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Boon or bane of outsourcing
Effects of outsourcing in america
The impact of offshoring on the US economy
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Disadvantages
Decline of Innovation Abilities
One of the main risks of producing abroad would be the loss of product innovation skills itself and capabilities slowly leading to the decline in their competitive edge. Pisano and Shih (2012a) have argued that “mass migration of manufacturing has seriously eroded the domestic capabilities needed to turn inventions into high-quality, cost-competitive products...”. Looking at Kodak, back in the 1960’s and 1970’s it’s profits were from the sale of colour films and not cameras therefore it allowed it’s lens, shutter and other mechanical components to shut down while other Japanese companies like Canon, Nikon and Minolta took over film cameras instead. However as the company tried to build their digital camera business, most of their components were from Asia- memory cards, rechargeable batteries, electronic sensors and the like. Kodak had lost its capability to manufacture and along with it the ability to innovate crucial components of a camera. (Pisano 2012a)
Naghavi and Ottaviano (2009) came up with a model where offshoring is associated with less feedback from the offshored production plant to domestic innovation divisions and more coordination problems slowly leading to lower product innovation. It especially so in sectors where R&D are cheap and product differentiation is strong. Fuchs and Kirchain (2005) suggests also that “the static economies of offshore manufacture .... lead to dynamic diseconomies—specifically, disincentives for innovation”.
Variety of Operational Risks
Another disadvantage would be operational risks. There could always be a chance of increasing costs, over-dependence on a supplier, exploiting of knowledge transfer and even diminishing quality of goods ...
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...ven development, and jobs in the North American apparel industry. Global Networks, (online) Volume 3,Page 143–69. Available at: http://onlinelibrary.wiley.com/doi/10.1111/1471-0374.00054/pdf (assessed at 25th of April 2014)
38. Levy, D. L. (2005), Offshoring in the New Global Political Economy. Journal of Management Studies, (online) Volume 42 Page 685–693. Available at: http://onlinelibrary.wiley.com/doi/10.1111/j.1467-6486.2005.00514.x/full 9assessed at 21st of April 2014)
39. Storper, M. (1997). The Regional World: Territorial Development in a Global Economy. London: Guildford Press.
40. Waldman, A. (2004). ‘What India's upset vote reveals: the high tech is skin deep’. New York Times, (online) 15th May, Page 6. Available from: http://www.nytimes.com/2004/05/15/world/what-india-s-upset-vote-reveals-the-high-tech-is-skin-deep.html (assessed at 23rd of April 2014)
Globalisation is a growing phenomenon that is the result of various developments in the global environment, each of which merits an individual analysis of its social impacts. For the purpose of this analysis, the focus will be placed upon arguably its most controversial aspect, offshore outsourcing. Offshore outsourcing, or offshoring, is becoming an increasingly common business practice as a result of a combination of the recent technological advancements in the areas of transportation and communication, and the increased competitiveness of the business world. From the perspective of firms, tapping into cheap labor from less developed countries is a very logical business decision to reduce costs and maximize profits. This has not only motivated businesses to engage in offshoring, it has sometimes been critical to their survival in fiercely competitive environments.
In the 1960’s American Companies started offshoring job positions to Asian countries, and Hispanic countries. American Companies started offshoring American Jobs because their business was more profitable in other countries, so in order for the companies to be closer to those countries American Companies started hiring employees in those countries. Furthermore, as American companies realized how much money they could save by offshoring jobs to other countries with low income they started offshoring more jobs with the purpose of saving money. As American companies offshored white and blue collar positions, their profit incremented and they were able to invest more money in their products. The objectives of this report are the following:
Disadvantage: increase the expense of leasing and managing retail stores; widely distribution will produce more opportunity to competitive with competitors directly, for example, they are located in the same mall.
Recently outsourcing has been in the news, especially during political election years. It seems to be a phenomenon that is causing much concern among the population. But exactly how is outsourcing effecting both workers and businesses? And is it as big of a problem as politicians describe?
Since the concept of outsourcing was introduced it has been a subject of debate between politicians and citizens of the United States. Remarkably, it was the United States who supported outsourcing and now it is the United States that feels its economic progress is being threatened by outsourcing. One may argue that the financial situations that existed two decades earlier are not the same as they are today, thus the change of time, business priorities of economies have also changed.
The exporting of American jobs is an issue that is important and will become increasingly so as more and more white collar jobs are shipped overseas. American companies in the past few decades have been sending American jobs overseas paying residents of other countries pennies on the dollar what they had paid American workers to do. This saves the companies millions of dollars on labor costs but costs Americans precious jobs.
This article revealed how outsourcing manufacturing damaged U.S. industries’ competitiveness and innovative abilities. There were several problems that affected the U.S. economy, like the decline of trade, lack of research and development funding, and poor managerial decisions. Several government and businesses’ recommendations were made to restore U.S. industries’ competitiveness and innovative capabilities. Simply by restoring U.S. innovative abilities will the industrial commons bounce back and there will be economic growth.
Do you ever wonder what our nations underlying focus is? The answer is simple and should be fairly easy to guess… Money! Outsourcing originated from someone coming up with the idea that we can make products for practically nothing in other countries and make very high profits. Although it seems like a great idea to businesses, it negatively affects our country. American consumers are buying these products that are made in other countries and the companies profits are continuing to rapidly increase. At the same time, people that are in the production field of work in America are losing their jobs because producers would rather pay foreign workers to get the job done for a much lower wage. When it comes down to it, one of the reasons our economy is suffering is because of outsourcing. Basically, it all comes down to money. The consumers don’t pay close enough attention to where the products are made. Therefore, consumers are spending extra money and are causing outsourcing to thrive. The lack of knowledge Americans have on the subject of consumers affecting outsourcing is leading our country to economic stress but if we begin to recognize the issue, the jobs we could potentially save may be our own.
Gillies, G. (2005) Transnational Corporations and International Production. Concepts, Theories and Effects, Edward Elgar, Cheltenham
Outsourcing has been around for many years. In this paper, I will discuss some of the history of outsourcing, the good things about outsourcing, and the bad things about outsourcing. Outsourcing is important because many companies rely on it in order to get many different products and services to their facility on time and in good shape. Outsourcing is a huge part of the business industry today. Any business can be affected by outsourcing.
One problem anyone is going to have in just about any industry is the amount of inventory to keep at warehouses. If there is too much inventory, then high costs will become a problem and hurt your bottom line. At the other end, if you try to save too much money by keeping inventories dangerously low, it may create stock-outs. These can infuriate your clients
[6] Kripalani, Majeet & Egnardio, Pete. The Rise Of India. Business Week Online. December 8, 2003. http://www.businessweek.com/magazine/content/03_49/b3861001_mz001.htm
What does it mean to offshore outsource? Let’s first start by explaining what outsourcing means. The basic meaning of outsourcing is to obtain goods or services from an outside place. This gives businesses and companies the ability to save money. When the businesses and companies save money that ultimately means the consumers will also save money. The word offshore means some distance from the shore. According to Blinder “Offshoring, by contrast, means moving jobs out of the country, whether or not they leave the company” (20). To better understand the meaning of offshore outsourcing, we can say that it is the process where the companies provide jobs to foreign countries. Big
Offshoring has become a big factor in the global economy. Many companies have opened customer service centers in different countries due to the savings. Clothing companies moved their manufacturing plants to other countries due to the cost of labor. Major stores in the US, for example, Wal-Mart, brings in most of their products from other countries to save money and pass that savings onto the consumer. Capitalism in the US has recently helped the global economy, the benefits of the Americans in the world’s marketplace is seen in the return of money to the rest of the world.
Currently in the global environment, there is a strong sense of competition that must be achieved through better performance, almost all firms are competing in international markets due to the reduction in barriers for capital and tariffs. With the new changes in both communication and technology, the consequences faced are that production processes are no longer within national boundaries but spread across (Debrah & Smith, 2002).