Outsourcing occurs when a business decides to allow a foreign firm to carry out certain tasks on its behalf. It may be manufacturing, constructing, hiring labour, or producing goods using offshore employees and facilities, and then importing them. The main aim is to ensure low cost of production, maximize returns and be competitive.
Advantage of outsourcing
Outsourcing has both advantages and disadvantages. Various benefits are accrued from business outsourcing. An organization can be competitive in today’s world, can get cheap quality products while creating a new market and new jobs (Katharine 395). The standard of living is high as they specialize in priority fields promoting innovations. It spurs economic growth achieved through low-priced goods as consumers will spend less while saving and this has a direct increase in gross domestic product. The company has an opportunity of becoming global due to the free trade policy. The citizens can afford more goods, courtesy of low prices.
The local jobs are increasing especially due to specialization and there is the restructuring of cost with the ability to predict the future prices. The company benefits from a pool of wider knowledge and experience that increases its capacity and development (Buckman 2).
Disadvantages of out sourcing
However, some proponents argue that outsourcing is a recipe for a future economic crisis. They claim that America has lost most of the jobs to other cheaper countries which is an aftermath of free trade. The government should drop certain clauses of the trade agreement to protect the local jobs. Moreover, tax should be levied on such goods to avoid future recessions. They assert that the campaign should be emphasized on buy America to build America, as a result, many people are jobless and beggars due to the export of jobs (Donnellan 3).
Why we should outsource
In reality, the advantages of outsourcing outweigh the disadvantages. In the modern entrepreneurship society, organizations are keen on efficiency, specialization, and profitability. The current global market is too competitive in terms of time, quality, innovativeness, market diversity, labour relations, economic growth, and global financial constraints that require new strategies that would position the organization at par with its competitors. The global trend today shows a desire for cheap quality goods, wide market share, increased need for product development and change which means organizations are bound to go for specialized production techniques with low-risk levels (Craig 9).
Today’s entrepreneur is interested in maximizing his returns and does what is best for the interest of his business. This means he will slash activities that can be done easily elsewhere with little input as a tool of leveraging the risks.
An organization that is outsourcing can borrow from others the new technology and production. Free trade has made the world a global market and any organization can now reach out easily especially with the recent trend in information technology. Worth noting is the fact that the entrepreneurs who outsource will have enough time to be creative using their brainpower as well as utilizing their wisdom and knowledge. Through free trade, the world is being influenced to embrace democracy as a tool of promoting peace especially the communists and the autocracy (Craig 4).
Those who oppose outsourcing should understand that certain occupations cannot be outsourced like retailing, catering, and personalized care because they require a personal touch and therefore should be carried at home. The government agencies are also outsourcing, saving the U.S a lot of dollars. Remember many developing countries are a major target market of U.S goods. Outsourcing from them is a payback tool and enhances business relations. To sum it all, the greatest beneficiary is the consumer who spends less on top quality goods. He is in a position of buying a variety of goods in large quantities resulting in an improved standard of living.
It is important to consider the gains made by the economy as the total output is becoming higher. The recent shift in demography shows an aging population that is not giving birth. This means an organization that outsource across the globe will not be disrupted in its business undertaking.
Buckman Rebecca. “Factory Employment is Falling World-Wide,” Wall Street Journal 5 (2003):A2.
Craig Paul. “Jobless in the USA.” NewsMax 11 (2003): 9 – 10.
Donnellan Michael and Clements Stewart achieving high performance through finance business process outsourcing. West Sussex: Wiley, 2004.
Katharine Abraham et al ‘’Firms’ use of outside contractors: theory and evidence’’, Journal of Labor Economics Vol14 (2001):394 – 424.