Necessity of Cutting Costs and Allocating Resources in Business

Outsourcing emerged on the financial arena during the 1980s and has since then been spreading. Outsourcing production was furthered with the process of globalization which provided a new component leading to the strengthening of resources, skill and labor specializations across the world. The process of outsourcing is using the skill and abilities of a third-party to accommodate society on the foundation of labor. As stated earlier, it was during the 1980s that the process kicked off mainly due to the efforts of corporations when they began to hire labor forces across the world. Even though outsourcing has come out from its developing stages, there are still following effects on the US economy.

At the time of development of globalization there were many concerns about its benefits. However, it has brought significant changes in all segments of human life and International business is one area in which it contributed heavily (Reich, 1998). Companies all over the world are currently formulating their business strategies mainly after considering the trends in global market instead of domestic market. Outsourcing and offshoring are some of the new business principles emerged in this world after the implementation of globalization (Samimi and Jentabad, 2014). The core of these new business concepts is to exploit the business opportunities in overseas countries as much as possible (Samimi and Jentabad, 2014).

The business environment that influences companies' activity determines them to search for new development strategies intended to help them increase their business. In most cases, companies expand their business on international level. This is because the numerous growth opportunities provided by markets they have not addressed before can help them reduce their costs by outsourcing some of their processes and activities to cheaper destinations, or to increase their incomes by addressing new markets and new customer segments. The number of companies that outsource their production process to countries in Asia, Africa, Eastern Europe that are able to provide skilled workforce at lower costs is increasing. The scope of this international operation can be observed in the significant price reductions in product categories like electronics, clothing, and numerous types of services.

Outsourcing can be a means to perform the core functions of an organization effectively by having more time focused on the activities critical to the delivery of services to customer. The non-core activities are performed by the leaders in that area which will help to achieve better efficiencies. Outsourcing can substantially lower costs, help to access better technology and use innovative ideas etc.(Robert,2001). The advantages of outsourcing are: Cost savings:

Outsourcing is a practice used by different companies to reduce costs by transferring portions of work to outside suppliers rather than completing it internally. (Investopedia) Outsourcing jobs has become increasingly popular in the economic realm of the world since the mid-20th century and has since then become a more controversial topic. The United States economy has been under the microscope for the last 4 years due to the economic recession. In today’s global business competitive environment, companies must find innovative ways that adapt to new strategies to sustain revenue generation, while also remaining competitive. This paper gives the effects that I have found to be most pertinent to the ongoing debate over outsourcing jobs, and how it can affect the U.S economy.

In light of recent growth of domestic and foreign countries outsourcing and off shoring over seas, companies been taken advantage of the cheap labor cost for outsourcing and off shoring manufacturing. Competitive business investing in domestic and foreign manufacturing have affects every part of the business industries from design, software development, finances and logistic management, i.e., customer and sales. Nevertheless, outsourcing been praised by businesses for outcomes of cost-effectiveness, efficient, productive and strategic, but damned as malicious, because of companies’ greediness, detrimental, and brutal in the public eyes.

The process of globalization has numerous significant effects on countries, organizations, and individuals. These effects can be observed in the quality of products, in their prices, but also in their availability. Because of globalization, numerous companies prefer to expand their business on international level. Some of them outsource some of their processes and activities to cheaper destinations that allow them to reduce their investments.

In today’s global business competitive environment, business organizations must innovate and adapt new strategies to sustain revenue generation, value while remaining competitive. Organizations have embraced outsourcing principles and adopted them to help in expanding to new markets. Outsourcing has enabled US multinational corporations to reduce costs and compete effectively in the global market. While the proliferation of outsourcing has been beneficial to short term growth by taking advantages of; low wages, taxes and investment incentives in developing countries, it will significantly dissolve the competitive advantages the United States enjoys. The outsourcing approach changes the historical model of economies of scale, the resulting intangible and hidden trade costs of outsourcing shall have a heavy bearing on the US economy. The competitive advantage of high technology, support for startups will be gradually eroded, enabling developing countries to compete directly with the United States.

Outsourcing will increasingly be used to stimulate the creation of value and innovation in organizations. Enterprises will use outsourcing as a tool to consistently position themselves at the forefront of their industries, turning to the best talents, resources and opportunities, and sometimes using outsourcing to access new markets.

In the past decade the topic of outsourcing has become a heavily debated subject on if it is ethically correct to outsourcing jobs to foreign countries. Outsourcing has become more and more an option for many companies and not just an economic fad. The decision to outsource is a difficult one for any company to make because there are many advantages and disadvantages to consider. The decision to outsource affects many people, communities, and industries so if a corporation decides to outsource they must consider how it will affect human dignity, the common good of the economy, and subsidiary.

Global outsourcing is used by companies to help enhance and develop the business. Global outsourcing also taken by a firm to help solve problems that occur in an Organizations. Global outsourcing is helping organizations to take some expertise from outside which takes outsourcing locally and internationally during the recent years. Global outsourcing is a prime example in the development of the industry. It has become common place among the companies, and the world is more global now than ever before. It is inevitable outsourcing has led to a growing demand for such items as it contracts or contract negotiations, and continue to create demand for more advanced technology throughout the business. Global outsourcing occurs when a business decides specific contract tasks or services to other businesses. Global outsourcing comes as a result of economic necessity, and transpires when a company specializing in the service or product that can perform or produce a more cost-efficient than a larger company. Projects of this great company submitted to the company more cost efficient. What many do not realize that it is important to enter into contracts and contract negotiations when outsourcing to a successful transaction.

Globalization and technology have generated many changes to the world’s economy as it has opened the doors for businesses all over the world to international markets. This means, expanding their economies by growing their target market areas. Now a day, businesses don’t talk about understanding their local markets, but understanding the global market. Some developing nations have taken advantage of this opportunity to grow their economies and they are working on becoming a global power. International Outsourcing has generated a significant change in the way business is conducted and has most definitely been a key element to the growing global economy. India is a good example of a developing country that has broken

Outsourcing has become increasingly commonplace in businesses today. Outsourcing is defined by “the strategic use of outside resources to perform activities traditionally handled by internal staff and resources” Outsourcing is a relatively new operations management tool that began to be used around the time of the Industrial Revolution. This arose out of major technological advances in transportation in the form of the railway and canals and in communication in the form of the telegraph which allowed organisations to expand beyond their . According to Joanne Yates ‘the spread of the telegraph and of railroads encouraged firms to serve larger regional and national markets.’ This evidenced by a rise in small engineering and architecture consultants. It wasn’t until the 1970’s that outsourcing began to become more popular. The 1970’s marked the rise of computer technologies where companies began to research into home computer systems. Also in the late 1970’s communist China opened its doors to global trade. In manufacturing, the largest cost is labour therefore offshoring manufacturing to developing nations such as China where the cost of labour is

The business environment that is significantly influence by the process of globalization determines companies to develop different types of strategies that allow them to create competitive advantage. Some of them focus on reducing the prices of their products. This objective is usually reached by addressing the outsourcing strategy of some of their processes. This helps them reduce production costs, which leads to reduced prices of these companies' products and services. This allows companies that use outsourcing to increase their market share.

Offshore outsourcing represents one aspect of how globalization is occurring in the current economies. Globalization is the interdependency of transportation, distribution, communication, and economic networks across international borders. (Gibson, Ivancevich, Donnelly, Konopaske, 2009) It means that the labor supply market is globalized and that cross-cultural management can become essential and more important than ever before.