Outsourcing & Offshoring
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Few topics associated with global trade are more vehemently debated than outsourcing. For this discussion, you will watch two video clips that provide some perspective on outsourcing. Using the information you gain from the videos and the materials you studied in the course module, respond to the discussion question below.
This video clip is from the film Outsourced. It covers American sentiment on losing jobs to India and the availability of Chinese goods. We want cheap stuff; however, most of it comes from China.
As countries like China and India become leaders in manufacturing, the costs of their expertise rises, diminishing their advantage against U.S. counterparts. At the same time, convoluted and increasingly risky supply chains dependent on inexperienced vendors have turned once stable brands like Boeing into the perfect “reshoring” case study. This video explains why outsourcing can be bad for business.
OPTION 1:
Select ONE of the following perspectives on outsourcing, and answer the related questions. Although your opinion is always valued, be sure to support your opinion with facts obtained from your course materials, the videos, or a reliable source. Make sure to cite your sources.- The consumer: Does the consumer benefit? Are prices lowered by outsourcing? Why or why not?
- Efficiency and productivity: Does outsourcing enhance efficiency and productivity? Why or why not?
- Competition: Does outsourcing encourage competition? Is this a good thing? Why or why not?
- Developing countries: Does outsourcing benefit developing countries? Why or why not?
- International stability: Does outsourcing foster international cooperation, respect, and stability? Why or why not?
OPTION 2:
You can also choose to interview a friend or family member who owns a small business or works for a large company. Ask them what services their organizations outsource or offshore. Why do they do so? What benefits does it bring their business? Did they make the decision to outsource or offshore? Do you have a friend or family member who lives in another country than the US that does work for a US-based company (customer service, manufacturing, etc.)? What is their perspective on their work?In your response, you should list the questions you asked and the answers OR tell the story from their perspective. Then, form your own opinion: is offshoring and/or outsourcing as bad as it is portrayed in the media? Why or why not?
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In order to receive full credit for this assignment, you must first post your own response to the question(s) above by Friday, September 22 at 11:59pm ET. You then must comment meaningfully on at least two classmates’ posts by Sunday, September 24 at 11:59pm ET.
This assignment is worth a total of ten (10) points — 6 possible points for your original post, and up to 2 points for each of the two responses to your classmates’ posts. Please reference our Discussion Rubric for more information, and to this guide from MSSU to learn more about what it means to respond meaningfully to a classmates’ post.
Source: Lumen Learning
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- Competition: Does outsourcing encourage competition? Is this a good thing? Why or why not?
‘More and more companies may be considering outsourcing and offshoring their work as a potential way to reduce costs and streamline their operations. Outsourcing is when a company hires an outside organization to do specific jobs or provide services. Offshoring means a business arranges to get its work done in a different country, usually to take advantage of cost savings.Many companies may be considering one or both—or a combination of the two, known as offshore outsourcing—in order to help stay competitive, especially in global markets.’ -American Express Business Article
Usually when I think of outsourcing, I think of large companies who turn to third party vendors that offer a specialized skill or service for compensation. What distinctively comes to mind would be a warehouse doing their hiring through a temp service. There are many pros and cons to outsourcing, but it is safe to say that it does encourage competition among business owners. From an entrepreneurial standpoint let’s look at some of the advantages:
1. Saving on labor and infrastructure.
When you outsource, you can pay your help as a contractor. This allows you to avoid bringing an employee into the company. Outsourcing reduces the cost of hiring human capital and eliminates the need for companies to build their facilities. Infrastructure costs are reduced because companies do not have to invest in office space, equipment, or utilities.2. Access to outsider perspectives / innovation.
By tapping into external talent pools, businesses can leverage the experience, knowledge, relationships, networks, and know-how of others.3. Focus on core competencies.
Often times with expanding businesses especially, administrative duties tend to increase with growing demand. By outsourcing work, businesses and entrepreneurs have gained more time and opportunities to expand their operations and stay ahead of the competition.In the global market, if you are not outsourcing you are not thriving. Reducing the cost of labor, saving time in the back office, and innovation are all critical components when you are trying to run an efficient business. Staying ahead of the competition is important, and most companies who turn to external parties reap many benefits. I’ve come to find that often times outsourcing offshore is an option that many business owners take advantage of too. It can enhance the understanding of overseas markets, create new markets, and broaden the customer base while cutting them a tax break. There are foreign countries who even offer financial incentives for companies to come set up shop on their land. This is terrific news for a business owner who may be looking to reduce operational costs.
It is hard to say whether or not all of this is inherently a good thing or bad thing though. If you’re investing in a company, it’s good but like every coin this one has two sides. There are people who will argue that outsourcing, offshoring, and specifically a combination of both isn’t a good thing. In some cases, overseas employees are paid less than what they would be paid here in the U.S. and are subject to unfair work conditions; whilst depleting themselves of natural resources and devastating the landscapes around them. The electric car & smartphone businesses demonstrate this struggle with the ongoing fight for rights in the cobalt mines of the Congo. Some critics go so far as to say that what’s going on in the DRC is modern-day slavery. Companies like Apple, Tesla, and Samsung all rely on cobalt for the production of lithium batteries. In my personal opinion, I think outsourcing is good as long as it’s done ethically and responsibly.
‘In response to significant criticism, Apple, along with Samsung, Sony and HP, joined the Chinese-led Responsible Cobalt Initiative to pursue greater supply chain transparency. The non-profit Enough Project would later praise the iPhone producer, writing in a November report that Apple “has committed substantial resources to developing processes for sourcing minerals from mines that benefit Congolese communities.” ‘ – CNBC
In conclusion I can confidently say that businesses are competitive on all levels, but outsourcing and offshoring is a driving factor in what makes it such a gladiatorial game.
Works Cited:
CNBC; Apple’s potential cobalt mining play is about more than money: Experts (cnbc.com)
American Express Business; Potential Advantages of Offshore Outsourcing in Business (americanexpress.com)
Additional Sources:
Washington Post; Mines for electric car metals in Congo strain workers’ health, families – Washington PostThe New Yorker; The Dark Side of Congo’s Cobalt Rush | The New Yorker
Computerworld; Amex on the defensive about offshore plans | Computerworld
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The consumer: Does the consumer benefit? Are prices lowered by outsourcing? Why or why not?
- Are Prices Lowered by outsourcing
Prices are indeed lowered by outsourcing due to the fact that outsourcing can lower prices by 20 to 30 percent. this is because outsourcing leads to more efficiency in a number of ways, like labor cost; even though you have to probably hire more workers it wouldn’t matter due to the fact that labor is cheaper in other countries. Also, outsourcing will allow you to tap into larger productions and companies which might be more efficient and will maybe reduce the cost. Both these things will lower the cost of a product.
- Better quality items
Better quality items are the main focus of most companies and sometimes certain companies may not have the resources or ideas to get that product. When outsourcing you get access to factories all around the world and they sometimes they can make a product better than it once was due to their expertise in certain areas that are involved in the production process. The consumer benefits from this because they are getting better quality items.
- A variety of products
Outsourcing can give companies the option to have a wider range of products, like Apple with their multiple products like air pods, computers, phones, etc. The consumer benefits greatly from this because while they are getting quality products for the most part; they also get a variety of products depending on their needs of course.
- Improved technology and unique twist on products
Personally, I think the biggest benefit of outsourcing is what ideas and resources other countries have to bring to the table. Some countries have things we don’t like more advanced technology or to be more specific a different flavored chip that the United States doesn’t have. We can get these unique attributes from outsourcing, and it has been done before. This benefits the consumer because it can introduce them to something new or improved.
All these things have been a positive look at how outsourcing can benefit the consumer but that is not to say that there are no negatives to come with it. Outsourcing can result in quality issues if not managed properly and can lead to quality controls like if you get an action figure and it breaks with a slight move, or you get a faulty computer. Another negative is that Communication with other countries can be difficult due to the fact that everyone has their own culture, and some might have a different primary language, basically a language barrier. These examples can affect the consumer who is buying a product with quality issues without even knowing just to realize they bought a faulty product and now have to try getting a refund. The overall impact is based on how outsourcing is managed it can either be a positive thing for consumers or a negative thing, if that’s the case the consumers will keep buying or stop and the company will either rise or fall.
Work cited:
Six Reasons Outsourcing Could Benefit Your Business (forbes.com)
What is outsourcing? | Definition and examples – IONOS
The Benefits of Outsourcing – Foundation for Economic Education (fee.org)
Why It Matters: Role of Business | Introduction to Business | (coursesidekick.com)Module 3
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• Does outsourcing benefit developing countries?
Whether or not a company chooses to outsource work in another nation is a heavily debated topic. Host nations are most often developing nations that can use the influx of jobs and money to help stimulate their own economy and improve quality of life. The developed nation can cut costs by hiring cheaper labor while still providing jobs for those in need. By the 1990s outsourcing became a new hot topic due to the discovery of sweatshops by the American people which highlights the exploitation of these workers. It broadcasted the poor working conditions, tremendously long hours, and little pay for their time.
Not all outsourcing is a bad thing, in India they have it likely the best out of any nation with less labor-intensive jobs. Developed nations provide jobs in tech and customer service which are a cake walk in comparison to factory jobs. Unfortunately, most nations like Ethiopia have factory and warehouse work as outsourced positions. These opportunities at first seem to be good but after a short time many walk because of the conditions, pay, and hours. Many are enticed with the idea of new opportunities but are faced with a harsh reality after trying to work in these fields. In “Everything We Knew About Sweatshops Was Wrong” the authors take a deep dive into a new factory in Ethiopia screening for new workers in their plant. What they found after many young women started work at these factories was a high turnover rate due to the conditions and poor pay. Many of the women could earn the same by working in their village selling clothes, trinkets, and food instead of facing hard labor. “To our surprise, most people who got an industrial job soon changed their minds. A majority quit within the first months. They ended up doing what those who had not gotten the job offers did — going back to the family farm, taking a construction job or selling goods at the market.” After a year of following the applicants and new workers at the factories set up only one third stayed. This highlights the harm outsourcing causes, with the developed nations taking advantage of the workers in developing nations. In the end if working the same jobs in their villages made them a similar wage these factories are truly predatory, meaning outsourcing really creates more harm than help.
Article is listed below
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Does the consumer benefit? Are prices lowered by outsourcing? Why or why not?
The consumer does benefit from outsourcing. The cost of production and manufacturing in foreign countries such as India and China always happen to be lower. This allows U.S companies to achieve better margins coordinating cost of production to revenue. Producing and manufacturing goods in America is more costly, which will then in turn lead to the products and services being produced to be costly as well. To offset this reality, many corporations outsource in an effort to reduce consumer costs at the end of the process. American consumers are accustomed to prices brought forth by outsourcing. Many may find the prices of American produced goods to be too expensive relative to the prices they have known previously. Companies realize that outsourcing allows them to be more profitable as a business, as well as attract more customers due to the costs of products and services eventually being lower. Outsourcing also allows corporations to entertain global markets as well, which allows more consumers access to products and services. Ultimately, the consumers do benefit from outsourcing. However, other parties do not benefit from outsourcing, such as American manufacturers who lose jobs as a result of corporations taking their manufacturing needs to foreign enterprises. The employees of many foreign manufacturers also do not benefit; yes there is a surplus of job opportunities, but the compensation in accordance to the labor expectations is usually unjust and inadequate.
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