...Is Production and Service Offshoring by United States Multinationals Bad for the United States Economy? Offshoring or offshore labor outsourcing is when a company relocates all or part of its production or services such as accounting or human resources to another country. There is no doubt that this has an effect on the U.S. economy. This paper will discuss the reasons that U.S. multinationals choose to offshore as well as the positive and negative effects this has on our economy. The downside of offshoring is the unemployment that occurs domestically when a U.S. company sends some or all of its production abroad. The disruption caused by this unemployment may lead to lower consumer spending by the laid-off workers which can in turn cause a reduction in economic growth overall. Additionally, unemployment caused by offshoring may necessitate a major effort to retrain the affected workers for new jobs which may be quite costly. Another problem with offshoring is the risk that products manufactured abroad pose because they are made without proper oversight. This can lead to dangerous and unhealthy imported goods such as toys tainted with lead and pet food laced with toxic substances. The positive side of offshoring is the money that a company saves on labor costs. They also avoid costly regulatory or environmental laws, and experience lower tax rates. Additionally, offshoring can be beneficial when certain company responsibilities can be done more efficiently overseas because...
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...“Outsourcing-Offshore” Outsourcing is said to have emerged a few thousand years ago with the production and sales of food, tools, and other household appliances. As soon as small communities and societies began to form, people with specialized professions began to trade with each other for goods and services. It can be said that each worker was outsourcing some activities to others. Research shows that even in the industrial age, a few thousand years later, very few companies outsourced any of their operations. Companies in the 1800s and 1900s were vertically integrated organizations, taking care of their own production, mining, and manufacturing from raw materials to finished goods as well as then shipping the goods to company owned retail outlets. These companies often handled their own taxes, employed their own lawyers, as well as designed and built their own buildings without outside assistance. This model does not apply to all companies during that time period, but it gives a general idea of the time. The history of outsourcing portrays that as onshore outsourcing continued manufacturing outsourcing of low-tech items such as toys, shoes and apparel goods began to take place. After this manufacturing higher value items like high-tech components and consumer electronics began to appear. In fact outsourcing history demonstrates that manufacturing was the first activity that began to move to offshore destinations in a quest for lower costs. Globalization began during...
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...Abir Abdulbaki 28053 Successful Southwest Airlines Southwest airlines (SWA) is an American airlines that provide traveling services with low prices. It operates only in the US and rely mostly on domestic passengers. It’s a very successful airlines with high revenues and performance. The company revenues, operating profit, and net profit increase consistently. In December 2006, it earned 9,086 million dollars which is 19.8% more than 2005. Moreover, the operating profit increased by 28.8 % to be 934 million dollars. The net profit in 2006 was 499 million dollars and this is an increase of 3.1% from year 2006 (Datamonitor,2007). Southwest airlines have been profitable even when its competitors have been struggling to gain a small amount of profit. What are the strategies that SWA is following to be this successful ? Alternatives to lay-offs : There are several alternatives to lay-offs that cut costs and reduce labor surplus with less disadvantages. Some examples of these alternatives are downsizing, pay reductions, transfers, work sharing, and hiring freeze (Noe,R. Hollenbeck,J.Gerhart,B, & Wright,P ,2010). In the wake of 9/11 terrorists attacks, Southwest refused to lay-off employees while its competitors got rid of employees and unprofitable routes. Southwest took the positive side of this difficult times and increased its existence and used their low cost model. Planned purchase of new planes was delayed. Also, it scraped ongoing plans to renovate...
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...Introduction Off-shoring and outsourcing have become especially prevalent in recent years due to the shift in foreign labour markets becoming more competitive, and even favourable in some sectors. It should be noted that domestic examples of outsourcing do not shift the labour market because within the country itself, there are no structural changes. As a result, this paper will focus on outlining the various off-shoring and outsourcing implications and effects on international labour markets. Outsourcing vs. Off-shoring Companies have been able to implement off-shoring and outsourcing because of the phenomenon of lower transportation costs and instant communication across barriers of the world. Outsourcing and off-shoring are often grouped together and defined similarly, however they can be understood and interpreted in many ways. Outsourcing is a division of labour by contracting foreign third-parties abroad. In comparison, off-shoring is a more extreme form of outsourcing. It instead relocates key production sectors abroad, but not core innovative activities. Companies will often setup their own facilities which results in a decrease in foreign unemployment. Specific examples related to off-shoring and outsourcing will be discussed throughout the paper. In a wider spectrum, firms use off-shoring and outsourcing to remain competitive with the ongoing globalization that is present. Both countries involved are able to raise their nation’s GDP by shifting labour...
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...DSC 2006 Operations Management Outsourcing [pic] I. Introduction Outsourcing is used extensively by both the manufacturing and service industries, and there are plenty of reasons to utilize outsourcing. Organizations make use of outsourcing usually in the interest of lowering cost and to make better use of time and energy costs, hence redirecting their energy to something more important or just to conserve energy. Outsourcing is essentially a division of labour. One simple example involves companies outsourcing their financial statements to accountancy firms to consolidate their expenditures, hence eliminating the need to hire an accountant. Another relevant example would be to hire the services of another company to manage all or parts of the services that otherwise would be otherwise rendered by an IT unit of the organization. Some reasons for outsourcing include organizations being able to focus purely on their core business, for example an automobile factory. The raw materials required to manufacture an automobile are outsourced to other companies and hence the company itself can focus on just creating quality automobiles. By outsourcing the raw materials to companies who specialize in providing them, they can also ensure that the raw materials are of reasonably better quality and this can be done by contracting with a new service level agreement. Another reason being companies are able to access the wide pool of talent available through hiring agencies. In layman terms...
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...No. 2005-12-A Office of Economics Working Paper U.S. International Trade Commission Growth in Services Outsourcing to India: Propellant or Drain on the U.S. Economy? William Greene* U.S. International Trade Commission January 2006 *The author is with the Office of Economics of the U.S. International Trade Commission. Office of Economics working papers are the result of the ongoing professional research of USITC staff and are solely meant to represent the opinions and professional research of individual authors. These papers are not meant to represent in any way the views of the U.S. International Trade Commission or any of its individual Commissioners. Working papers are circulated to promote the active exchange of ideas between USITC Staff and recognized experts outside the USITC, and to promote professional development of Office staff by encouraging outside professional critique of staff research. Address correspondence to: Office of Economics U.S. International Trade Commission Washington, DC 20436 USA No. 2006-01-A OFFICE OF ECONOMICS WORKING PAPER U.S. INTERNATIONAL TRADE COMMISSION Growth in Services Outsourcing to India: Propellant or Drain on the U.S. Economy? William Greene U.S. International Trade Commission January 2006 The authors is with the Office of Economics of the U.S. International Trade Commission. Office of Economics working papers are the result of the ongoing professional research of USITC Staff and are solely meant to represent...
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...CHAPTER 1 INTRODUCTION 1.0 Overview In recent years, researchers have identified that the offshore outsourcing of services is starting to become a thriving business area, serves as a tool for maintaining and increasing the competitiveness and also an important asset of international growth strategies of many service firms. Bryborn & Jantell (2005) states that every now and then there is a boom of interest in cutting operating costs and every time there is a different ways of how it is done. In the 1990’s, the trends used to cut costs were re-engineering of business processes. However, in the early 2000’s, after the economical downturn, there was a similar trend to reorganize business processes and the trend was called offshore outsourcing. The major driving force for offshore outsourcing are customers who wants more of everything for less money. In MIDAS Bulletin Oct-Dec 2004 publication mentioned that, “ Malaysia is among the top three contenders for offshoring business in the world according to the 2004 Offshore Location Attractiveness Index compiled by the global management consulting firm A.T. Kearney, sources were quoted. Malaysia is ranked 3rd behind India (1st) and China (2nd) but ahead of Singapore (5th), Philippines (6th) and Thailand (13th). In its report, A.T. Kearney considers Malaysia a “ natural choice” for offshore services in view of its low costs, particularly for infrastructure, the most attractive business environment among emerging...
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...Effects of Outsourcing Name Institution Effects of Outsourcing Abstract Outsourcing is the practice of assigning a firm's business progressions to an outside agency for the purpose of improving service quality, driving innovation, or developing benefits of lower labour costs (Burkholder. 2006). Intercontinental outsourcing occasionally known as offshoring is a significant facet of economic globalization. Since outsourcing hints to more specialization, it is anticipated to reduce production expenses and to raise productivity. This study uses micro data on American firms to investigate the effects of international and domestic outsourcing on the economy at large, jobs, the production quality and the its ethnic view in the United States. It is based on a unique survey on outsourcing covering the period 2001 to 2013 over a decade of study. The survey allows one to distinguish between domestic and international outsourcing and between outsourcing of core and support activities. This article will highlight the changes that have been observed since the initiation of the outsourcing practise to its impact on the areas of study in sub-topics. Introduction The conflict has been going on from at least the 1880s, when the first New England textile mills initiated moving its manufacturing process to the Carolinas. Whatever name it goes by be it runaway plants, outsourcing, global sourcing, offshoring workers and the public tends to have mixed fillings towards it, executives view it as...
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...Company report on cross border offshoring management, cultural dimensions and gamification Table of Contents Table of Contents Executive Summary | p.5 | Chapter I – Introduction1.1 Purpose of the Report1.2 Effects of Globalization on Businesses’ 1.3 Company Background1.4 Outline of the Report | pp.6-7 | Chapter II – Cross Border and Offshoring Management 2.1 Introduction2.2 Defining culture2.3 Defining management and cross cultural management 2.4 Offshoring2.5 Key problems in cross cultural teams2.6 Conclusions | pp.8-11 | Chapter III – Analyzing and Explaining Cultural Dimensions3.1 Introduction3.2 Analysis of cultural dimensions and Country Comparisons 3.2.1 Power Distance 3.2.2 Uncertainty Avoidance 3.2.3 Long term orientation 3.2.4 Indulgence 3.2.5 Individualism 3.2.6 Masculinity 3.3 Limitations of Hofstede’s Dimensions | pp.12-17 | Chapter IV – Gamification4.1 Introduction4.2 Defining and Explaining gamification4.3 Gamification’s effects on business4.4 Examples of gamification4.5 Criticism – The dark side of gamification | pp.18-20 | Chapter V – Corporate Social Responsibility5.1 Introduction5.2 Defining and explaining CSR 5.3 The Foxconn and Apple scandal5.4 Recommendations and Actions | pp.21-22 | Chapter VI – Recommendations to Management | pp.23-24 | Chapter VII – Conclusions | pp.25 | References | pp.26-27 | Executive Summary Executive Summary This report provides an analysis and evaluation of...
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...| Commonwealth of Independent States | Global IT Today and In the Future | | Todd, Tate, Djokovic, Santaga, Johnson | 12/18/2011 | | Table of Contents Introduction to the Commonwealth of Independent States # 3-5 CIS Countries in the 21st Century # 5-9 Offshoring Strategies and Potential # 9-12 IT Infrastructure # 13-16 CIS Countries in the Future # 16-21 Appendix # 22 References # 23-25 Introduction to the Commonwealth of Independent States - Andrew Tate The Commonwealth of Independent States is a regional area that includes countries from the eastern part of Europe as well as countries from the Middle East part of the world. These countries include: Armenia, Azerbaijan, Belarus, Kazakhstan, Kyrgyz Republic, Moldova, Russia, Tajikistan, Turkey, Turkmenistan, Ukraine, and Uzbekistan. Each of the countries belonging to the Commonwealth of Independent States are former parts of the Soviet Republic, which broke up along with the former Soviet Union, with the official date of the CIS formation being marked as December 8, 1991. The “founding” countries of the Commonwealth of Independent States were the Republic of Belarus, Russia, and Ukraine, with eight other countries (Armenia, Azerbaijan, Kazakhstan, Kyrgyzstan, Moldova, Turkmenistan, Tajikistan, and Uzbekistan) joining the CIS 13 days after the formation(http://en.wikipedia.org/wiki/Commonwealth_of_Independent_States). According to 2008 statistics, the total population of the countries that...
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...Economic Incentives and Global Competition Florida Institute of Technology MGT 5100 The primary goal of state and municipal governments offering economic incentives was intended to encourage job creation. Because global competition facing U.S. companies has progressively increased over the years, domestic companies have been faced with two primary options in order to remain competitive; move their operations to lower labor cost regions outside of the United States or invest in technologies that lessened the necessity for expensive labor within the U.S., in which both would result in reductions in jobs and earnings within states and municipalities. Job retention became the primary focus after that. Financial incentives would be necessary to back programs in place to keep companies open and employees employed. Without it, the programs would plummet. State and local governments have been slow to react in changing their incentive programs to help keep jobs in tact, while foreign governments have reacted almost immediately, making their incentive programs much more attractive. This has affected several industries. While some states have experienced growth, there are more that are experiencing or have experienced reduction in operations and the closing of facilities. This eventually caused local governments to want to help out a little more. They have begun to arrange economic incentives for the purpose of keeping automotive operations and other industry operations and their...
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...REVIEW OF ECONOMIC POLICY, VOL. 22, NO. 4 DOI: 10.1093/oxrep/grj029 OUTSOURCING AND OFFSHORING: IMPLICATIONS FOR PRODUCTIVITY OF BUSINESS SERVICES MARI SAKO Saïd Business School, Oxford1 This paper reviews the implications of outsourcing and offshoring for the productivity of business services in the UK. Official statistics indicate that business-service productivity has grown by over 20 per cent in the last 7 years at the same time as employment grew by 20 per cent. The paper considers possible factors that account for the simultaneous growth of employment and productivity. First, we discuss outsourcing and offshoring, and their role in enhancing productivity through greater specialization, standardization, and consolidation of business processes, and a shift to higher value-added services. Outsourcing of business services is interpreted as part of corporate restructuring, namely as the unbundling of corporate functions as well as vertical disintegration. Second, as some services become more like products, both low-skilled and high-skilled jobs are subjected to productivity growth through standardization and digitization. It is argued, however, that the future of business-service productivity is on a knife-edge, depending on the mix of two sources of productivity enhancement—namely greater standardization and capturing value from customized solutions. I. INTRODUCTION Services have become a dominant part of the UK economy, accounting for 66 per cent of GDP, as compared...
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...Timmy Throntveit Organizational Theory September 21, 2014 Research Paper: Outsourcing Outsourcing is the practice used by different companies to reduce costs by transferring portions of work to outside suppliers rather than completing it internally (Investopedia). Why do many organizations outsource their business overseas to countries like China or India? Outsourcing is an effective cost-saving technique when used properly. Outsourcing is sometimes more affordable to purchase a good from companies with comparative advantages than it is to produce their products internally. China and India are the fastest growing economies around. The most obvious reason is the reduced costs. Wages for skilled workers are lower in developing countries such as China or India. The outsourcing of American jobs has become one of the biggest topics in the United States. The country's working class faces pressures which they have not experienced since the Great Depression of the 1930s (Magdoff, Foster). Outsourcing continues to have several different opinions from many individuals. On one side of the topic, many are in support due to the low cost for companies. The main reason is outsourcing boosts the United States economy. On the opposing side, many are opposed to outsourcing because of the reduction of jobs in the United States and a variety of other factors. The focus on outsourcing has led to many companies being shipped to foreign countries like China and India. With the rise of technologies...
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...and R. Swaminathan for their useful comments. The usual caveat applies. _______________ This is a longer version of the paper prepared for IMRC 2006 conference on Global Competitiveness through Outsourcing: Implications for Services & Manufacturing, Indian Institute of Management (IIM), Bangalore, July 13-15, 2006. Abstract This paper analyses the implications of differing global demographic trends for India’s competitiveness in outsourcing and offshoring. It also briefly notes the implications of differing demographic trends among the Indian states. The paper argues that demographic complementarities with high-income countries provide India with one-time opportunity to sustain its growth rate and occupy all segments of global outsourcing and offshoring activities. India has used the labor cost advantage to gain reasonable market share in these activities. It however faces serious internal and external challenges in sustaining its international competitiveness, particularly with respect to labor cost. With sustained focus on human resource development, diversification and upgradation policies India can continue to atleast maintain its global market share, and help nurture globally competitive companies. Keywords: Outsourcing, Offshoring, Globalization. India, Demographic Trends, -1- I. Introduction Outsourcing has been among the most extensively debated public policy...
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... Marks Question 3 – 6 Marks Page 1 of 23 Melissa Roberts 9610377 Pacific Brands Global Strategy & Leadership S2 2013 Module 1: An introduction to strategy and leadership The global context of business (Drivers, challenges, benefits of globalisation, value of localisation) Page 1.28 Drivers of Globalisation • Competitive Forces -‐ The ability to effectively offshore manufacturing to reduce costs has been possible because of globalization. The pressure of competitors offshoring has been a driving force for PB to follow suit. If they continued to manufacture domestically, their costs to manufacture would be a lot higher than competitors; if they were to compete on price, their...
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