterprise group is a set of enterprises controlled by the group head. It is an association of enterprises bound together by legal and/or financial links.  A group of enterprises can have more than one decision-making centre, especially for policy on production, sales and profits.  It may centralise certain aspects of financial management and taxation.  It constitutes an economic entity which is empowered to make choices, particularly concerning the units which it comprises.  The most extensive version of an enterprise group includes affiliates, sister enterprises, the parent enterprise and even joint ventures.

Control

Control means the ability to determine the general policy of an enterprise by choosing appropriate directors, if necessary.  In this context, enterprise A is deemed to be controlled by enterprise B,  when B controls, whether directly or indirectly, more than half of the shareholders voting power or more than half of the shares in enterprise A.

Indirect control means than an enterprise may have control through another affiliate which has control over enterprise A.

Control can be exerted via effective minority control without owning more than half of the shareholders voting power or more than half of the shares.

Group Head      

The group head is a parent legal unit, which is not controlled either directly or indirectly by any other legal unit, controlling one or more enterprises.  In the case of multinational enterprise groups global and domestic group heads can be identified.  The global group head is the group head of the multinational enterprise group, the domestic group head is on the top of the truncated national part of the multinational enterprise group.

Subsidiary

A subsidiary is a legal unit which is controlled either directly or indirectly by another legal unit in an enterprise group.

 

Business Functions

Core business function:

This function is the primary activity of the enterprise and will in most cases equate with the main activity of the enterprise.  It includes production of final goods or services intended for the market/for third parties carried out by the enterprise and yielding income.  The core business function equals in most cases the primary activity of the enterprise.  It may also include other (secondary) activities if the enterprise considers these to comprise part of their core functions.

Support business functions:

Support business functions (ancillary activities) are carried out in order to permit or facilitate production of goods or services intended for the market/for third parties by the enterprise. The outputs of the support business functions are not themselves intended directly for the market/for third parties.

The support business functions are divided into:

  • Distribution and logistics consists of transportation activities, warehousing and order processing functions.
  • Marketing, sales and after sales services including help desks and call centres.  This consists of market research, advertising, direct marketing services (telemarketing), exhibitions, fairs and other marketing or sales services.  Also including call-centre services and after sales services such as help-desks and other customer supports services.
  • ICT services include IT-services and telecommunication.  IT services consist of hardware and software consultancy, customized software data processing and database services, maintenance and repair, web-hosting, other computer related and information services. Packaged software and hardware are excluded.
  • Administrative and management functions includes legal services, accounting, book-keeping and auditing, business management and consultancy, HR management (e.g. training and education, staff recruitment, provision of temporary personnel, payroll management, health and medical services), corporate financial and insurance services.  Also including procurement functions.
  • Research & Development, engineering and related technical services include R&D, intramural research and experimental development, engineering and related technical consultancy, technical testing, analysis and certification.  Design services are included as well.
  • Other support functions are all other functions not previously mentioned, including manufacturing as a secondary activity for services enterprises.

 

Classifications

Geographical Areas

The geographical areas used in this survey are as follows:

  • United Kingdom
  • EU15: (excluding UK and Ireland): Belgium, Denmark, Germany, Greece, Spain, France, Italy, Luxembourg, Netherlands, Austria, Portugal, Finland and Sweden
  • EU12: Czech Republic, Estonia, Cyprus, Latvia, Lithuania, Hungary, Malta, Poland, Slovenia, Slovak Republic, Bulgaria, and Romania
  • Russia
  • Other European countries: Switzerland, Norway, Turkey, Belarus, Ukraine and the Balkan states
  • China
  • India
  • Oceania and other Asian countries: Includes Japan, Korea, Near-, Middle- and Far-East, and Oceania (including Australia and New Zealand)
  • USA and Canada
  • Brazil
  • Rest of the world: Includes Mexico, South and Central America (except Brazil) and Africa

NACE Rev.2 is the statistical classification of economic activities. NACE is an acronym for 'Nomenclature Généraile des Activities  Économiques dams les Communautés Eurpéenes' (General Industrial Classification of Economic Activities withn the European Communities).

 

Industry (Sections B to E):

 

 

 

Manufacturing (Section C):

 

 

High-technology manufacturing:

 

 

Division 21

Pharmaceuticals

 

Division 26

Computers, electronic & optical products

 

Group 30.3

Air spacecraft

 

Medium-high-technology manufacturing:

 

 

Division 20

Chemicals

 

Group 25.4

Weapons & ammunition

 

Division 27

Electrical equipment

 

Division 28

Machinery

 

Division 29

Motor vehicles

 

Division 30_X_30.1_30.3

Transport equipment excluding ships, boats, excluding air & spacecraft 

 

Group 32.5

Medical & dental instruments

 

Medium-low-technology manufacturing:

 

 

Group 18.2

Reproduction recorded media

 

Division 19

Coke and petroleum products

 

Division 22

Rubber and plastic products

 

Division 23

Other non-metallic mineral products

 

Division 24

Basic metals

 

Division 25_X_25.4

Fabricated metal products excluding machinery

 

Group 30.1

Ships and boats

 

Division 33

Repair & installation machinery

 

Low-technology manufacturing:

 

 

Division 10

Food

 

Division 11

Beverages

 

Division 12

Tobacco

 

Division 13

Textiles

 

Division 14

Clothing

 

Division 15

Leather products

 

Division 16

Wood products

 

Division 17

Paper products

 

Division 18.1

Printing

 

Division 31

Furniture

 

Division 32_X_32.5

Other manufacturing excluding medical and dental instruments

 

Other industrial:

 

 

Section B

Mining and quarrying

 

Section D

Electricity, gas, steam and air conditioning supply

 

Section E

Water supply; sewerage, waste management and remediation services

Non-financial services        (Sections F to N excluding K):

 

 

 

Distribution:

 

 

Section G

Wholesale and retail trade; repair of motor vehicles and motorcycles

Information & Communication:

 

 

 

Section J

Information and communication

Professional, Scientific & Technical Services:

 

 

 

Section M

Professional, scientific and technical activities

Other services:

 

 

 

Section F

Construction

 

Section H

Transportation and storage

 

Section I

Accommodation and food service activities

 

Section L

Real estate activities

 

Section N

Administrative and support service activities

 

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