Why Indian Suppliers Are Moving to Tier 2 Cities?

They are moving to tier 2 cities because operating overheads - rent etc are lower in tier 2 cities. real estate is cheaper. Cost of living is cheaper for the employees also. Sometime the difference can be as much as 30%.

India's BPO and offshore product development experts feel that although the Tier Two cities are improving their infrastructure, the small town BPO boom isn't here yet. There is still considerable play left in the IT services hubs of Delhi, Gurgaon, Noida, Bangalore, and Mumbai. Overall infrastructure in the outsourcing hubs is still miles ahead of the Tier Two cities and smaller towns in India that also often come with big physical infrastructure handicaps and dodgy telecom connectivity.

IN TIER 2 CITIES COST IN PURCHASE OF BUILDING OR IT'S RENT IS LOW.EMPLOYEES ARE AVAILABLE AT LOWER COST.ALL OTHER COST LIKE CONVEYANCE IS REDUCED TO ALMOST 50 %. IN ANY CASE ENTIER COST IS REDUCED AND NATURALLY THE INCOME LEVEL WILL GROW.

If we make a comparison between Metros and 2nd tier cities, we will find out that In Metros, suppliers are facing too much competition although the turnover is good but margin is less. Whereas 2nd tier cities are less competitive although turnover is less but profit rate is high. Because suppliers can easily find out the POTENTIAL CUSTOMERS for them in 2nd tier cities... So more opportunities are available in developing 2nd tier cities than Metros...........

Manufactures are going towards two tier cities is definitely cheaper production cost as well it would provide employment to locals and stop the migration.

The indirect expenses are almost 100% in country;s nerve centres.The business profit margin gets reduced.By moving in Tier 2 Cities,the suppliers get advantage of cheap labour and increased profit margin.

No business likes to shift other then its own area but likes to grow as much as the potential. Every businees dont miss the oppertunity to get out the sugar from the canes to the last point.

Big cities the property cost, human cost, development cost relationship cost is very high where as the margins are competitive. cost ratio > profit ratio.

Whereas in small cities the centre level properties suit the pockets easily and act as the long term view to penetrate in different boundaries. HR cost is Low, Maintanance is very low followed by the developing society and culture omong the peoples everywhere. e.g Even Bihar is mordernisaing day by day.

Metro infrastructure is vastly available but with very polluted and packed/jammed envirnment, There is a huge GAp of required polution levels with actuals. Whereas small cities are still out of pollutions and infradevelopment, money penetration, source of income is grow at better ratio`s then any metro. Further the cost of living is too low with required minimum satisfaction levels of a human being whether consumer or employee or businessmen.

Most importantly, the communication advantage and Cheap technolgy availabilty make the whole process very cost effective and measures the controls very easily. Like Telephones, B`band, wireless, mobiles, v`sats, RF`s. also cheap airlines.

These make the suppliers move easily to different distant regions apart from metro..