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Outsourcing and Offshoring

Outsourcing and Offshoring

Introduction

The terms outsourcing and offshoring are always used concurrently in most of the business industries. However, there exists a particular difference between the two. Outsourcing means that a company contracts another different specialized company to do some specific and limited activity, function or operations that the firm does such as research, call centers, or credit payment management (Oshri et.al, 2015). Outsourcing entails the reintegration of a company’s roles and functions with the other company towards promoting the overall performance and operation of the outsourcing company. The other form of business collaboration is offshoring which differs from outsourcing. By contrast, offshoring is a situation whereby a company takes one of its branches operating in a given country and moves the whole branch offshore to a different country(Oshri et.al, 2015). When a company offshores, this implies that it shifts its location of service or production of some segment to a different nation.

Effects of Outsourcing

India could not have afforded to pay the bandwidth to connect brainy India with high technology America, so American shareholders paid for the expenditures. This investment in railroads turned out to be a huge advantage to the American economy. The United States companies discovered that they could benefit on India’s brainpower. This outsourcing of the employees whose capacity of quality and quantity helped the American factories through increasing productivity, as well as helping the foreigners who got jobs (Kandilov and Grenness, 2012). An adverse effect on the people of America who could not get the jobs as a result of stiff competition from the very smart Indian people. Outsourcing of employment helps the US companies gain a competitive edge in the world economy and market since the factories can sell their products to foreign countries through their overseas branches (Kang et.al, 2012). The process of subcontracting another company in a different country also increases the levels of unemployment in America.

Effects of Offshoring

The cheap imports from China have relieved U.S consumers roughly $600 billion and have saved U.S manufacturers undisclosed billions in more affordable parts of their commodities. This is very crucial because the general impression is that offshoring is a lose to lose proposition for American workers and that the reality is extremely complicated(Nayak and Taylor, 2009). Most industries build offshore factories not simply to obtain cheaper labor for goods and services they want to supply in America and Europe. American exports are stimulated when the motivation to serve foreign markets is enlightened (Messenger and Ghosheh, 2016). American companies that produce domestically and globally generate more than 21 percent of US economic output provide 56 percent of the US exports and employ at least 60 percent of all manufacturing employees. For example, if general motors company builds a factory offshore in Shanghai, China, it ends up creating job opportunities in America through the exportation of numerous products to its factory in China and thus benefiting from lower parts costs in Shanghai for its factories in the US.

Conclusion

Outsourcing and offshoring run hand in hand for almost all the big companies in the global market. Companies should strive to outsource some functions which they are not able to meet or implement due to the manner by which the company operates or the amount of job the company is attending. Offshoring by companies is also crucial and fundamental when a factory wants to invest its resources in a different country by establishing their branch there. Both forms of collaborating industries have the advantage of creating a large market for the c Outsourcing, and Offshoring should be adopted by companies since it creates a competitive edge for the market of their products provided this will not have an adverse effect on the employment levels. Companies products, and a disadvantage of creating unemployment (Nayak and Taylor, 2009).

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