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McCarthy, I., & Anagnostou, A. (2004). The impact of outsourcing on the transaction costs and boundaries of manufacturing. International Journal of Production Economics. doi:10.1016/S0925-5273(03)00183-X…
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8. Offshoring is when a company sells a product in one country but their factory is in a different country. Apple’s factories are in China but they are advertised in America.…
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Why offshore outsourcing?The events of September 11, 2001 in New York severely affected the air-travel sector. All the major airport retailers, including Globshop were hit hard by the drop in passenger traffic. The cash flow crunch, store closures and halting expansion made cost cutting that much more imperative for the firm. These provided the trigger for off shoring IT tasks and realizing significant saving. Less of a financial and operational burden allowed Globshop to concentrate on the core business and leave IT to a specialist company who can provide a better service for a lower price.Financially – Allowed them to reduce their fixed IT cost. As part of the centralisation plan business unit was already being closed but offshore allowed redundancies. Under a flexible/fixed contract Globshop employed ISS for the duration of a project, opposed to employing staff full time, incurring fixed overhead when capacity was not always utilise. Non-financially – the effective firm devoted additional efforts and had a clear agenda to manage user expectationAlternatives: in-house sourcing Onshore outsourcing In-house sourcing: this decision is made after the organization has performed independent benchmarking to determine that its costs and efficiencies are in line or better than those achieved by comparable organizations.The following graph shows the relationship between company size and potential need for outsourcing. As a company reaches 1,000-10,000 employees, the potential need for outsourcing drops dramatically. In organizations of this size, sufficient resources can usually be found in-house to perform a function, as well as having resources to handle backup coverage.Once you look at all the things a company must do to handle a service in-house, it becomes more evident why many companies choose outsourcing versus operating a service in-house. If a service is provided in-house, a company must: * Locate a qualified employee * Train the…
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“Outsourcing happens when a corporation decides to purchase a kind of product or service from a source outside of the company” (Herbert, 2004). It generally refers to products or services that were once done in-house, now purchased from a source external to the company. “When a multinational company moves or expands some of its operations and jobs to overseas locations, this is referred to as off shoring or offshore sourcing” (Herbert, 2004). Corporations are willing to develop their outsourcing strategy because outsourcing would enable U.S. companies to lower their prices in foreign markets and take advantage of growing incomes in those nations.…
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Outsourcing and off shoring are two different concepts that can co-exist. “Outsourcing” is where a company contracts with a third party to do some of the…
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Over the past few decades the United States has increased its use of outsourcing as a means to positively impact the economy, due to the apparent economic benefit this action has on the bottom-line for companies. In general, outsourcing is the movement of business operations and process to any location based outside the home country. The practice of outsourcing was introduced due to the perceived notion that it positively impacts the economy, saves money for companies, opens up opportunities for greater entrepreneurship, reduces regulations tied to company operations and leads to more Americans holding higher level jobs. However, one may also derive that the outsourcing of American jobs to foreign countries and workers has an immediate impact on the United States economy, which costs thousands of American jobs and negatively impacts the economy. The thesis statement of this paper is that the United States Government should take action now to protect its citizens by halting the outsourcing of American jobs.…
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The outsourcing trend has become a concerning, and debated topic in American politics and economics. The main outsourcing purpose is cutting production cost by transferring U.S jobs to lower paid foreign workers. Some views outsourcing as the way company‘s completeness, others see this as negative effect due to losing jobs. As a student of College Management who major in Business and also minor in Economic, I strongly believe that outsourcing is damaging America‘s economy.…
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Greenway, D. Gorg, H., and Kneller, R. (2008) ‘Offshoring and the UK Economy’. GEP, Leverhulme Centre for Research on Globalisation and Economic Policy.…
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Outsourcing is the contracting of a business process by another party. Outsourcing sometime involves transferring employee and assets from one firm to another. It can be foreign or domestic contracting and sometimes involves moving a business to another country. Financial savings from lower international labor rates can provide the biggest motivation for outsourcing. Companies will outsource for many reasons. The first reason is time, theoretically no company has the time to take care of everything. Companies seek help from foreign companies to get the job done. Second is money, many companies use cost efficiency as a reason to outsource. The final reason is skills and knowledge. Outsourcing allows companies to bring skills required to run the organization from outside the company. In the 80’s U.S. factory workers began losing their jobs when American cooperation’s realized that they could manufacture their goods cheaper in a foreign country. One after another U.S. plants closed and moved overseas, leaving millions…
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The definition of outsourcing includes both foreign and domestic contracting, which may include off- shoring, described as “a company taking a function out of their business and relocating it to another country.” [1]…
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While some may have the disposition that outsourcing means nothing except bad things for the United States consumers, they are entirely off base. We know that by allowing outsourcing it means there will be lower costs overseas which seemingly takes away jobs from us consumers back here in America; however, there are…
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In this article, Clott highlights the rapid growth of global outsourcing and the reasons behind it. Clott (2004) says one of the reasons for the growth is that, “…advances such as…
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If you had not heard about outsourcing before, now you have a good idea what it is. Now there are two sides to every story, so allow me to inform you about the people who support outsourcing, and why they say it is good for our country in the long term. Now the chairman of President Bush 's council of economic trade Advisers, N. Gregory Mankiw said,"Outsourcing is just a way of doing international trade." (U.S. Newswire via Comtex, 2004). President Bush 's 2004, economic report says basically outsourcing makes sense. The report (signed by President Bush) said that " When a good or service is produced more cheaply abroad, it makes more sense to import it than make or provide it domestically." (U.S Newswire via Comtex 2004). This all sounds like it makes a lot of sense. I mean wouldn 't you want to save money also? We all want to spend less and make more, but…
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The practice of offshoring which was unimaginable in the 1980s, was now desirable and possible. Though researchers still argue on the quantity of impact on US jobs from offshoring, but it is clear that it had impacted on main industries and jobs, specifically low wages work (Thomas, 2007).…
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The offshoring era began in the 1960s when manufacturing industries in developed countries started sending out work to factories in developing countries such as China, India, Taiwan, and Malaysia. Then, offshoring really took off in the late 1970s. Manufacturing companies began moving to other countries where they could find cheaper labor costs. One of the first large businesses that moved its manufacturing overseas was General Electric. According to Jack Welch, the CEO of General Electric at the time, “companies should seek to lower costs and maximize profits by moving operations wherever is cheapest” (The Week, 2011). He further goes on to say that “ideally, you’d have every plant you own on a barge to move with currencies and changes in the economy” (The Week, 2011). In the 1990s, with the development of the Internet, tech support, call centers, and other such jobs started moving offshore as well. The Internet boom also erased geographic boundaries, which allowed companies to have instant access to educated workers all over the world. This permitted big service companies and small…
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