1.) Do you agree with the opinion of The Council of Economic Advisor’s claim that “When a good or service is produced at lower cost in another country, it makes sense to import it rather than produce it domestically? Offshoring has its advantages as well as it disadvantages, as most business decisions do. It is the weighing of those two leverages that make the debate of offshoring such a conflict. Offshoring reaps many benefits for companies. For starters, offshoring allows companies to stream their productions globally. With this they may then begin to cut cost of goods to a lower rate to increase the demand, a plus for both the company and it’s consumers. This investment also acquires new customers and even puts the companies into new market …show more content…
Political stability in offshoring is a tough aspect. It can often be a deal breaker for a company when deciding where to set up offshoring positions. No company wants to establish such an investment for it to be nationalized or worse threatened by a foreign military strife both internationally and externally. For example, many companies want to set up offshoring in India due to their high education level however it is hard to do so with political issues taking part in the decision making. At this time in India, the government is struggling financially. They continue to have money issue daily due to lack of documented regulations that could prevent chaotic situations from forming. This makes American companies weight the benefits and conflicts if they are to set up business within India’s jurisdiction. On top of this questionable factor, American companies have to also consider the conditions of the area in which they would be residing in. As minor as it may seem, the factor of the conditions of desired area effects the companies. In India, the area is a bit rough compared to American land. The power networks, roads, and transportation system face a huge demand to be re-established. The government has recognized the issue and has begun funding the restoring (Pg.9). Dejectedly, it has been estimated to cost about $45 billion in public and private sector investment (pg. 9). At this price is it even worth the uprooting, probably
Further, they point out that even more educated highly trained workers with higher-value jobs such as software engineers, accountants, radiologists, and journalists in the developed world The increased safety net costs of the unemployed may be absorbed by the government (taxpayers) in the high-cost country or by the company doing the offshoring. And when it comes to health and safety requirements it is based upon the company they work and job they do. All of the companies now are recommended the safety measures of their workers. The choice of offshoring destination is often made according to cultural concerns.
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).
Ferreira, J., & Prokopets, L. (2009). Does offshoring still make sense? Supply Chain Management Review, 13(1), 20-n/a., pp 1-5, Retrieved from http://search.proquest.com/docview/221135949?accountid=12085
· Choose the right location: The type of work being outsourced will influence the location. India has gained a reputation for software development. Between 2003 and 2004 it has seen over a 30% growth in software and IT service exports, and by the year ending in March, 2004, Indian companies have earned $12.5 billion in technology exports. But India is not the only source of reliable but inexpensive labor. Countries such as China, the Philippines, Romania, Argentina, and even Ghana and Ireland are all centers for offshore operations of various
is the attempt of this paper to explain outsourcing , it's pro's and con's and
Outsourcing can be a good business strategy because it can expand efficiency, reduce operational costs, upsurge productivity, speed up product development, and likewise allow companies to focus on their core capabilities. (Mourdoukoutas, 2011).
Outsourcing is a practice in which an individual or company performs tasks, provides services or manufactures products for another company. The term itself is often referred to as offshore outsourcing, for the purpose of this essay we will like to talk about the export of labor and manufacturing by Apple Inc, Nike and Walmart to companies outside of the United States. Outsourcing has three main advantages, let us talk about a few of the reasons why a company will decide to outsource verses insource.
Many people insist that there are no clear cut ways to stop the issue of outsourcing, while some people offer up ideas on how company’s could still keep the majority of their work in America while still outsourcing. Outsourcing has become the wise thing to do in business now days and with these economic times, it is only going to
Outsourcing has become an alternative for many major companies as a way to not only manufacture products in other countries, but also employ and develop jobs in other countries in which reality should be available in the United States. Outsourcing as it may seem beneficial to the companies that employ it, actually harms the economy by decreasing the job market that is present in the United states. Offshore outsourcing has a strong potential to affect a variety of jobs ranging from low paid low and skill jobs to high paid and skill jobs. A princeton economist had predicted that about thirty to forty percent american jobs can be offshored in the next ten to twenty years (Institute, 2015). Specifically, informational technology jobs is field that has been targeted to be outsourced in the past, present, and future. A study from the Center for Urban Economic Development found that U.S. imports of business, professional and technical services increased their outsourcing by seventy seven percent in the years of 1997 and 2002 (Offshoring vs Outsourcing, 2015). With the large number of jobs that could move offshore in the future, there is the potential for an increase in the number of jobs moving to other countries, specifically informational technology jobs. This in return would result in a negatively affecting United States jobs and its economy.
Offshoring is defined as a “relocation of jobs and production to a foreign country. The relocated jobs and production could be at a foreign office of the same multinational company or at a separate company located abroad” (Garner, 2003:6). Firms tend to transfer production of intermediate goods and business services to least
Outsourcing is a business strategy that has been around since the eighties and has grown in popularity year after year since. There should be advantages to outsourcing for this trend to occur. There are however certain types of companies that would disagree with this method. Outsourcing has become one of the most controversial issues in business today. This report will explore different approaches on this matter to try and understand whether outsourcing is always the best option or not. It will study the advantages and disadvantages of outsourcing and insourcing, why some companies prefer one as opposed to the other and finally the factors that affect their decision, such as environment and cost.
Over the past decade or more, outsourcing is becoming an essential success factor. Many multinational organizations rely on outsourcing for a variety of products and services such as technology, customer support, automobile, clothes, telecommunication products and many more (Gottschalk, 2006). Outsourcing is an excellent process when it comes to cost advantage. Additionally, it provides organizations the time and workforce to focus on organization’s core business capabilities (Gottschalk, 2006).
Outsourcing: A company can save the cost and create a value if any of the value chain activity can be performed outside the company otherwise performed in-house. Companies withdraw from a few noncore activities and rely upon the outside company to supply a part of the product or services that is not a company 's core competency. Outsourcing can increase competitiveness any time when the same activity performed better at a lower cost, these activities are not a core capabilities of the company, it reduces time and speeds up the process, allow organizational flexibility, and allows concentration on the core business competencies that the company does best. Normally, before making any strategic move, a cost-benefit analysis is performed to decide, if off-shore, on-shore or service contract to another firm is necessary and the best move from a strategy perspective. Off-shore outsourcing adds a complex foreign supplier, global trade into the equation and requires consideration of a global strategy as part of the generic strategy.
For as popular as outsourcing is, the benefits of this practice should be outstanding. So, what are some of these benefits that companies are taking advantage of? Well for each business the benefits that they receive would vary based on the different aspects of each company. Some companies would gain from cheaper labor costs that you could get by outsourcing to a different company that takes place in a different country. These other countries may not have to worry about a minimum wage requirement or competing wages from other companies. They may also have a high population that would provide for the possibility of a quicker production process or the ability to produce at a higher volume in a shorter amount of time.
When the question arises, there are lots of facts which explains the advantages of offshoring to India and that explains the best to the asked questions. Whatever are the ingredients required for performing offshoring functions, the location (India) is very rich in that, and thus it offers lots of advantages. Some of them are pointed out in list below:-